Ingersoll Rand (IR)

Industrial manufacturing company Ingersoll Rand (NYSE:IR) met Wall Streets revenue expectations in Q3 CY2025, with sales up 5.1% year on year to $1.96 billion. Its non-GAAP profit of $0.86 per share was in line with analysts’ consensus estimates.

Company Overview

Started with the invention of the steam drill, Ingersoll Rand (NYSE:IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.

Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Dover (NYSE:DOV), Xylem (NYSE:XYL), and Parker Hannifin (NYSE:PH).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Ingersoll Rand’s 6.4% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Ingersoll Rand’s annualized revenue growth of 5.7% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

Ingersoll Rand also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Ingersoll Rand’s organic revenue was flat. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Ingersoll Rand grew its revenue by 5.1% year on year, and its $1.96 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not catalyze better top-line performance yet.

Ingersoll Rand has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 42.1% gross margin over the last five years. Said differently, roughly $42.07 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

Ingersoll Rand’s gross profit margin came in at 43.7% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Ingersoll Rand has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Ingersoll Rand’s operating margin rose by 4.6 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Ingersoll Rand generated an operating margin profit margin of 19.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Ingersoll Rand’s EPS grew at an astounding 19.3% compounded annual growth rate over the last five years, higher than its 6.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Ingersoll Rand’s earnings to better understand the drivers of its performance. As we mentioned earlier, Ingersoll Rand’s operating margin was flat this quarter but expanded by 4.6 percentage points over the last five years. On top of that, its share count shrank by 4.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Ingersoll Rand, its two-year annual EPS growth of 6.9% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Ingersoll Rand reported adjusted EPS of $0.86, up from $0.84 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Ingersoll Rand’s full-year EPS of $3.22 to grow 10.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Ingersoll Rand has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 15.7% over the last five years.

Taking a step back, we can see that Ingersoll Rand’s margin expanded by 3.5 percentage points during that time. This is encouraging because it gives the company more optionality.

Ingersoll Rand’s free cash flow clocked in at $383.7 million in Q3, equivalent to a 19.6% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Ingersoll Rand historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.7%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Ingersoll Rand’s ROIC averaged 2.2 percentage point increases over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Ingersoll Rand reported $1.18 billion of cash and $4.79 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.05 billion of EBITDA over the last 12 months, we view Ingersoll Rand’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $111.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Ingersoll Rand beat analysts’ organic revenue expectations this quarter. On the other hand, its full-year EBITDA guidance missed and full-year EPS guidance was lowered, which is usually a bad sign. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 6.2% to $73.84 immediately after reporting.

Updated: December 4, 2025 at 10:02 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Ingersoll Rand.

When it comes to Ingersoll Rand’s business quality, there are some positives, but it ultimately falls short. Although its revenue growth was mediocre over the last five years, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. Be wary, however, as Ingersoll Rand’s organic revenue declined.

Ingersoll Rand’s P/E ratio based on the next 12 months is 22.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $87.70 on the company (compared to the current share price of $79.40).