Ingersoll-Rand Plc (NYSE:IR) Q2 2016 Earnings Conference Call - Final Transcript

Jul 27, 2016 • 10:00 am ET


Ingersoll-Rand Plc (NYSE:IR) Q2 2016 Earnings Conference Call - Final Transcript


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Zac Nagle

[Technical Issues] earnings conference call released earnings this morning at 6:30 A.M and the release is posted on our website. This call is also being webcast and archived on our website at, where you will find the presentation accompanying our comments this morning.

Please go to Slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Please see our SEC filings for a description of some of the factors that may cause the actual results to differ materially from anticipated results. The presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release. The participants on this morning's call are Mike Lamach, Chairman and CEO; Sue Carter, Senior Vice President and CFO; and Joe Fimbianti, Director of Investor Relations. With that, please go to Slide 3, and I will turn the call over to Mike.

Mike Lamach

Great, thank you, Zac, and officially welcome to Ingersoll-Rand in your first earnings call with us. As you can see from our earnings release this morning, we had another excellent quarter. We had outstanding execution across the company, delivering 15% EPS growth, record operating margins, share gains, and strong cash flow, despite challenging industrial markets. We are seeing strong momentum in the operating system that we have been installing and developing in the company over the past six-plus years.

As we did last quarter, I'd like to start out spending a few minutes linking this quarter's performance to the longer-term strategic direction of the company to help investors understand how we're building a more valuable, sustainable, and less cyclical company over the longer term. With our operating system, operational excellence and growth excellence have been cornerstones of the strategy from the beginning, with our goal of becoming the very best operating company within our diversified or multi-industry peer group.

This quarter, we continued to deliver best-in-class operating leverage of 47% and our goal is to achieve top quartile organic growth for the quarter and for the year as well. There were a number of noteworthy milestones that showed clear progress in these areas during the quarter. Our residential HVAC business had another outstanding quarter with record revenue and profitability. We estimate that over the past quarter and 12 months we now have benchmark profitability in this business and are seeing the benefits of a five-year effort to refresh the product line, align and reposition the channel, and dramatically improve product management, manufacturing, and supply chain. Our residential business is also a model for the deployment of product growth teams, who are delivering market-share and margin growth.

Our commercial HVAC business in North America had record second quarter bookings and revenue. Similar to our residential HVAC story, we have executed on a consistent strategy with a goal to have the freshest, most energy efficient, and reliable product line in the industry and have supported that with consistent operational improvements along the