Ingersoll-Rand Plc (IR) reported adjusted earnings per share (EPS) of 31 cents in its first quarter of 2012 compared with 34 cents per share in the year-ago quarter and 76 cents per share in the last quarter, comprehensively beating the Zacks Consensus Estimate of 25 cents.
Sales amounted to $3.15 billion, falling 3.8% year over year and 10.2% sequentially. Total revenues, excluding the recently divested Hussmann business, were up approximately 3% year over year. This beat the Zacks Consensus Estimate of $3,038 million and also surpassed management’s expectations of $2,975 million – $3,075 million.
Geographically, revenues from U.S. markets escalated 4% annually, whereas revenues from international operations grew 1% (4% excluding currency).
Segment-wise, Climate Solutions delivered sales of $1.66 billion, decreasing 8.9% year over year and 12.8% sequentially, primarily attributable to weakened sales of sea-going containers.
The Industrial Technologies segment posted revenues of $688.7 million, increasing 7.5% year over year but falling 7.4% sequentially. The annual surge was a result of increased Air and productivity along with club car sales across all major global areas.
Revenues from the Residential Solutions segment dropped 2.7% year over year and 4.8% sequentially to $421.7 million in the first quarter of 2012. The residential security revenues scored well across the Americas but were offset by the adversities faced by the Residential Heating, Ventilating and Air-Conditioning (HVAC) segments during the quarter.
Finally, the Security Technologies segment recorded sales of $378.5 million, up 0.9% year over year but down 8.8% sequentially. The nominal year-over-year rise was attributable to sales in the Americas which were again partially offset by deteriorating offshore demands in this segment.
Adjusted operating margin for the first quarter of 2012 came in at 6.7% compared with 7.0% in the year-ago quarter and 9.5% in the previous quarter. Inflationary pressures, investment costs and restructuring activities took its toll on margins in the quarter.
The effective adjusted tax rate came in at 26.7% in the first quarter of 2012 compared with 24.8% in the year-ago quarter.
Balance Sheet and Cash Flows
The company had a cash balance of $1.1 billion at the end of the quarter versus $1.2 billion at the end of the previous quarter. Debt balance at $3.6 billion remained static over the last quarter.
Cash flow generated during the quarter amounted to $16.4 million and the company has a negative cash flow balance of $36.5 million at the end of the first quarter of 2012.
Outlook
For the second quarter of 2012, management expects revenues to fall within $3.8 billion to $3.9 billion with EPS from continuing operations between 85 cents and 90 cents. The tax rate is projected to be at 25% for the quarter.
In 2012, Ingersoll-Rand projects revenues between $14 billion and $14.4 billion along with EPS targeted at $2.90 – $3.10. The company is expected to generate cash flows of $1.1 billion by the end of 2012.
The company posted a conservative outlook for the upcoming quarter mainly due to the ongoing weakness from the European markets. Besides, HVAC sales are expected to remain modest in the North American markets while other end markets would be under leash through 2012.
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