Follow the Government's Energy Efficiency Contracts

Like many firms, Ingersoll-Rand has seen business slow in this challenging economy. Analysts have trimmed their per-share profit forecasts by half, to about $2 for 2009. That reduced profit forecast now looks too conservative, as the company's new contract flow is likely to hold up better than had been feared, because of the upcoming stimulus programs.

Moreover, management is in the process of restructuring, paring $300 million from the cost structure. And improved interdivisional operational synergies should yield another $300 million in gains. Taken together, these actions should enable Ingersoll-Rand to build a stronger foundation for when the economy eventually rebounds.

Other publicly-traded companies that have been awarded ESPC contracts include Chevron (CVX - commentary - Cramer's Take), Con Ed (ED - commentary - Cramer's Take), Constellation Energy (CEG - commentary - Cramer's Take), FPL, Honeywell (HON - commentary - Cramer's Take) and Johnson Controls (JCI - commentary - Cramer's Take).

Investors should also keep any eye out for other companies that are developing energy-saving products. For example, my colleague David Peltier wrote about Baldor Electric (BEZ - commentary - Cramer's Take) last summer. As David wrote, Baldor's Super-E premium electric motors "cut electricity usage by 9%, saving $1,200 a year for the average 30 HP motor."

Investors should also watch the product announcements coming from Honda Motor (HMC - commentary - Cramer's Take), which has always been a strong player in the emergency power generator business. The company has been working actively with fuel cells, natural gas engines and other alternative energy sources, and it has talked about plans to introduce more household-focused energy efficiency products.

If you are aware of any other companies that are a play on energy efficiency, please send me an email, as I intend to develop and maintain an "efficiency portfolio."

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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.