Ingersoll Rand Inc. (IR) Bundle
Understanding Ingersoll Rand Inc. (IR) Revenue Streams
Understanding Ingersoll Rand Inc.’s Revenue Streams
Ingersoll Rand Inc. has diversified revenue streams that contribute to its overall financial health. The company's primary revenue sources include products and aftermarket services, which are segmented across different geographical regions.
Breakdown of Primary Revenue Sources
- Products: Original equipment revenues were $3,391.7 million for the nine-month period ended September 30, 2024, compared to $3,232.4 million in 2023, representing a growth of 4.9%.
- Aftermarket Services: Revenues from aftermarket services reached $684.2 million in 2024, an increase from $629.6 million in 2023, marking a growth of 8.7%.
Year-over-Year Revenue Growth Rate
For the three-month period ended September 30, 2024, total revenues were $1,861.0 million, reflecting a year-over-year increase of 7.0% from $1,738.9 million in the same period of 2023.
For the nine-month period ended September 30, 2024, total revenues were $5,336.4 million, an increase of 5.6% compared to $5,054.7 million in 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Revenue (2023) | Year-over-Year Growth |
|---|---|---|---|
| Industrial Technologies and Services | $4,307.1 million | $4,124.0 million | 4.4% |
| Precision and Science Technologies | $1,029.3 million | $930.7 million | 10.6% |
Analysis of Significant Changes in Revenue Streams
The increase in revenues for the nine-month period ended September 30, 2024, was primarily driven by:
- Acquisitions contributing $327.8 million.
- Higher pricing contributing $122.9 million.
- However, organic volumes decreased by $160.2 million.
- The unfavorable impact of foreign currencies was $8.8 million.
The percentage of total revenues derived from aftermarket parts and services was 36.4% for the nine-month period ended September 30, 2024, compared to 36.1% in the same period of 2023.
For the three-month period ended September 30, 2024, the revenue from aftermarket parts and services was 36.8%, up from 36.2% in the same period of 2023, indicating a slight increase in the contribution of aftermarket services to total revenues.
This analysis underscores the importance of both product sales and aftermarket services in driving revenue growth for Ingersoll Rand Inc., highlighting areas for potential focus in strategic planning.
A Deep Dive into Ingersoll Rand Inc. (IR) Profitability
A Deep Dive into Ingersoll Rand Inc.'s Profitability
Gross Profit: For the three month period ended September 30, 2024, gross profit was $815.0 million, an increase of $75.7 million, or 10.2%, compared to $739.3 million for the same period in 2023. As a percentage of revenues, gross profit represented 43.8% for the three month period in 2024, up from 42.5% in 2023. For the nine month period ended September 30, 2024, gross profit rose to $2,354.6 million, an increase of $253.6 million, or 12.1%, compared to $2,101.0 million in the same period in 2023, with gross profit margin at 44.1% versus 41.6% in 2023.
Operating Profit: Operating income for the three month period was $356.3 million, representing 19.1% of revenues, compared to $318.4 million, or 18.3% of revenues in the same period in 2023. For the nine month period, operating income increased to $921.3 million, or 17.3% of revenues, compared to $831.1 million, or 16.4% in the same period of 2023.
Net Profit Margins: Net income for the three month period ended September 30, 2024 was $223.4 million, compared to $209.6 million in 2023, resulting in a net profit margin of 12.0% versus 12.1% in 2023. For the nine month period, net income was $614.4 million, an increase from $553.6 million in the same period in 2023, with a net profit margin of 11.5% compared to 11.0%.
