Ingersoll Rand Sees Broad Demand Recovery, Long-Cycle Orders Accelerate

Key Points

• Demand is recovering broadly: Ingersoll Rand’s organic revenue growth improved from a 1% decline in the first quarter to approximately 4% growth in the second quarter. July orders in its Industrial Technologies and Services business rose in the mid-teens, with long-cycle projects across compressors, blowers, vacuum and pumps accelerating.
• Growth investments and pipelines are expanding: The company has increased sales capacity, localized manufacturing in Brazil and India, and sees opportunities tied to nearshoring, semiconductors, infrastructure and potential Middle East rebuilding. North America is showing the strongest momentum, while India remains a bright spot within a mixed broader EMEA region.
• Management expects margin and strategic improvement: Ingersoll Rand anticipates better price-cost trends in the second half and maintains long-term EBITDA margin targets of roughly 30% for ITS and mid-30% for PST. It is pursuing disciplined bolt-on acquisitions, with about 200 companies in its funnel, while China remains challenging due to overcapacity and pricing pressure.

Ingersoll Rand NYSE: IR executives said improving demand in short-, medium- and long-cycle businesses, combined with investments in commercial capabilities and engineered solutions, supported a more optimistic outlook for organic growth.

Speaking at a Morgan Stanley conference, Chairman, President and Chief Executive Officer Vicente Reynal said the company moved from a 1% organic revenue decline in the first quarter to approximately 4% organic revenue growth in the second quarter. He said the improvement was broad-based across end markets and regions rather than driven by a single project or easy comparison.

Reynal said Ingersoll Rand has invested during the past 12 to 18 months in additional sales resources, new facilities and localized manufacturing. The company opened a facility in Brazil intended to localize technologies in Latin America and expanded compressor capacity in India following double-digit growth in that market.

Orders Improve Across Cycle Lengths

Chief Financial Officer Vik Kini said Ingersoll Rand provided an unusual intra-quarter update because of encouraging order activity in July. Orders in the company’s Industrial Technologies and Services, or ITS, business were up in the mid-teens during the month, he said.

Kini said short- and medium-cycle momentum was comparable with the second quarter, while larger long-cycle projects accounted for the stronger growth rate. He said long-cycle orders included projects across compressors, blowers, vacuum and pumps and were geographically broad rather than concentrated in a single region.

According to Kini, certain projects had remained active in the company’s sales funnel but experienced longer customer decision-making cycles. In July, several of those projects advanced to purchase-order stages. He said the company did not view the activity as a one-time “flush” of its funnel, citing healthy quoting activity and continued replenishment of potential projects.

Reynal said the long-cycle pipeline continues to expand, supported by areas including nearshoring, semiconductor-related investment and potential rebuilding activity in the Middle East. End markets for those projects include infrastructure, power generation, air separation, water and wastewater, food and beverage, and pharmaceuticals, Kini said.

Regional Trends and Engineered Solutions

North America has shown the strongest recent improvement, with high-single-digit organic order momentum in the Americas during the second quarter, Reynal said. He attributed the recovery partly to improving demand in general manufacturing, food and beverage and power generation, following a prior decline in renewable natural gas orders.

Europe has been relatively stable over the past several years, though not a major growth contributor, executives said. Kini characterized the broader Europe, Middle East, India and Africa region as relatively neutral, with India continuing to post strong growth while other markets have shown mixed conditions.

The company is also pursuing a more integrated engineer-to-order strategy, drawing technologies from its ITS and Precision and Science Technologies, or PST, segments to provide modular solutions for customers. Reynal said the approach could support applications such as wastewater facilities and other sites requiring multiple technologies.

On artificial intelligence and data-center infrastructure, Reynal said Ingersoll Rand’s direct participation has been minimal so far. However, he said the company sees potential to offer engineered, modular systems to hyperscalers and colocation operators. The company is holding discussions with prospective data-center customers and has conducted customer research and site visits, he said.

Reynal also cited indirect opportunities from AI-related semiconductor expansion, air-separation compressor demand and wastewater requirements at large facilities.

Aftermarket, M&A and China

Aftermarket revenue represents roughly the high-30% range of company sales, according to Reynal. He said aftermarket demand can begin within roughly six months of an equipment installation through consumables required to maintain warranties and equipment efficiency. Longer-term opportunities include multiyear service agreements, remote monitoring and preventive maintenance.

On acquisitions, Reynal said Ingersoll Rand has roughly 200 companies in its acquisition funnel and 11 under letters of intent. He said the company remains focused on disciplined bolt-on acquisitions and does not see a current need for a transformational deal, although it has the financial capacity to pursue one if a particularly compelling opportunity emerges.

Kini said the company’s long-term preference is to maintain leverage below two times, though it could consider leverage above three times for a transformational transaction if there were a near-term path back below its target.

In China, Kini said pricing has remained challenging amid market overcapacity and a broader reset in demand. China accounted for about 10% of company revenue, down from approximately 15% several years ago, he said. Still, China grew at a low-double-digit rate in the second quarter including a low-single-digit pricing headwind, implying volume growth in the mid-teens, according to Kini.

Management expects pricing conditions in China to move closer to flat over time if volume recovery and market stability continue, though it does not expect pricing to match North American or European levels.

Margins and Second-Half Priorities

Reynal said ITS margin pressure in the second quarter reflected price-cost effects, tariff-related pricing actions, lower organic volume and investments in technology and commercial operations. He expects price-cost conditions to improve in the second half as the company laps some earlier tariff-related actions, realizes incremental pricing and benefits from restructuring actions.

Management reiterated that ITS could reach roughly 30% EBITDA margins over time, while PST has a path toward mid-30% margins. Kini said PST reported a 31.5% margin in the second quarter and is approaching its near-term target range, with continued growth in its precision technologies and life sciences businesses representing a key driver.

Executives said Ingersoll Rand expects pricing outside China to contribute roughly 1% to 2% through the cycle, while balancing price actions with the need to sustain improving organic volume growth.

About Ingersoll Rand (NYSE:IR)

Ingersoll Rand Inc NYSE: IR is a global industrial company that provides mission-critical equipment, technologies and services for managing air, gas and fluids. Its offerings are used in manufacturing, energy, transportation, food and beverage, life sciences, chemical processing and other industrial applications.

The company's products include compressors, vacuum and blower systems, air treatment equipment, pumps, fluid-handling systems, power tools and related aftermarket parts and services.

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