Trian Fund reduces its stake in Ingersoll-Rand

Trian Fund and Ingersoll-Rand

Trian Fund Management, L.P. added to its positions in the Bank of New York Mellon Corporation (BK), Mondelez International Inc (MDLZ), PepsiCo, Inc. (PEP), and Tiffany & Co. (TIF). During the second quarter of 2014, the fund decreased its positions in Allegion plc (ALLE) and Ingersoll-Rand plc (IR), and sold its position in GNC Holdings, Inc.(GNC).

A 13D filing in September reveals that Trian Fund added to its position in Wendy’s Company (WEN).

Trian Fund reduces its stake in Ingersoll-Rand

Trian Fund reduced its position in Ingersoll-Rand in the quarter ended in June. The stock accounted for 11.02% of the fund’s 2Q14 portfolio.

Corporate profile

Ingersoll-Rand is a global diversified firm providing products, services, and solutions to enhance the quality and comfort of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and increase industrial productivity and efficiency.

Revenue beats estimates

Ingersoll-Rand reported net earnings of $291.3 million, or earnings per share (or EPS) of $1.07, for the third quarter of 2014. Net earnings included $298.3 million, or EPS of $1.10, from continuing operations, as well as a net loss of $7.0 million, or negative EPS of $0.03, from discontinued operations.

The results for 3Q 2014 included $1.2 million of restructuring expenses that had a negligible impact on EPS. This compares with net earnings of $165.9 million, or EPS of $0.56, for 3Q 2013

The company’s reported revenues increased 5% to $3,385 million, beating estimates by 6%. In 3Q 2013, revenues were $3,214 million. Total U.S. revenues were up by 6% compared with 2013, and revenues from international operations increased 5%. New equipment and aftermarket revenues were up 6% and 4%, respectively, compared with 3Q 2013.

The 3Q 2014 operating margin was 13.0%, compared with 11.8% in 2013.

Segment review

The Climate Segment delivers energy-efficient solutions globally. It includes Trane and American Standard Heating and Air Conditioning, which provide heating, ventilation, and air conditioning (or HVAC) systems, and commercial and residential building services, parts, support, and controls. The segment also includes Thermo King, the leader in transport temperature control solutions. Revenues for 3Q 2014 were $2,644 million, increasing 6% compared with 3Q 2013.

Total Thermo King refrigerated transport revenues increased in the third quarter compared with last year. The company saw gains in all equipment categories and in aftermarket revenues. Bookings increased by more than 20% in 3Q 2014, due to strong orders for auxiliary power units, marine equipment, and demand in the North American trailer business.

Residential HVAC revenues increased by a low-single-digit percentage in 3Q 2104 compared with 2013, primarily due to volume gains in air conditioning units. Bookings also increased by a low-single-digit percentage compared with last year.

The Industrial Segment delivers products and services that enhance energy efficiency, productivity, and operations. It includes Ingersoll-Rand compressed air systems and services, power tools and material handling systems, and ARO fluid management equipment, as well as Club Car golf, utility, and rough terrain vehicles. Total revenues in 3Q 2014 were $741 million, increasing by 3% compared with the third quarter of 2013.

Revenues for air compressors and industrial products increased by a low-single-digit percentage compared with 3Q 2013. Revenues were up mid-single digits in the Americas and Asia, and declined in Europe. Bookings increased by a low-single-digit percentage compared with last year. Club Car revenues increased slightly compared with 3Q 2013, as sales growth in utility vehicles offset decreased activity in the North American golf market.

 Acquisition of Cameron’s Centrifugal Compressor division

In August, the company entered into an agreement to acquire the assets of Cameron International Corporation’s centrifugal compression division for $850 million. The acquisition is expected to close before the end of the year, subject to regulatory approval.

Ingersoll-Rand management said, “this deal offers complementary product, manufacturing and engineering strengths, as well as financial synergies that make it a natural fit into our core business and will provide meaningful value to our shareholders. This opportunity expands our Industrial Segment and will be accretive to EPS & EBITDA margins in 2015.”

Outlook

Based on a forecast of moderate growth in worldwide construction and modest growth in industrial markets for the remainder of the year, the company expects revenues for full-year 2014 to increase by approximately 4%. Ingersoll-Rand expects full-year reported EPS from continuing operations to be in the range of $3.17 to $3.21.

Fourth-quarter 2014 revenues are expected to increase by approximately 3% to 4%. Reported EPS from continuing operations for the fourth quarter should be in the range of $0.68 to $0.72.

The concluding part of this series looks at the position Trian Fund sold during Q2.