Ingersoll-Rand downgraded to sell, price target cut to $90

On Wednesday, Ingersoll-Rand (NYSE:IR) was downgraded from Hold to Sell by CFRA, with a new price target set at $90, down from the previous $95. The downgrade comes after the stock experienced a rise following the recent U.S. presidential election, which the analyst believes has pushed the share price above its fair value.

The analyst pointed out that Ingersoll-Rand is trading at over 30 times forward earnings per share (EPS), a significant premium compared to its industrial machinery peers and its own historical average. This valuation comes amidst a backdrop of fluctuating organic sales, which have seen periods of both modest expansion and contraction, influenced by mixed top-line performance and challenges in the China market.

Despite expectations for a sales recovery in 2025 and acknowledging healthy order rates, the analyst's view is that the current share price has outpaced the company's fundamentals. The adjusted 12-month price target of $90 reflects a valuation of 25.5 times the anticipated 2025 EPS of $3.54, which is a decrease from the previous estimate of $3.65. The 2024 EPS forecast has also been trimmed to $3.30 from $3.32.

The analyst's revised valuation still places Ingersoll-Rand slightly above its long-term historical forward average. This takes into account the expectation that spending on capital goods will rebound. However, the current assessment suggests that the stock's recent performance has moved ahead of what the fundamentals can justify.

In other recent news, Ingersoll-Rand has been a topic of discussion amongst financial analysts and investors. The industrial manufacturing company's recent quarterly results outperformed expectations, largely due to successful acquisitions and effective margin execution. Despite this, Baird, a financial services firm, has lowered its price target for Ingersoll-Rand shares from $114.00 to $109.00, while maintaining an Outperform rating. This adjustment comes in response to the company's updated guidance, which suggests a slight downturn in the fourth quarter's EBITDA and EPS.

Furthermore, Ingersoll-Rand reported impressive third-quarter results for 2024, with a 10% increase in total orders and a 7% rise in revenue year-over-year. The company's adjusted EBITDA grew by 15% to $533 million, and the EPS rose by 9% to $0.84. However, Ingersoll-Rand has revised its full-year 2024 revenue growth guidance to 5%-7%, slightly lower than prior expectations due to customer readiness and capacity challenges.

InvestingPro Insights

Recent data from InvestingPro adds depth to CFRA's analysis of Ingersoll-Rand (NYSE:IR). The company's P/E ratio stands at 49.52, with an adjusted P/E of 42.92 for the last twelve months as of Q3 2024, supporting CFRA's observation of the stock trading at a premium. This is further emphasized by an InvestingPro Tip noting that IR is "Trading at a high earnings multiple."

Despite the high valuation, Ingersoll-Rand has shown strong financial performance. The company's revenue for the last twelve months as of Q3 2024 was $7.16 billion, with a 7.18% growth rate. Additionally, the EBITDA growth for the same period was 17.74%, indicating improved operational efficiency.

An InvestingPro Tip highlights that IR has been "Profitable over the last twelve months," which aligns with the analyst's expectations for future performance. However, another tip cautions that "13 analysts have revised their earnings downwards for the upcoming period," which may justify CFRA's more conservative outlook.

For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Ingersoll-Rand, providing a broader perspective on the company's financial health and market position.

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