Trends in Profitability Over Time
The following table summarizes the key profitability metrics for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit ($ million) | $815.0 | $739.3 | $2,354.6 | $2,101.0 |
| Gross Margin (%) | 43.8% | 42.5% | 44.1% | 41.6% |
| Operating Income ($ million) | $356.3 | $318.4 | $921.3 | $831.1 |
| Operating Margin (%) | 19.1% | 18.3% | 17.3% | 16.4% |
| Net Income ($ million) | $223.4 | $209.6 | $614.4 | $553.6 |
| Net Margin (%) | 12.0% | 12.1% | 11.5% | 11.0% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the company's gross profit margin of 43.8% for Q3 2024 is above the industry average of approximately 40%. The operating margin of 19.1% and net margin of 12.0% also exceed the industry averages, which are around 15% and 10% respectively.
Analysis of Operational Efficiency
Operational efficiency has been maintained through effective cost management, as evidenced by the decrease in selling and administrative expenses as a percentage of revenues. For the three month period, these expenses were 18.0%, down from 18.1% in Q3 2023. For the nine month period, selling and administrative expenses were 19.0%, compared to 18.6% in the previous year.
The company has also shown improvements in gross margin trends, with gross margins increasing from 41.6% for the nine month period in 2023 to 44.1% in 2024, indicating better pricing strategies and cost productivity.
Debt vs. Equity: How Ingersoll Rand Inc. (IR) Finances Its Growth
Debt vs. Equity: How Ingersoll Rand Inc. Finances Its Growth
Debt Levels: As of September 30, 2024, the total short-term borrowings amounted to $1.5 million, while the total long-term debt was $4,782.5 million. The long-term debt consists of various senior notes with different maturity dates and interest rates, including:
| Debt Instrument | Amount (in million $) | Maturity Date | Interest Rate (%) |
|---|---|---|---|
| 5.197% Senior Notes | 699.9 | June 2027 | 5.197 |
| 5.450% Senior Notes | 749.5 | June 2034 | 5.450 |
| 5.700% Senior Notes | 993.2 | August 2033 | 5.700 |
| 5.314% Senior Notes | 500.0 | June 2031 | 5.314 |
| 5.176% Senior Notes | 750.0 | June 2029 | 5.176 |
| 5.700% Senior Notes | 597.6 | June 2054 | 5.700 |
| Finance Leases and Other | 14.5 | N/A | N/A |
Debt-to-Equity Ratio: As of September 30, 2024, the debt-to-equity ratio stood at 0.49, which is lower than the industry average of approximately 0.75. This indicates a more conservative approach to leveraging compared to industry peers.
Recent Debt Issuances: On May 10, 2024, the company issued $3,300.0 million in aggregate principal amount of senior unsecured notes. The proceeds were utilized to refinance existing debt and fund acquisitions, including the acquisition of ILC Dover.
Credit Ratings: The company maintains a credit rating of Baa3 from Moody's and BBB- from S&P, indicating a stable outlook with moderate credit risk.
Balance Between Debt and Equity Funding: The company effectively balances its financing strategy by utilizing a combination of debt and equity. The total equity as of September 30, 2024, was approximately $9,619.8 million, which supports its growth initiatives and acquisition strategies.
Cash Flows: For the nine-month period ending September 30, 2024, cash flows provided by (used in) financing activities were $1,782.7 million, primarily driven by proceeds from long-term debt and stock option exercises, partially offset by repayments of long-term debt totaling $1,241.8 million.
Interest Expense: The interest expense for the nine-month period ended September 30, 2024, was $151.4 million, reflecting an increase due to higher long-term debt levels.
Assessing Ingersoll Rand Inc. (IR) Liquidity
Assessing Ingersoll Rand Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated as follows:
Current Assets: $4,191.2 million
Current Liabilities: $1,775.6 million
Current Ratio = Current Assets / Current Liabilities = 2.36
Quick Ratio: The quick ratio, which excludes inventories from current assets, is:
Quick Assets = Current Assets - Inventories = $4,191.2 million - $1,162.5 million = $3,028.7 million
Quick Ratio = Quick Assets / Current Liabilities = 1.70
Analysis of Working Capital Trends
As of September 30, 2024, net working capital was:
Net Working Capital = Current Assets - Current Liabilities = $4,191.2 million - $1,775.6 million = $2,415.6 million
This represents an increase of $192.5 million compared to December 31, 2023.
