Peter Brieger Ingersoll-Rand Co IR-N TOP PICK Jan 30, 2006

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.)

HVACs: residential and industrial. They have done a great job. They have re-domiciled. 2/3rds North American and 1/3^rds international. (Analysts’ target: $85.00).

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.)

(A Top Pick April 6/17. Up 10%.) This is in the machinery space. It has done pretty well. Pulled back a little, and he continues to be very positive on it. They do a lot of HVAC work, energy efficiency and consumption management and water flow.

(A Top Pick November 22/16. Up 23%.) He continues to like the industrial sector. Machinery is slowly becoming interconnected. The capital stock of the US economy is the oldest it has been in history. In the last year, companies who are spending, are being rewarded by the share prices going up.

(A Top Pick April 19/17 Up 7%). He got out back in August at $85. They rotated out of this into more defensive stocks at the time. He saw a sector backlog growing and still sees this as a great company.

(A Top Pick April 6/17, Up 9%) Urbanization, globalization and energy consumption are tailwinds, but faces risks recently. It hasn't been as great as he'd thought though they've done a great turnaround. Performance has disappointed. not as good Honeywell.

This is a play on reshoring, on making stuff (industrials like power tools and HVACs), and companies that make things that contribute to infrastructure and industrial growth are in the right spot now.

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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Hold. They are a re-constituted company and doing a lot of things right. It's been flat, but it's about to re-accelerate.