Ingersoll-Rand's Climate Company Named Trane Technologies

Ingersoll-Rand plc IR recently announced that its climate company will be known as Trane Technologies plc. This climate company will come into existence in early 2020 following Ingersoll-Rand’s divestment of its Industrial segment to Gardner Denver Holdings, Inc. GDI.

It is worth noting here that Ingersoll-Rand’s share price increased 1.46% yesterday, eventually closing the trading session at $133.01 per share.

Inside the Headlines

As noted, Trane Technologies will be a pure-play climate control company, with market-leading brands being Trane and Thermo King. Trane Technologies’ innovative capabilities will help it provide effective solutions to customers in transportation, buildings and homes arenas.

Trane Technologies is expected to trade under the symbol “TT” on the New York Stock Exchange. While Mike Lamach will act as the company’s chairman and CEO, Dave Regnery will be the president and chief operating officer.

Details of the Divestment Agreement

In April 2019, Ingersoll-Rand entered an agreement to sell its Industrial segment to Gardner Denver. The transaction will be accomplished by spinning-off the Industrial segment to Ingersoll-Rand’s shareholders and then combining it with Gardner Denver.

The transaction, once completed, will create a global industrial company with expertise in mission-critical flow creation and industrial technologies. This company’s name is expected to be Ingersoll Rand while the trading on NYSE will be done under “IR” ticker symbol.

The combined company’s 2019 revenues are predicted to be $6.6 billion and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) are likely to be $1.6 billion. Additionally, the company anticipates realizing cost-synergies of $250 million by the end of three years of the completion of transaction.

Meanwhile, Ingersoll-Rand’s Climate segment will become a pure-play climate solution provider. Its revenues and adjusted EBITDA are predicted to be $12.9 billion and $2 billion respectively. Upon completion, the climate company will receive $1.9 billion in cash. The proceeds are likely to be used for repaying debts ($600 million to $1 billion) as well as repurchasing shares and making acquisitions ($900 million to $1.3 billion).

Subject of receipt of regulatory approvals and fulfillment of customary closing conditions, Ingersoll-Rand believes that the transaction will be completed in early 2020.

Zacks Rank, Estimates and Price Performance of Ingersoll-Rand

With a market capitalization of nearly $31.4 billion, Ingersoll-Rand currently carries a Zacks Rank #3 (Hold). The company is poised to gain from innovation of products; robust demand in non-residential HVAC (heating, ventilation, and air conditioning), residential HVAC and others; shareholder-friendly policies and inorganic initiatives. However, cost inflation, forex woes and high debts are concerning.

In the past 60 days, Ingersoll-Rand’s earnings estimates have been revised for 2019 and 2020. Currently, the Zacks Consensus Estimate is pegged at $6.40 for 2019, reflecting growth of 0.3% compared with the tallies 60 days ago. The same for 2020 is pegged at $6.92, exhibiting a decline of 0.6% compared with the tallies 60 days ago.

Ingersoll-Rand PLC (Ireland) Price and Consensus

 

Ingersoll-Rand PLC (Ireland) Price and Consensus

Ingersoll-Rand PLC (Ireland) price-consensus-chart | Ingersoll-Rand PLC (Ireland) Quote

In the past three months, shares of Ingersoll-Rand have increased 7% compared with the industry’s growth of 3.9%.

Stocks That Warrant a Look

Two better-ranked stocks in the industry are Tennant Company TNC and DXP Enterprises, Inc. DXPE. While Tennant currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Tennant and DXP Enterprises have improved for the current year. Further, Tennant and DXP Enterprises delivered positive earnings surprises of 40% for and 16.39% for the last reported quarter, respectively.

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