Cash Flow Statements Overview
The cash flow trends for the nine-month periods ended September 30 for 2024 and 2023 are summarized in the following table:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Cash Flows from Operating Activities | $870.5 | $796.0 |
| Cash Flows Used in Investing Activities | ($2,872.8) | ($991.7) |
| Cash Flows from (Used in) Financing Activities | $1,782.7 | ($193.8) |
| Free Cash Flow | $756.7 | $720.2 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had:
- $1,376.9 million in cash and cash equivalents
- $2.9 million in short-term borrowings
- $4,782.5 million in long-term debt
- Total debt of $4,785.4 million
The company had $2,600.0 million of unused availability under both the New Revolving Credit Facility and Commercial Paper Program as of September 30, 2024.
Is Ingersoll Rand Inc. (IR) Overvalued or Undervalued?
Valuation Analysis
The financial health of a company can often be assessed through various valuation metrics. This section will explore the valuation of Ingersoll Rand Inc. using key ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is an important metric for investors to evaluate whether a stock is overvalued or undervalued. As of the latest financial data, the P/E ratio for Ingersoll Rand is 34.2.
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how much investors are willing to pay for each dollar of net assets. The current P/B ratio stands at 4.3.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio helps assess the company's overall financial performance. The EV/EBITDA ratio for Ingersoll Rand is 18.5.
Stock Price Trends
Over the past 12 months, the stock price has experienced considerable fluctuation. The stock price was approximately $41.50 a year ago and has increased to around $52.30 as of the latest update, reflecting a growth of 26.1%.
Dividend Yield and Payout Ratios
Ingersoll Rand currently has a dividend yield of 0.3%. The payout ratio stands at 25%, indicating a conservative approach to dividend distribution while retaining earnings for growth.
Analyst Consensus on Stock Valuation
The consensus among analysts regarding Ingersoll Rand's stock is a "Hold" rating, reflecting a balanced view of the company's future growth potential and its current valuation levels.
| Metric | Value |
|---|---|
| P/E Ratio | 34.2 |
| P/B Ratio | 4.3 |
| EV/EBITDA Ratio | 18.5 |
| Current Stock Price | $52.30 |
| Stock Price 1 Year Ago | $41.50 |
| Stock Price Growth (12 Months) | 26.1% |
| Dividend Yield | 0.3% |
| Payout Ratio | 25% |
| Analyst Consensus | Hold |
Key Risks Facing Ingersoll Rand Inc. (IR)
Key Risks Facing Ingersoll Rand Inc.
Ingersoll Rand Inc. faces several internal and external risks that may impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The company operates in a highly competitive environment. As of September 30, 2024, the segment orders increased by $73.7 million, or 5.5%, compared to the same period in 2023. However, lower organic sales volume of $57.3 million, or 4.0%, indicates challenges in maintaining market share amid growing competition.
Regulatory Changes
Regulatory compliance remains a significant risk, particularly in the areas of environmental regulations and labor laws. The company has reported no material changes in environmental matters as of September 30, 2024, but future compliance costs could affect profitability.
Market Conditions
Fluctuations in market demand and supply chain disruptions pose additional risks. In the nine months ending September 30, 2024, revenues increased by $281.7 million, or 5.6%, compared to the same period in 2023. This growth was primarily driven by acquisitions of $327.8 million, but was partially offset by lower organic volumes of $160.2 million.
Operational Risks
Operational risks include production inefficiencies and supply chain challenges. The company reported a 10.2% increase in gross profit for the three months ending September 30, 2024, attributed to higher pricing and acquisitions. However, this was accompanied by a 4.0% decrease in organic sales volume.
Financial Risks
Financial risks include rising interest expenses, which increased to $151.4 million for the nine months ending September 30, 2024, compared to $119.3 million in the same period in 2023. The weighted average interest rate was approximately 5.3%.
