Ingersoll Rand Q1 2025 slides: Strong orders offset by margin pressure amid tariff challenges

Introduction & Market Context

Ingersoll Rand Inc (NYSE:IR) released its first quarter 2025 earnings presentation on May 1, 2025, revealing mixed results characterized by strong order growth but declining margins as the company navigates tariff challenges. The industrial equipment manufacturer reported a 10% increase in orders with a book-to-bill ratio of 1.10x, indicating healthy demand for its products and services despite macroeconomic uncertainties.

The company’s stock reacted negatively in after-hours trading, falling 4.74% to $72.60, following a 1.03% gain during the regular session where it closed at $75.43.

Quarterly Performance Highlights

Ingersoll Rand reported solid top-line growth in Q1 2025, with revenue increasing 3% year-over-year to $1.72 billion. However, profitability metrics showed some pressure, with adjusted EBITDA remaining flat at $460 million while margins contracted by 70 basis points to 26.8%. Adjusted earnings per share declined 8% to $0.72 from $0.78 in the prior-year period.

As shown in the following financial performance comparison chart:

A bright spot in the quarterly results was the company’s free cash flow performance, which reached a record $223 million for a first quarter, representing a substantial 124% increase compared to Q1 2024. This improvement reflects the company’s continued focus on operational efficiency and working capital management.

The following chart illustrates the company’s free cash flow components and leverage ratio trends:

Segment Analysis

Ingersoll Rand’s two business segments delivered divergent results in the quarter. The Industrial Technologies and Services (ITS) segment, which represents approximately 79% of total revenue, experienced a 1.6% revenue decline to $1.35 billion. Adjusted EBITDA for this segment decreased to $389.1 million, with margins contracting 110 basis points to 28.8%.

The segment breakdown shows mixed performance across product lines:

In contrast, the Precision and Science Technologies (PST) segment demonstrated robust growth, with revenue increasing 22.9% to $364.7 million. Adjusted EBITDA for this segment rose to $106.2 million, though margins declined 170 basis points to 29.1%, reflecting integration costs and product mix changes.

The following chart details the PST segment’s performance:

Strategic Initiatives

Ingersoll Rand highlighted several strategic initiatives in its presentation, including its approach to mitigating tariff impacts. The company is facing approximately $150 million in tariff costs, including both direct exposure and supply base impact. Management has implemented comprehensive mitigation actions, including price increases effective April 1st and tariff surcharges beginning in early May.

The company’s tariff mitigation strategy is outlined in the following slide:

On the acquisition front, Ingersoll Rand continues to execute its disciplined M&A strategy, focusing on bolt-on acquisitions that complement its existing business. Recent transactions include G&D Chillers, a manufacturer of premium glycol chillers with annual revenue of approximately $25 million, and Advanced Gas Technologies, a supplier of onsite gas generation systems with annual revenue of about $5 million.

The company also announced a significant increase to its share repurchase program, authorizing an additional $1 billion on top of the $993 million remaining under the existing authorization. Management is targeting up to $750 million in share repurchases in 2025.

Forward-Looking Statements

Despite the mixed quarterly results, Ingersoll Rand maintained its full-year 2025 guidance, projecting total revenue growth of 3-5%, with organic growth between -1% and 1%. The company expects acquisitions to contribute approximately $330 million, or 4.5%, to revenue growth.

Adjusted EBITDA is forecast to be between $2,070 million and $2,130 million, representing growth of 3-6% year-over-year. Adjusted EPS guidance ranges from $3.28 to $3.40, which translates to flat to 3% growth compared to 2024.

The following slide details the company’s 2025 guidance:

Management emphasized that they are taking a prudent approach to guidance, particularly regarding organic volume in the second half of the year. They noted that marketing qualified leads (MQLs) were up double-digits in Q1 2025 and remained strong in April, suggesting healthy underlying demand.

Executive Summary

Ingersoll Rand’s Q1 2025 results present a mixed picture. The company is demonstrating strength in order intake and cash flow generation, while facing challenges in margin preservation and earnings growth. The implementation of tariff mitigation strategies and continued execution of its M&A playbook highlight management’s proactive approach to navigating a complex global trade environment.

As illustrated in the company’s key highlights slide:

Looking ahead, Ingersoll Rand remains focused on leveraging its IRX (Ingersoll Rand Execution Excellence) operating system to drive operational improvements and offset external pressures. With a strong balance sheet, ample liquidity, and a disciplined capital allocation strategy, the company appears well-positioned to weather near-term challenges while continuing to invest in long-term growth opportunities.

Full presentation:

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