It's time to take another look at Ingersoll-Rand
The company turned in another solid performance in the third quarter. Revenue was up 10%, with about eight of those percentage points coming from internal organic growth. Margins moved nicely, and the company reported 27% growth in diluted earnings per share. Cash flow has also been strong of late, though the company offered no cash flow statement for this quarter in its earnings release.
While growth was a bit muted compared with last quarter, most of the same underlying trends were in place. Climate control was still a growth laggard, even though bookings were up 12% and Wal-Mart
Ingersoll-Rand's been especially active in acquiring companies for the past five years, but that seems to be over. Management says it still sees opportunities to make positive "bolt-on" acquisitions in the industrial and security spaces. But it seems that these will be smaller deals, and that the company is relatively happy with its current major lines of business.
It's normal for conglomerates to carry discounts to pure-play companies, but in Ingersoll-Rand's case, it seems a bit overdone. Even an estimate of moderate low-teens growth suggests that this stock will produce a decent return over the next few years. Assuming that management has indeed crafted a business that can weather cyclical ups and downs, this should be an industrial idea worth further study.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).