TRANE TECHNOLOGIES PLC earnings calls

Americas commercial HVAC demand and pricing

Q (Andy Kaplowitz · Citi): Asked about the competitive environment and visibility for continued strong order growth in Americas commercial HVAC; also asked about pricing and returning to 25% incremental margin in 2027.

A: Management said the pipeline of activity remains very robust globally and that data center orders are lumpy and larger than core verticals. They said pricing came in lighter in Q3 due to timing and mix in short-cycle businesses, but expect stronger pricing in Q4 and remain committed to the 25%+ long-term incremental margin framework.

"But look, I think that the pipeline of activity that we are seeing is still very, very robust, and that is very encouraging to me." — David Regnery (CEO·CHAIR)

Supply chain issues and a supplier acquisition

Q (Scott Davis · Melius): Asked whether supply chains are getting better or worse and what bottlenecks remain; and whether the Cancoil deal signals more vertical integration to control supply risk.

A: Management said supply chain headwinds built through the quarter, driven by higher demand on suppliers (fans, coils, heat exchangers) and a sudden regulatory disruption that caused short-term shortages and rework, which is now behind them. They said Cancoil is a long-standing supplier that will help supply resiliency and expertise, and they will consider similar opportunistic deals.

"The good news there is that's behind us, or at least 80% of it was behind us at the end of the third quarter." — David Regnery (CEO·CHAIR)

Drivers and sustainability of operating leverage

Q (Julian Mitchell · JPMorgan): Asked what is driving the step-up in organic operating leverage in Q4 and whether it's sustainable into next year; also asked about changing competitive dynamics across businesses.

A: Management said easier comps, announced price increases that are sticking, and Q3 supply-chain challenges that are now behind them are driving better leverage into Q4. They reiterated commitment to invest in innovation to support pricing and said Residential showed sequential price improvement with two price increases executed this year.

"We have announced a number of price increases this year, and that continues to stick." — Chris Kuehn (CFO)

Stellar margins and data center orders

Q (Amit Mehrotra · UBS): Asked about Stellar's normalized margin opportunity and when it becomes accretive; and whether Americas order decline is just lumpiness or if other verticals feel rate impact.

A: Management reiterated Stellar guidance for 2026 (~$500 million revenue, neutral EPS) and said they see a mid-teens EBITDA opportunity in a couple of years as they scale factories. They said Americas order decline is lumpiness driven by large, data-center dominated projects and they remain confident in strong order growth and a $12.5 billion backlog.

"We've described it, Amit, as in a couple of years' time, mid-teens EBITDA opportunity." — Chris Kuehn (CFO)

Backlog details and residential product trends

Q (Steve Tusa · Wells Fargo): Asked for the amount of backlog for future years, price/mix in residential, and about hybrid ductless products and the Mitsubishi partnership.

A: Management said backlog beyond 2027 is over $8 billion, and price versus inflation is a headwind this year but baked into guidance; the 454B product's initial pricing was accounted in volume and normalizes next year. They confirmed a partnership with Mitsubishi for hybrid systems and that they also offer a side-discharge outdoor unit in their own portfolio.

"we do have a partnership there with Mitsubishi that helps us with the hybrid systems." — Donny Simmons (COO)

Service business and labor programs

Q (Toby Okwara · Morgan Stanley): Asked why organic service growth stepped down despite easier comps, and how labor constraints affect service and manufacturing hiring/training.

A: Management said the service business is strong (over 10% globally excluding Middle East) and that they invest heavily in training; they described a four-year registered apprenticeship program with over 350 participants to build technicians. On supplier-side skilled labor they noted it's important but gave no specific details.

"I think we have now over 350 in the program, and that number is going to continue to grow." — David Regnery (CEO·CHAIR)

EMEA margin impact and data center adoption

Q (Joe Ritchie · Goldman Sachs): Asked how much of EMEA's margin impact is from the Middle East conflict and about adoption of next-gen data center systems and content per facility.

A: Management said over 80% of the EMEA margin impact in the quarter is due to the conflict in the Middle East, quantified as about $18 million lower operating income year-over-year. They also said they're engaged with hyperscalers on next-gen systems, are developing standards (e.g., 800 VDC), and have orders in the pipeline for modular designs.

"for the third quarter, you have to think of it as probably 80%-plus of the impact of the margins in EMEA are due to the conflict in the Middle East." — Chris Kuehn (CFO)

Which businesses had weaker pricing in Q3

Q (Andrew Obin · BofA): Asked whether the below-expectation pricing in Q3 applied to residential, commercial, or both.

A: Management said the short-cycle businesses—residential, transport, and unitary—were the main drivers of lighter-than-expected pricing in Q3. They said commercial HVAC (Applied) had positive price, and they expect pricing to strengthen in Q4 (around 1.5 points enterprise, ~2 points Americas).

"Think of, say, residential and transport were really the big drivers there." — Chris Kuehn (CFO)

Transport recovery and M&A effect on leverage

Q (Noah Kaye · Goldman Sachs): Asked whether Thermo King recovery will produce incrementals above company average and how recent M&A affected reported leverage.

A: Management said they are very bullish on Thermo King Americas, with strong order growth and large fleets buying earlier, and expect the recovery to contribute meaningfully next year. They said Stellar expectations haven't changed, other small acquisitions were made and will be seeded with investments, and that purchased businesses improve as they deploy the operating system.

"Yeah, look, first of all, very bullish on our Thermo King business in the Americas." — David Regnery (CEO·CHAIR)

Price disclosure and Asia pricing

Q (Nigel Coe · Wolfe): Asked to confirm Q3 pricing details and whether Asia Pac got worse, especially China.

A: Management said Q3 enterprise price was around 50 basis points; Americas price was up about 60 basis points but transport was negative on mix; EMEA had +50 basis points; Asia had negative price of around a point, attributable to China. They said these numbers will appear in the 10-Q.

"For the third quarter, you're right, Enterprise was around 50 basis points." — Chris Kuehn (CFO)

Inflation drivers and residential demand

Q (Joe O'Dea · Vertical): Asked how inflation compares to earlier this year across categories and specifics on residential direction and potential pull-forward effects.

A: Management said inflation is higher across commodities, fuel, and electronics versus prior months and that price vs inflation is a headwind this year; they plan supplier negotiations, productivity, and pricing actions for next year. On residential, they said Q3 was stronger than expected with no pull-forward, sell-in and sell-through are roughly equivalent, channel inventory is healthy, and they expect high-single-digit growth in Q4.

"year-to-date sell in and sell through are roughly equivalent to each other." — Chris Kuehn (CFO)

No question recorded

Q (Varun Govindaraj · Bernstein): No question was recorded for this turn.

A: No management answer was given in this exchange.

Reference designs and data center white space

Q (Varun Govindaraj · Bernstein): Asked what role reference designs play in commercial process and whether Trane must provide them to engage some customers; and asked about other data center white spaces beyond chillers, CDUs, and Stellar modular.

A: Management said reference designs get them invited to many tables (hyperscalers, influencers) to design more efficient thermal management systems and reflect their system-level innovation; they expect to produce more reference designs. On other white spaces, they said they see many opportunities but will be disciplined and opportunistic; no specific new products named.

"I would tell you that we get called to sit around a lot of tables to help, whether it be hyperscalers or other influencers, to think through how we could make the thermal management system more efficient." — David Regnery (CEO·CHAIR)