Q3 2024 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7% | Driven by higher pricing and acquisition contributions, partially offset by lower organic volume in certain geographies and unfavorable currency. The overall increase reflects the company’s focus on price-cost management and strategic M&A. |
Precision and Science Technologies | +27% | Boosted by acquisitions (e.g., Controlled Fluidics, Del PD Pumps) and strong pricing, with some organic growth in life sciences and industrial markets. This segment also benefited from improved demand-generation activities and operational execution. |
Original Equipment | +6% | Supported by recent acquisitions and price increases, although organic volumes declined slightly in certain product lines. Despite currency headwinds, product innovation (like advanced compressor offerings) helped sustain growth. |
Aftermarket | +9% | Enhanced by acquisition synergies, pricing actions, and a continuing strategic emphasis on service and parts. The company has set a goal to raise the aftermarket share of total revenue, targeting increased attachment rates for aftermarket products. |
Americas | -12% | Reflects a slowdown in short-cycle orders compared to a strong prior-year period. While pricing remains positive, certain end markets, such as energy and general industrial, softened. Some larger projects did not repeat, driving the overall region’s year-over-year decline. |
EMEIA | -19% | Impacted by macroeconomic headwinds and lower industrial demand in Western Europe. Ongoing geopolitical uncertainties also dampened capital spending in select end markets. Currency effects and fewer large project orders versus the prior year further contributed to the decline. |
Asia Pacific | -18% | Primarily driven by a drop in China amid economic headwinds, especially in previously high-growth sectors like EV battery and solar. Lower large-project orders and cautious customer spending contributed to the regional slowdown, despite some sequential stabilization. |
Operating Income (EBIT) | +12% | Benefited from gross margin expansion attributable to pricing gains and productivity initiatives. Although selling and administrative expenses rose, disciplined cost control and the integrated IRX operational framework helped drive EBIT improvements overall. |
Net Income | +7% | Higher gross profit and lower tax provisions lifted net income. Offsetting factors included increased operating expenses (e.g., M&A transaction costs) and one-time items (like certain asset write-downs), leading to a modest but positive YoY increase. |
EPS (Basic) | +6% | Reflects the net income growth and consistent share-repurchase activity, though partially offset by higher interest expenses. While the earnings base expanded on acquisitions and cost initiatives, additional one-time charges moderated the overall increase in EPS. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2024 | 6% to 8% | 5% to 7% | lowered |
Organic Revenue Growth | FY 2024 | 0% to 2% | Reduced by 200 bps from prior guidance | lowered |
M&A Contribution | FY 2024 | $440 million | $455 million | raised |
FX Impact | FY 2024 | 1% headwind | Flat | raised |
Adjusted EBITDA | FY 2024 | $2.01B to $2.06B | $2.01B to $2.04B | lowered |
Adjusted EPS | FY 2024 | $3.27 to $3.37 | $3.28 to $3.34 | lowered |
Corporate Costs | FY 2024 | No prior guidance | $170 million | no prior guidance |
Interest Expense | FY 2024 | Gross $250M; Net $170M | No changes | no change |
Adjusted Tax Rate | FY 2024 | 22% to 23% | No changes | no change |
CapEx | FY 2024 | No changes from prior guidance | No changes | no change |
Free Cash Flow Conversion | FY 2024 | Remains in line with prior guidance | No changes | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue Growth | Q3 2024 | 6% to 8% | 7% year-over-year growth (1,861.0Vs. 1,738.9) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Margin Expansion | Has been a consistent theme: Q2 saw a 230 bps uplift for ITS , Q1 showed a 290 bps gain overall , and Q4 2023 reported continued margin strength. | Achieved a 210 bps year-over-year improvement in adjusted EBITDA margin, with ITS up 190 bps and PST slightly down 30 bps but showing sequential improvement. | Consistent positive trend |
Organic Order Growth (PST & ITS) | Q2 PST orders grew 6% , ITS orders faced some headwinds ; Q1 PST orders were down 5% but improving sequentially , ITS down 7% on large-project timing. | PST: 3% organic order growth; ITS: 3% organic revenue growth in Q3 on top of strong comps. | Stable with slight rebound |
Biopharma & Life Sciences | Q2 showed 8% organic order growth in legacy Life Sciences and optimism about ILC Dover biopharma unit ; Q1 saw sequential improvements in Life Sciences ; Q4 2023 expected normalization by H2 2024. | Highlighted strong momentum in biopharma (high potency APIs, gene therapies) and continuing ILC Dover integration. | Continued positive outlook |
Service Business & Acquisitions | Q2 stressed CAPS acquisition for service expansion in Australia ; Q1 highlighted ILC Dover strategic fit for Life Sciences ; few details in Q4. | Service business showed positive momentum, and ILC Dover integration proceeded well; 15 acquisitions in 2024, focusing on bolt-on deals. | Ongoing expansion |
