Activist Targets Ingersoll Rand Shakeup Over Share Surge (Update 1)

Updated to include UBS, Wells Fargo analyst comments and additional data.

NEW YORK (TheStreet) -- An economic recovery and a 2012 share surge may not be enough for Ingersoll Rand(RAND) after the Nelson Peltz-run activist fund Trian Fund Management announced a 7.33% stake in the industrial conglomerate.

When unveiling its Ingersoll Rand stake, the investment fund headed by Peltz said that it would look to launch discussions with management on how to improve the 141-year old company's lagging earnings and shares.

While Trian indicated that it would push for some financial changes like share repurchases and an increase of the company's leverage, it left the door open for a much broader restructuring of the company's diverse portfolio of industrial, tools, compressed air and transportation units.

A Wednesday morning share surge and analyst reactions signal that Trian's investment may be positive for Ingersoll Rand's stock, however, a construction-based earnings rebound may be more likely than any radical changes brought on by the activist fund.

"We see upside this year as depressed construction end markets begin to recover, and as management continues to pursue margin improvement initiatives... More radical strategic alternatives (sale of a business, spin-off, separation, etc) are feasible, but we believe unnecessary given opportunities for further internal improvements," wrote UBS analyst Jason Feldman in a Wednesday note to clients.

Still, Feldman views the investment as a positive because as Trian advocates, Ingersoll Rand, "could safely be substantially more aggressive with share repurchases rather than focus on reducing leverage. We also believe there could be some opportunities to accelerate restructuring/cost saving initiatives."

In a filing Wednesday with the Securities and Exchange Commission, New York-based Trian said it has bought 21.9 million shares of Ingersoll-Rand and will seek active discussions with the Swords, Ireland-based industrial conglomerate on how to lift faltering shares and earnings.