Hamilton, Bermuda-based Ingersoll-Rand Co. last week announced that revenues increased 7 percent in the fourth quarter of 2006 compared with the 2005 fourth quarter. The company reported net earnings of $222.0 million, or earnings per share of 72 cents, for the fourth quarter of 2006, compared to fourth quarter 2005 earnings of $291.6 million, or EPS of 87 cents.
Overall, the company’s revenues increased to $2.9 billion, compared with revenues of $2.7 billion for the 2005 fourth quarter. Approximately 5 percentage points of the revenue increase were attributable to organic growth, with an additional 2 percentage points of growth contributed by acquisitions.
Fourth-quarter earnings included $229.9 million, or EPS of 74 cents, from continuing operations, as well as net cost of $7.9 million, or an EPS loss of 2 cents, from discontinued operations, which represent the retained costs and gains on the sale of discontinued businesses. In comparison, net earnings from continuing operations for the 2005 fourth quarter were $272.9 million, or 81 cents EPS, as well as earnings of $18.7 million, or EPS of 6 cents from discontinued operations.
“Our fourth quarter performance demonstrated the strength of our diversified business portfolio,” said Herbert Henkel, chairman, president and CEO. “Double-digit revenue increases in our diversified industrial businesses more than offset revenue declines in businesses affected by the significant slowdown in North American residential markets.
“The corrective actions we initiated in the fourth quarter to reduce costs and, where warranted, to adjust operations consistent with market conditions will deliver benefits throughout 2007. Overall, 2006 represented the first significant challenge for the current diversified Ingersoll Rand business portfolio. Our record full-year revenues and earnings per share provide clear evidence that our strategy is working, and that our business execution remains solid.”
Full-year 2006 net revenues were $11.4 billion, an 8 percent increase compared with net revenues of $10.5 billion in 2005. Excluding acquisitions, revenues increased by 7 percent. Recurring revenues were $2.4 billion for 2006, an increase of 11 percent compared with last year. Operating income for 2006 totaled $1.4 billion compared with $1.3 billion in 2005.
The company reported full-year 2006 earnings of $1.0 billion, or EPS of $3.20, which includes earnings from continuing operations of $1.1 billion, or EPS of $3.31, and net costs of $35.8 million, or an EPS loss of 11 cents, from discontinued operations. EPS from continuing operations increased by 7 percent compared with full-year 2005. In comparison, the company reported full-year 2005 earnings of $1.1 billion, or EPS of $3.09.
In the Compact Vehicle Technologies segment, which includes Bobcat compact equipment and Club Car golf cars and utility vehicles, total revenues decreased by about 12 percent to $578.0 million compared with $657.3 million in the fourth quarter of 2005. Operating margins of 6.4 percent declined compared with last year.
According to the company, Bobcat revenues decreased by more than 15 percent compared with the fourth quarter of 2005, because of the ongoing contraction in the North American market for compact equipment and a related planned reduction in shipments to distributors to draw down equipment inventories. Bobcat distributors significantly reduced inventories during the second half of the year and their equipment stocks starting 2007 are consistent with expected retail demand.
In the Construction Technologies segment, which includes Ingersoll Rand road pavers, compactors, portable power products, general purpose construction equipment and attachments, revenues were $319.8 million and increased by 21 percent compared with the fourth quarter of 2005, primarily as a result of continuing strength in the international road development and repair markets and ongoing improvement in worldwide markets for attachments and utility equipment.
In the Industrial Technologies segment, which includes compressed air systems, tools, fluid handling and energy generation systems, total revenues in the fourth quarter increased by approximately 15 percent to $541.1 million. The strong revenue gain primarily reflects higher worldwide sales of complete units of air compressors and increased revenues from the aftermarket business, the company said.
“Based on the forecasted macro-economic environment, we anticipate revenue growth of approximately 4 percent to 5 percent for 2007,” said Henkel. “Full-year 2007 earnings from continuing operations are forecasted to increase to a range of $3.61 to $3.71 per share compared with $3.31 per share in 2006.
Ingersoll Rand is a global diversified industrial company providing products, services and integrated solutions to industries ranging from transportation and manufacturing to food retailing, construction and agriculture.
According to David Bleustein, analyst for UBS Investment Research, the price target of $46 per share remains the same.
“We maintain our 2007 EPS estimate of $3.60 and our 2008 EPS estimate of $4.00,” said Bleustein. “We maintain our price target of $46 per share, which reflects a 20 to 25-percent discount to the market multiple on our 2008 EPS estimate. We maintain our Buy 2 rating on Ingersoll-Rand.”
