Industrial machinery conglomerate Ingersoll Rand (IR) will report second quarter earnings this morning. This is not an earnings preview post or comments about my expectations. Obviously this market is not right in the head, cookoo, insane, whatever you want to call it. So I’m not expecting the stock price to correlate with the fundamental story one way or another. I do want to point out to folks that Ingersoll Rand is a completely different beast that we’ve all known it as. No longer is it construction equipment or the road building machinery that we’ve all seen when driving around. While it still has a lot of those identifiably Ingersoll products, Ingersoll Rand went through a dramatic transformation this past year as it sold off Bobcat (small excavators and loaders) and acquired heating, ventilation, and air conditioning (HVAC) maker Trane.

Folks should forget the old Ingersoll Rand and focus on the newly-acquired Trane business as that should be the pride and joy going forward. Trane was such a big acquisition that Trane is now the dominant business for Ingersoll Rand, and rightly so. HVAC (heating, ventilation, and air conditioning) is a major component of both the infrastructure and energy theme, but a story which the media has chosen to neglect. Given the high energy prices, more attention should be paid to HVAC systems since the heating and cooling of buildings, homes, factories, etc. is actually the top user of energy in the U.S. All this talk of alternative fuels for our cars or solar power pales in comparison to the amount of energy we could save on heating and cooling buildings. Also, energy conservation rather than increasing energy production would lighten the load on our already failing power grid. Similarly, it would save costs as we wouldn’t have to build out our power grids and increase power generation capacities with new power plants, wind farms, solar panels, etc.

Last summer, I wrote an in-depth piece on this topic in Four Energy Efficiency Trades for a Cool Summer. I think it’s such a decently written piece that I’m not gonna do it again- just read it! But remember, Trane was a brand of American Standard at the time of the publication, but Trane is now part of Ingersoll Rand. So what was said about Trane now applies to Ingersoll Rand. In 2003, I was part of a team that conducted an energy efficiency study of the Keck Science Building of the Claremont Colleges (CA), working with both Trane and Johnson Controls (JCI) on proposed solutions. I can attest to the importance and viability of the HVAC system to increase energy efficiency.

For a closer look into the “new” Ingersoll Rand, Jim Cramer had a great Mad Money segment dedicated to it: The Great Transformation of Ingersoll-Rand. He explained it much better than I can. Take a gander. Or, read the segment’s transcript on Mad Money Recap.

Referenced Resources:

• Industrial 101: Industrial Products and Equipment for Dummies
• FERC Electric Power Markets: U.S. Government Data, Analysis, and Reports
• Jim Cramer’s Mad Money: The Great Transformation of Ingersoll-Rand
• The Great Transformation of Ingersoll-Rand Transcript
• Mad Money Recap

** Disclosure: I am long IR calls as of this post **

This entry was posted on Friday, August 1st, 2008 at 4:43 am and is filed under Engineering, Gov\'t & Utilities, Oil & Energy, Research Analysis, Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.