Stock price when the opinion was issued
An industrial company. They’ve grown their earnings 15% a year over the last 5 years, in a world where companies have not been spending on capital spending. They have a compressor business which is industrial. They have HVAC. If there was a pickup in spending in infrastructure in the US, this company will win. If there is a pickup in non-residential construction they will win. They are already performing and making new highs. Dividend yield of 2.12%. (Analysts’ price target is $77.72.)
Capital spending in the US is set to rise. 85% of their business is environmental control. HVAC systems are being put in or being replaced in commercial buildings. If there is an infrastructure spend on schools and hospitals, that is a big spend. Their compressor systems are used in construction sites. Dividend yield of 1.95%. (Analysts’ price target is $85.50.)
EPS had a nice beat on estimates of 69c coming in at 78c. Revenue did miss estimates of $1.7B coming in at $1.69B. IR has been growing nicely over the last few years and margins have also expanded substantially in recent periods. Debt is also at more manageble levels now with a net debt/EBITDA ratio at 0.7x. Revenue outlook for the year came in below expectations which caused the stock to take a bit of a hit after earnings were released. It is a stable name but with an expensive valuation at nearly 27x forward earnings. Debt is less of a concern now, but valuation is expensive for a slow-growth name. IR will likely be a stable investment opportunity that should continue to expand its bottom line, while top line growth will be slow. We think it is a good company, but not overly exciting.
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Good company. Diversified industrial with exposure to a lot of capital spending related industries. This sector is very cyclical and tends to do well when economies start to pick up. He feels the economy will continue to recover for some time.