Ingersoll Rand is out with an absolutely nightmarish pre-earnings release this evening displaying exactly what I wrote about in my earnings update. Much like Nucor, IR is at the epicenter of the global economy. If a company like IR is doing poorly it’s likely that the entire economy is doing poorly.
After the bell IR said:
“Our initial forecast for the first quarter of 2009 was based on a significant decline in our key end markets. Like most industrial companies, we have experienced an accelerated decline in business compared with prior expectations. Our revenues will be lower than we previously forecast. However, because of cost reduction and productivity programs we initiated in 2008, first quarter earnings per share are expected to remain in our prior range, although at the low end.”
First-quarter revenues are projected to be in the range of $2.9 billion, a decrease of approximately 25% to 27% compared with proforma 2008 results of $3.9 billion. The company’s original forecast for the quarter was for proforma revenues to decrease by 19%, in the $3.1 to $3.2 billion range. Cost management, benefits from restructuring programs and accelerated synergy savings from the acquisition of Trane have helped to offset the loss of operating earnings due to the lower volumes.
“For the full year, assuming current business conditions continue, and without any improvement in the economy or any positive impact from economic stimulus packages, revenues and earnings would be adversely affected. Revenues would be in the range of $13.6 billion, down approximately 17% from 2008 on a proforma basis, versus previous guidance of down by 8% to 9%. Earnings per share from continuing operations would be approximately $0.45 below the bottom end of the previous guidance range of $1.85 to $2.25 per share.” Estimates for both the first quarter and the full year are preliminary and could change.
“We expect to meet our debt-reduction targets for 2009 as we continue to focus on generating earnings, aggressively manage working capital, control capital expenditures and reduce dividend payments. We are currently assessing our forecast for the full-year based on updated market expectations and available contingency actions. A more comprehensive discussion of first-quarter results and a full-year forecast will be presented in our first quarter earnings release, scheduled for April 22, 2009,” said Mr. Henkel.
Ignoring the dividend cut and the financing concerns IR’s guidance reduction is something I expect to see a lot of this quarter. And for those of you who are wondering whether this is “priced in” just take a look at the current estimates:
Analysts currently expect Q1 revenues of 3.15B vs IR’s estimates of 2.9B. Full year revenue estimates are 14.5B vs IR’s estimates of 13.6B. Full year EPS estimates are for 1.78 vs IR’s new expectation of 1.45. Analysts estimates are similar across just about every industry group. The 20% overestimate by 20 different analysts is something that we will likely see across the board this quarter. Second half estimates need to be slashed and that is likely to put pressure on stocks.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.