MKm Partners Initiate Coverage On Ingersoll Rand PLC

MKM Partners has initiated coverage on Ingersoll Rand PLC IR with a Buy rating and $48 PT. MKM believes consensus reflects the Street's skepticism regarding Ingersoll-Rand's Gap to Excellence program, which outlines a path to more than $6.00 of earnings power by 2013 via productivity initiatives. It expects sentiment to improve when 2011 guidance proves to be on-plan. MKM believes a replacement cycle in commercial and residential HVAC should augment a recovery in new activity and start to take hold in 2011. We believe the combination of easy comparisons and the replacement dynamic should support growth well above 3%-4% long-term growth to approximately 6%. In total, HVAC represents nearly 50% of IR's revenues. 2010 and 2011 EPS estimates of $2.36 and $3.15, respectively, are above consensus of $2.35 and $3.04. MKM's estimates are underpinned by 6% core growth, 25% volume-based incremental margins and 1% net productivity estimates. IR is trading flat at $40.60