Ingersoll Rand: Leveraged To Strong Industrial Markets And Capital Reallocation

 

Another of my “really like the company, don’t like the valuation” names, Ingersoll Rand (IR) has produced a mix track record since my last update on this industrial name – the shares are up more than 13% since that article, which is worse than the S&P 500’s return over that time, but more or less in line with the broader industrial sector. The “but”, though, is that Ingersoll Rand posted a couple of strong quarters and made some significant positive capital/business allocation moves, so I’d argue there’s been some “catch up” to what I saw as a high valuation.

I wish I could say that Ingersoll Rand was a bargain today, but I don’t see that. There’s another “but” here, too, though, and that is Ingersoll Rand’s exposure to what could be a stronger-for-longer industrial capex cycle, as well as upside to a more aggressive capital allocation and portfolio transformation plan. Including estimated M&A, I do see Ingersoll Rand set up for returns on the low end of the high single-digits, and that makes it a more tempting call.

 

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Ingersoll Rand: Leveraged To Strong Industrial Markets And Capital Reallocation