What do refrigeration equipment, construction machinery, and golf carts all have in common? Not a single thing. But such a wide array of product areas nevertheless works out in the end for Ingersoll-Rand (NYSE:IR).
Revenue for the fourth quarter rose 10% as reported, with organic growth of about 6% -- a result that's on the high end of the company's long-term organic growth targets. Despite high material costs, Ingersoll-Rand was still able to leverage higher sales into better profitability. Operating margins improved a bit, and operating income grew 16% over last year, leading in turn to per-share growth from continuing operations of 27%.
Though there can be drawbacks in running a number of very different businesses under one corporate roof, there's also a notable advantage: Strong results in some businesses can offset weaker results in others and thus mute the peaks and troughs a bit.
Each of Ingersoll's business units posted revenue growth, with the strongest reported growth in security technology (industrial technology was stronger on an organic basis) and the weakest in climate control. On the income side, security technology was again the leader (though climate control had double-digit growth as well), while construction technologies were hurt by higher costs and declines in China.
While cash flow growth here has been a little spotty, at least the return on invested capital has been improving. Factor in the possibility of more "bolt-on" acquisitions and the likelihood of further margin improvement, and the company should be in good shape to hit its targets.
A nice run in the fall took some of the cheapness out of this stock, at least relative to other conglomerates that I've recently looked at, such as United Technologies (NYSE:UTX), Danaher (NYSE:DHR), and Tyco (NYSE:TYC). But Ingersoll-Rand still doesn't look overpriced to me.
For more amalgamated Takes:
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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).