China Market Weakness | Q2 indicated cautious outlook, expecting stability rather than a major rebound ; Q1 noting tough comps in EV battery/solar ; Q4 2023 saw mid-single-digit order decline in China. | Remains challenged; stimulus has yet to yield tangible benefits. China represents 15% of ITS, with orders down 15%. | Persistently cautious |
Supply Chain Disruptions | Q4 2023 highlighted ongoing disruptions affecting factory efficiencies. | No mention in Q3 2024. | No longer mentioned |
Pricing Normalization | Q2 suggested returning to 1%-2% net pricing levels , and Q4 2023 anticipated 2% full-year price growth in 2024. | Not specifically referenced in Q3 2024. | Previously an active topic |
High Backlog Levels | Q2 backlog supported revenue guidance ; Q1 backlog up 2% YoY with a 1.02x book-to-bill ; Q4 2023 noted historically high backlog due to longer-cycle projects. | Backlog grew year-over-year and sequentially; order timing pushed some shipments into 2025. | Continues to be elevated |
Energy Efficiency & Sustainability | Q2 had only broad sustainability references ; Q1 saw new oil-free vacuum technology cutting 50% energy consumption ; Q4 2023 included 17% efficiency gain in some compressors. | Introduced patented oil-free solutions (30% cost reduction) , acquisitions (e.g., Blutek) targeting biogas & carbon capture. | Growing emphasis |
Longer-Cycle Projects | Q2 noted mega-project bottlenecks pushing revenue to 2025 ; Q1 cited large-project timing as a key factor in order variability ; Q4 2023 backlog heavily influenced by longer-cycle items. | Delays due to site readiness, EPC capacity; funnel activity up 22% YoY, shifting revenue into 2025. | Adds visibility into 2025 |
Marketing Qualified Leads (MQLs) | Q2 MQLs rose 13% YoY but faced elongated order conversion ; Q1 MQLs up 4% YoY with stronger sequential gains. No Q4 data. | MQLs up 12% YoY and 7% sequentially; conversions delayed but no cancellations. | Consistent pipeline driver |
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2025 Outlook
Q: Will growth return to normal in 2025?
A: Management expects a gradual recovery in 2025 but does not foresee a great recovery. They are encouraged by year-over-year and sequential backlog growth, which bodes well for 2025. Detailed guidance will be provided in the next earnings call. -
Margin Outlook
Q: What is the margin outlook for Q4 and 2025?
A: They delivered exceptional margin performance in Q3, with EBITDA margins around 30%. In Q4, they expect margins to remain at this level, with corporate costs normalizing. For 2025, they anticipate normal margin expansion in line with historical trends while continuing investments in growth initiatives. -
Project Delays
Q: What is causing project delays and their impact?
A: Project delays are global, primarily due to site readiness issues like permits, labor availability, and EPC capacity constraints. While the sales cycle is elongated, there are no cancellations, and backlog is growing, which is encouraging for future prospects. -
China Market
Q: How is demand in China affecting the business?
A: The China market has been challenging, with significant declines in orders. However, customers are willing to invest, and management is optimistic about engagement levels. They believe China's stimulus on energy efficiency could benefit them in 2025. -
M&A Activity
Q: Will M&A activity remain robust in 2025?
A: Yes, management sees a lot of good activity and expects 2025 to be encouraging for acquisitions. They have several bolt-on acquisitions in the pipeline, continuing their active M&A strategy. -
PST Growth
Q: Is PST expected to return to growth?
A: Positive order momentum in PST has been observed for a few quarters. Management expects PST to return to positive organic growth in Q4 and is encouraged by the outlook for 2025. The integration of ILC Dover is going well, contributing to growth. -
Biopharma Business
Q: How is the biopharma business performing?
A: The biopharma business is growing strongly, up 20%, focusing on high-potency APIs for gene therapies, cancer treatments, and GLP-1 weight reduction medicines. They provide essential powder handling and containment processes for these developments. -
Service Revenue
Q: How is service revenue performing?
A: Service revenue is positive with good momentum and organic growth. Their focus on recurring revenue and service-oriented solutions is well-received by customers across the U.S., Europe, China, and India. -
Orders and Backlog
Q: What are expectations for orders and book-to-bill?
A: Management expects the full-year book-to-bill ratio to be approximately 1. Although the second half typically sees a ratio below 1, they are experiencing positive order momentum in PST and anticipate organic orders to be strong in Q4. -
Free Cash Flow
Q: What is the outlook for free cash flow?
A: Free cash flow remains strong, with ongoing opportunities to improve working capital, especially from M&A activities. They continue to target 100% free cash flow conversion, focusing on accounts payable, inventory optimization, and efficient cash management.
Research analysts covering Ingersoll Rand.