Ingersoll Rand fell the most in almost three years after cutting its full-year sales and profit forecasts amid slowing demand for climate control and residential-security businesses.
Shares of the maker of security systems and Trane air conditioners dropped $3.87, or 12 percent, to $28.09 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest decline since Nov. 20, 2008. The shares have fallen 40 percent this year.
Consumer-related businesses such as residential heating and air conditioning, golf and residential security were “significantly affected” in the third quarter, accounting for the lower sales volume, the company said in a statement today. Commercial-security sales were also slower than expected. In July, Ingersoll Rand reported second-quarter profit that missed analysts’ estimates, hurt by lower sales of Trane products.
“The company has now disappointed for the second consecutive quarter in a rather unforgiving market,” James Lucas, an analyst with Janney Montgomery Scott LLC in Philadelphia, said in a research note today. “We would expect IR’s shares to be range-bound for the foreseeable future until the company can restore investor confidence.”
Revenue this year will be $14.85 billion to $15 billion, down from a previous projection of $15.3 billion to $15.5 billion, the Swords, Ireland-based company said. Analysts projected $14.8 billion, the average of 16 estimates compiled by Bloomberg.
The residential business makes up 15 percent of revenue and less than 10 percent of profit, said Lucas, who lowered his recommendation on the stock today to “neutral” from “buy.”
Ingersoll Rand predicts 2011 earnings per share of $2.70 to $2.80 a share, reduced from an earlier forecast of $2.90 to $3.10. Analysts projected $2.94, according to the average of 19 estimates. For the third quarter, the company cut its earnings per share forecast to 77 cents to 80 cents from 85 cents to 95 cents previously.
“We already did a resetting of the bar in the residential business,” Joshua Pokrzywinski, an analyst with MKM Partners in Stamford, Connecticut, said in a telephone interview. “To come back 2 1/2 months later and take down numbers for the year another 27 cents kind of implies that these guys have a crisis of credibility.” He has a ‘buy’ rating on the shares.
Ingersoll Rand reported on July 21 second-quarter profit of 88 cents a share, excluding some items, which trailed analysts’ estimates of 93 cents. Sales at the company’s residential solution unit fell 1.3 percent from a year ago to $632.1 million and bookings dropped 6 percent.
United Technologies Corp., the maker of Carrier air conditioners, said in July that its residential cooling market was “softer.”
For Ingersoll Rand, there are concerns the weaker sales may spill over into the commercial unit, Stephen Tusa, a New York-based analyst with JPMorgan Chase & Co., said in a report today.
“While the commercial businesses remain ok, we think it’s a matter of time before related orders slow,” wrote Tusa, who has an ‘overweight’ rating on the shares. “The size of revenue miss suggests there is some incremental weakening there.”
Ingersoll Rand had reaffirmed its full-year profit forecast on Aug. 8 and said it agreed to sell a 60 percent stake in the Hussmann refrigerated display case unit for $370 million. Hussmann adds 4 cents to the third-quarter earnings-per-share forecast and about $200 million to revenue, the company said today.