Oct 28, 2026 earnings call — Recovery plan to regain share and restore margins
Updated full-year adjusted EPS guide is $21 to $21.50 and revenue growth now expected ~6%.
Revenue $1.6B (est $1.6B) · EPS $6.84 (est $7.29)
Key quotes
"We have launched a recovery plan focused on regaining share and restoring margins."
"We are rewiring our pricing approach to be more dynamic in current competitive conditions."
"we can talk about that being inherent part of our portfolio with the full launch coming up in Q1 27"
Analyst Q&A 12
HCS margin drop and inventory
Q (Jeffrey Hammond · KeyBanc): He wanted to understand drivers of margin degradation in HCS and whether inventories still need to be destocked.
A: Management said the main cause was a short-term mismatch: price realization was low while tariffs and inflation hit in Q3. They plan a price increase for 2027 and said inventories are down 15% with more seasonal declines expected.
"I just believe there is a short term mismatch between our pricing realization which was very low, and inflation and tariff that came through." — Alok Maskara (CEO)
Where share loss happened and guide drivers
Q (Ryan Merkel · William Blair): He asked where share loss occurred, whether price actions helped regain share, and the split between 1-step and 2-step HCS revenue guidance.
A: Management said the noticeable share loss was in RNC and there is no incremental share loss beyond that; defending share forced lower price realization in Q3. They said 1-step is expected to be down in the full year low double digits and 2-step expected to be up low single digits, and the guide decline was mostly related to second half pricing actions.
"Overall, what we expect is in the 1 step to be down in the full year low double digits 2 step, we expect to be up kind of low single digits." — Michael Quenzer (CFO)
Competition type and cost cuts
Q (Noah Kaye · Oppenheimer): He asked which competitors are driving pressure (incumbents vs new entrants) and what cost-structure actions are needed; also asked about data-center cooling investments.
A: Management said lower-tier competition mainly comes from new overseas entrants, while incumbents pressure the rest; cost savings will come largely from retooling the distribution network, exiting capacity, and SG&A productivity. On data-center cooling, they said a 2-phase cooling technology is about 18 months away and is not baked into plans.
"So the technology which is 18 months away perhaps from the current state technology." — Alok Maskara (CEO)
Entry-tier launch and Q4 HCS volumes
Q (Tommy Moll · Stephens): He asked if the entry-tier product will launch early next year and what could drive a big Q4 HCS volume decline.
A: Management said the entry-tier SKUs and pilots are ready and a full launch is planned in Q1 27 to help affordability and defend share. For Q4, they view it as a smaller, softer quarter and guided to a mid single digit total sales decline for the fourth quarter organically, noting sales-per-day matters.
"So those all design efforts are now at a stage We can talk about that being inherent part of our portfolio with the full launch coming up in Q1 27." — Alok Maskara (CEO)
Margin outlook and inventory impact
Q (Nigel Coe · Wolfe): He asked to confirm implied Q4 HCS margin decline and color on confidence for margin expansion in 2027; also inventory drivers.
A: Management said it is early for detailed 2027 breakdown but they expect 2027 to have higher sales, EPS, and EBIT; for the full year they implied about 200 basis points enterprise margin decline, with HCS about 50 basis points contraction driven by 1-step volume declines and price/cost headwinds. They also said acquisitions added about $100 million to inventory and organic finished goods inventory is down 15%.
"In the full year,, we expect about 50 basis points of margin contraction, mostly driven by volume declines in the 1-step as well as some price cost headwinds that we have seen through the year." — Michael Quenzer (CFO)
Restructuring and defending builder share
Q (Stephen Volkmann · Jefferies): He asked what restructuring actions and savings are planned and how they will recapture builder channel share while pricing up.
A: Management said restructuring centers on consolidation after acquisitions, distribution consolidation, SG&A productivity, and possible lease exits, which should materialize next year. They said defending share is top priority and the entry-tier product plus their direct-to-contractor model and logistics can help convert national accounts even while improving pricing over time.
"it is mostly around some of the acquisitions we have done. Around consolidation of distribution and some SG&A" — Michael Quenzer (CFO)
Entry-product margins and acquisition synergies
Q (Joseph Ritchie · Goldman Sachs): He asked how margins will trend as entry-level products scale and whether Comfort-Aire and Century synergies remain on track and accretive to EPS in 2027.
A: Management said they will cost-reduce the entry products and expect margins similar to current entry-level products after cost reductions. They said the Comfort-Aire and Century integrations are on track, provide strategic sourcing insight, and they remain confident those businesses will be accretive to EPS in 2027.
"Yes. So what we will do is we will cost reduce that product, and what we expect is that after that cost reduction, we will see margins similar to what we have in our current entry level products." — Michael Quenzer (CFO)
Pricing plan for 2027 and entry tier size
Q (Joseph O'Dea · Vertical): He asked how they will manage inflation and tariffs into next year and how confident they are on pricing; also what percent mix entry tier could reach.
A: Management said the Section 32 tariffs surprised them and it is too early to give 2027 numbers, but they expect to capture price starting 2027 via contract riders and annual increases. They said entry tier is a small but rapidly growing portion of the portfolio and will not move meaningfully in the near term.
"So we feel very good about price capture starting 2027." — Alok Maskara (CEO)
Value-proposition and non-US OEMs
Q (Amit Mehrotra · UBS): He asked why resetting the value proposition is not structurally bad for margins and whether non-US OEMs are gaining share.
A: Management separated price/cost, entry tier, and national account value proposition: they intend to capture price in 2027 to offset inflation, view entry tier as a small portion, and said their direct-to-contractor digital and logistics advantages can lower joint cost. They also said non-US OEMs are not new and the lines between US and non-US players have been blending for years.
"On the price cost that we talked about, we fully intend to go and capture price in 2027." — Alok Maskara (CEO)
Which products and competitors drive pressure
Q (Stephen Tusa · Wells Fargo): He asked which entry-tier products (side-discharge, ductless, 410A) are driving competition, how large side-discharge is now and where share fights occur.
A: Management said entry tier includes ductless, hybrid/side discharge, and lower-cost unitary products; side-discharge has performed better than expected across channels. They said lines between established US players and new entrants are blended so it is hard to attribute share loss to only one type of competitor.
"The side discharge which you have seen has been success in fact, it is been even better than we expected." — Alok Maskara (CEO)
How much price needed and resizing magnitude
Q (Nicole DeBlase · Deutsche Bank): She asked how much price is needed in 2027 (1-2% or more) and what magnitude resizing capacity and productivity actions could have on costs.
A: Management said they expect more than the traditional 1-2% pricing given large increases in steel, copper, and tariffs and feel confident about recovering costs, but cannot predict competitors. On resizing and productivity they are working through details, prefer to discuss with employees first, and will give more in the January 2027 guidance.
"I will tell you it is more than the traditional 1-2." — Alok Maskara (CEO)
JV impact on margins and parts growth
Q (Morgan Stanley): He asked whether JVs change mix or margins and if parts & repair demand is accelerating.
A: Management said early-stage JVs (Ariston water heaters, Samsung ductless) are performing well and are not expected to be margin dilutive, with similar margin and dollar trends as the rest of the portfolio. They said repair demand has stabilized and parts attachment rate is about 15% with opportunity to grow.
"As we have talked about in the past, we do not expect those to be margin dilutive and we are look. Working through that and making the appropriate investment and trade off to take that forward." — Alok Maskara (CEO)