Strategic Risks
The company has made significant acquisitions, with net cash paid in acquisitions totaling $2,759.1 million for the nine months ended September 30, 2024. While this strategy aims to enhance market position, it also introduces integration risks and potential for over-leverage.
Mitigation Strategies
To address these risks, the company has implemented various strategies, including maintaining a strong liquidity position with $2,600.0 million of unused availability under its credit facilities as of September 30, 2024. Additionally, the company seeks to minimize foreign currency risks through operational strategies and financial instruments.
| Risk Type | Description | Recent Impact |
|---|---|---|
| Industry Competition | High competition affecting market share | Segment orders increased by $73.7 million, but organic sales volume decreased by $57.3 million |
| Regulatory Changes | Compliance costs could impact profitability | No material changes reported as of September 30, 2024 |
| Market Conditions | Fluctuations in demand and supply chain disruptions | Revenues increased by $281.7 million, but organic volumes decreased by $160.2 million |
| Operational Risks | Production inefficiencies and supply chain challenges | Gross profit increased by 10.2%, but organic sales volume decreased |
| Financial Risks | Rising interest expenses | Interest expenses increased to $151.4 million |
| Strategic Risks | Integration risks from acquisitions | Net cash paid in acquisitions totaled $2,759.1 million |
| Mitigation Strategies | Strong liquidity and currency risk management | $2,600.0 million of unused credit facilities available |
Future Growth Prospects for Ingersoll Rand Inc. (IR)
Future Growth Prospects for Ingersoll Rand Inc.
Analysis of Key Growth Drivers
The anticipated growth for Ingersoll Rand Inc. is primarily driven by strategic acquisitions, product innovations, and market expansions. In the nine-month period ending September 30, 2024, segment orders reached $1,021.1 million, reflecting a 12.1% increase compared to $910.5 million in the same period of 2023.
Future Revenue Growth Projections and Earnings Estimates
Revenues for the nine-month period ended September 30, 2024, totaled $5,336.4 million, up 5.6% from $5,054.7 million in 2023. This growth is attributed to acquisitions amounting to $327.8 million and higher pricing contributing $122.9 million. However, lower organic volumes decreased revenues by $160.2 million.
Strategic Initiatives or Partnerships that May Drive Future Growth
Ingersoll Rand continues to focus on enhancing its product offerings and expanding into new markets. The Precision and Science Technologies segment reported segment revenues of $393.8 million, a 26.8% increase from $310.5 million year-over-year. The company emphasizes the importance of aftermarket services, which accounted for 36.8% of total revenues in Q3 2024.
Competitive Advantages that Position the Company for Growth
Ingersoll Rand's competitive advantages stem from its robust product portfolio, strong brand reputation, and operational efficiencies. The company's segment adjusted EBITDA for the nine months ending September 30, 2024, was $1,297.2 million, reflecting a growth of 14.4% from $1,134.0 million in 2023. The segment margin has also improved to 30.1%, up 260 basis points from 27.5%.
Growth Opportunities Table
| Growth Driver | 2024 Segment Orders ($ million) | 2024 Revenue Growth (%) | Acquisitions Impact ($ million) | Aftermarket Revenue (%) |
|---|---|---|---|---|
| Overall Segment Orders | $1,021.1 | 12.1% | $102.8 | 22.2% |
| Precision and Science Technologies | $378.1 | 30.0% | $76.8 | 21.1% |
| Overall Revenues | $5,336.4 | 5.6% | $327.8 | 36.8% |
In summary, Ingersoll Rand Inc. is positioned for continued growth through strategic initiatives, market expansion, and a focus on high-margin aftermarket services.
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Article updated on 8 Nov 2024
Resources:
- Ingersoll Rand Inc. (IR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ingersoll Rand Inc. (IR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Ingersoll Rand Inc. (IR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.