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Will Ingersoll-Rand (IR) Stock Be Helped Today By Cameron (CAM) Division Acquisition?

Stocks in this article: IR

NEW YORK (TheStreet) -- Ingersoll-Rand (IR)   said this morning it entered into an agreement to acquire the assets of Cameron International Corp.'s (CAM) Centrifugal Compression division for $850 million. The acquisition is expected to close before the end of the year.

The acquisition will immediately add to per-share earnings and Ebitda margins.

Cameron's Centrifugal Compression division provides centrifugal compression equipment and aftermarket parts and services for global industrial applications, air separation, gas transmission and process gas. It generated sales of about $400 million in 2013 and has approximately 850 employees.

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"We rate INGERSOLL-RAND PLC (IR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • IR's revenue growth has slightly outpaced the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
  • INGERSOLL-RAND PLC has improved earnings per share by 27.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INGERSOLL-RAND PLC reported lower earnings of $2.08 versus $3.29 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.08).
  • The gross profit margin for INGERSOLL-RAND PLC is currently lower than what is desirable, coming in at 33.56%. Regardless of IR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.63% trails the industry average.
  • Net operating cash flow has decreased to $246.10 million or 43.65% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: IR Ratings Report
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