Tariffs and Delayed Pricing Weigh on Outlook Amid Solid Execution

Industrial manufacturing company Ingersoll Rand (NYSE:IR) met Wall Streets revenue expectations in Q3 CY2025, with sales up 5.1% year on year to $1.96 billion. Its non-GAAP profit of $0.86 per share was in line with analysts’ consensus estimates.

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Revenue: $1.96 billion vs analyst estimates of $1.95 billion (5.1% year-on-year growth, in line)

Adjusted EPS: $0.86 vs analyst estimates of $0.86 (in line)

Adjusted EBITDA: $544.6 million vs analyst estimates of $541.2 million (27.9% margin, 0.6% beat)

Management lowered its full-year Adjusted EPS guidance to $3.28 at the midpoint, a 3.5% decrease

EBITDA guidance for the full year is $2.08 billion at the midpoint, below analyst estimates of $2.11 billion

Operating Margin: 19.2%, in line with the same quarter last year

Organic Revenue fell 1.3% year on year vs analyst estimates of flat growth (136 basis point miss)

Market Capitalization: $30.16 billion

Ingersoll Rand’s third quarter was met with a significant negative market reaction, as the company’s revenue and non-GAAP earnings per share matched Wall Street expectations, but underlying challenges began to surface. Management attributed the quarter’s results to persistent headwinds from recently implemented tariffs, slower organic growth across core industrial end markets, and delayed realization of pricing actions. CEO Vicente Reynal remarked that “the current dynamic tariff environment” is a temporary margin headwind, while CFO Vikram Kini highlighted proactive cost measures and disciplined M&A as key responses to these pressures.

Looking ahead, Ingersoll Rand’s revised guidance reflects continued caution, with management emphasizing the impact of tariffs and the timing of price realization as central challenges. Reynal stated that tariff-related costs will continue to weigh on margins into the first half of next year, but expects pricing actions to gradually offset these pressures. Kini further indicated that cost optimization initiatives and ongoing backlog growth should position the company to recover margin expansion in the second half of the year, while maintaining a focus on bolt-on acquisitions to drive long-term growth.

Management pointed to tariff-related costs, backlog-driven pricing delays, and steady execution on M&A as the main themes shaping the quarter’s performance and guidance revisions.

Tariff impact on margins: Tariff increases, particularly Section 232 tariffs, were described as the single largest drag on margins this quarter. Management expects these to continue impacting results until pricing adjustments fully flow through the backlog.

Backlog delays pricing benefits: The company’s growing backlog delayed the realization of recent price increases, with CFO Vikram Kini noting that most pricing actions will not be reflected in revenue until next year, especially for longer-cycle projects.

Disciplined M&A activity: Ingersoll Rand closed 14 bolt-on acquisitions year-to-date, targeting businesses that enhance its technological capabilities and life sciences footprint, with CEO Reynal highlighting the recent addition of Dave Barry Plastics to the Life Science platform.

Segment dynamics: The Precision and Science Technologies (PST) segment saw strong margin expansion and order growth, particularly in life sciences and short-cycle industrial businesses, while the Industrial Technologies and Services (ITS) segment faced revenue headwinds from tough clean energy project comparisons in the U.S.

Cost structure optimization: Proactive headcount reduction and other cost actions were implemented to offset margin pressures, but their full impact is not expected until 2026, indicating a lag between cost measures and financial improvement.