December 23, 2004  Email this 
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Ingersoll-Rand: Industrial Appeal
If you haven't yet had your fill of analysts' "best bets for 2005" picks, here's another for the stocking. Standard & Poor's likes industrial heavyweight Ingersoll-Rand Co. (IR) for its potential total returns in the coming year. Diversification is the key to the conglomerate's appeal, says S&P in its December 15 forecast edition of The Outlook. Ingersoll-Rand manufactures an array of tools and machinery, ranging from drill bits and refrigeration systems for trucks and supermarket display cases to its Bobcat line of construction vehicles. The company, which also makes Kryptonite and Schlage locks and security systems, just announced its purchase of the remaining 70% of Italian lockmaker CISA SpA to pad its security division.
Ingersoll took in nearly $10 billion in 2003, according to S&P, with 38% of those revenues coming from outside North America.
S&P believes growth in the construction industry will gather even more speed in 2005, which should help Ingersoll-Rand boost its annual sales by 9% to 10%. (Its ten-year average sales gain comes in at about 8%). S&P analysts "also see considerable room for improvement in the operating margin, which bottomed in 2001."
At $82, shares trade for less than 15 times the 2005 consensus earnings estimate of $5.54 per share, a P/E below its historical average.
Analysts at Prudential raised Ingersoll-Rand's price target to $90 from $85, the same value S&P places on the stock.
As an added enticement, Ingersoll pays its shareholders a $1 per share annual dividend.
--Elizabeth Frengel
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