Healthy Markets And Price Leverage Bode Well For Ingersoll-Rand

Ingersoll-Rand (IR) has had a so-so run of late. Although the company has been reporting some good core revenue and order growth numbers and a general upward trend in margins, the shares have lagged peers/comps like Lennox (LII), Gardner Denver (GDI), and only just matched the industrials sector as whole (and Atlas Copco (OTCPK:ATLKY) had also been outperforming Ingersoll-Rand until a recent dip tied to its semiconductor-exposed vacuum business).

I find that performance interesting given that the company continues to benefit from healthy cycles in the non-residential and residential building markets, has little meaningful exposure to sectors of concern like autos or electronics, and still has leverage to price/cost improvement and growing aftermarket/service sales. Although Ingersoll-Rand isn't cheap enough to call it a clear bargain (those are few and far between in the industrial sector), I wouldn't ignore the significant boost to guidance and the potential for IR to be one of the relatively few beat-and-raise stories in the second half.

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Healthy Markets And Price Leverage Bode Well For Ingersoll-Rand

The Market Doesn't Seem So Pumped About Weir

Weir Group (OTCPK:WEGRY, WEIR.L) got hit hard on the simultaneous declines in oil/gas and mineral/mining capex, and the company is now benefiting as spending recovers strongly in both markets. Although the bulk of Weir’s business is, and has virtually always been, its minerals business, the shorter-cycle oil/gas business tends to be the tail that wags the dog, with investors putting a lot of energy into worrying about near-term completions metrics, frac fleet spending, and market share trends.

Although I do have some longer-term market share concerns about the oil/gas business, I believe Weir is likely looking at a good stretch here of oil/gas and minerals order growth. I thought the shares offered about 5-10% upside back in late May of 2017, and the local shares are up about 10% since then. I still see a little upside from here, but investors should note the propensity for short-term excitement/worry about U.S. onshore activity to move the stock.

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The Market Doesn't Seem So Pumped About Weir

Seeking Alpha: Graham Corp Already Seems To Be Building In Better Days

Investors have seen multiple examples recently that demonstrate how quality industrial companies can bring in buyout offers at valuations above what I believe most analysts would calculate as fair on a stand-alone basis. Over the past three months, Gardner Denver, Edwards Group (EVAC), and Kaydon (KDN) have all accepted deals that I believe fit that pattern.

That brings me to Graham Corp (GHM). I love the idea of a company that holds strong market share in engineered-to-order ejectors, condensers, heat exchangers, and pumps, not to mention one that produces good returns on invested capital without overwhelming institutional ownership. On the other hand, shares are up more than 80% over the past year and it's tough to find a metric under which the shares are cheap. With that, I believe these shares are already baking in some degree of takeout premium, though I intend to keep it on the watchlist in case it sells off at some point.

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Graham Corp Already Seems To Be Building In Better Days

Investopedia: Is A Deal For Gardner Denver What SPX Really Needs?

Rumors have been swirling for a while about whether industrial compressor, blower and pumpmaker Gardner Denver (NYSE:GDI) would, in fact, reach a deal to sell itself and whether SPX (NYSE:SPW) would make an aggressive play for this company. With rumors now heating up that the two companies are in exclusive talks, it's very much worth asking whether this is really a good deal for SPX or Gardner Denver shareholders.

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http://www.investopedia.com/stock-analysis/2012/Is-A-Deal-For-Gardner-Denver-What-SPX-Really-Needs-SPX-GDI-IR-ATLKY1213.aspx

Seeking Alpha: Atlas Copco: Maybe The Best Industrial You Don't Know

Institutional investors may have the tools and resources that make international investing indistinguishable from domestic investing, but the retail investor is not so lucky. Consequently, high-quality industrial names like Atlas Copco (ATLKY.PK) can often go unnoticed by many investors. While Atlas Copco doesn't have the left-for-dead valuation of some industrials, investors who want a blue chip company with solid growth prospects can still pick up these shares for less than fair value.

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Atlas Copco: Maybe The Best Industrial You Don't Know

Investopedia: Diverse Markets Boosting Dover

So far this has been a solid quarter for a wide range of industrial conglomerates. Investors can add Dover (NYSE:DOV) to this list, as ongoing strength in markets like materials handling, fluid management, microphones, and frequency control products are helping this relatively small industrial conglomerate post very attractive revenue and order growth. 

An All Around Solid Second Quarter  
Arguably the worst that can be said about Dover's second quarter performance is that it did not beat the analyst estimates by a huge amount. Nevertheless, the company reported 21% top line growth, 14% organic revenue growth, and order growth of 15%. 


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http://stocks.investopedia.com/stock-analysis/2011/Diverse-Markets-Boosting-Dover-DOV-GDI-FLS-ETN-ABB-OSK-SI0729.aspx