• Organic Revenue Growth: 10% in Q4 2024.
• Adjusted EBITDA Margin Expansion: 110 basis points in Q4 2024.
• Adjusted EPS Growth: 20% in Q4 2024.
• Free Cash Flow: $2.8 billion for 2024, with 109% free cash flow conversion.
• Organic Revenue Growth (Full Year 2024): 12%.
• Adjusted EPS Growth (Full Year 2024): 24%.
• Organic Bookings Growth (Full Year 2024): 11%.
• Backlog: $6.75 billion entering 2025.
• Commercial HVAC Bookings (Americas & EMEA): Up more than 30% on a three-year stack in Q4 2024.
• Commercial HVAC Revenue (Americas): Up mid-50% on a three-year stack in Q4 2024.
• Commercial HVAC Revenue (EMEA): Up more than 60% on a three-year stack in Q4 2024.
• Applied Systems Revenue Growth (Americas): Up over 120% on a three-year stack.
• Applied Systems Revenue Growth (EMEA): Up over 90% on a three-year stack.
• Transport Refrigeration Revenue (Americas): Down low teens in Q4 2024.
• Transport Refrigeration Bookings (Americas): Down high 20s in Q4 2024.
• Organic Revenue Growth (Asia Pacific): Up 1% in Q4 2024.
• 2025 Guidance - Organic Revenue Growth: 7% to 8%.
• 2025 Guidance - Adjusted EPS: $12.70 to $12.90, representing 13% to 15% growth.
• 2025 Guidance - Free Cash Flow Conversion: 100% or greater.
• Q1 2025 Guidance - Organic Revenue Growth: 6% to 7%.
• Q1 2025 Guidance - Adjusted EPS: $2.15 to $2.20.

• Warning! GuruFocus has detected 7 Warning Signs with LHX.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Trane Technologies PLC (NYSE:TT) reported a strong financial performance for the fourth quarter of 2024, with 10% organic revenue growth and a 20% increase in adjusted EPS.
• The company achieved a high free cash flow conversion rate of 109%, enabling strategic M&A investments and significant cash returns to shareholders through dividends and share repurchases.
• Trane Technologies PLC (NYSE:TT) experienced robust growth in its Commercial HVAC segment, with bookings in the Americas and EMEA up more than 30% on a three-year stack.
• The company is well-positioned for future growth with a highly elevated backlog of $6.75 billion entering 2025, providing strong visibility into the upcoming year.
• Trane Technologies PLC (NYSE:TT) continues to invest in innovation and sustainability, enhancing its competitive advantage and driving strong demand for its solutions.

Negative Points

• Transport refrigeration bookings were down significantly, reflecting the inherent lumpiness associated with the timing of large customer orders in this business.
• The company faced challenges in the Asia Pacific region, particularly in China, where bookings and revenues declined due to tightened credit policies.
• Trane Technologies PLC (NYSE:TT) anticipates a flat to slightly down residential market in the first quarter of 2025 due to the impact of a prebuy in late 2024.
• The company expects transport markets to remain flat or slightly down in 2025, with a recovery not anticipated until the second half of the year.
• Currency fluctuations and normalization of transport businesses contributed to a $0.5 billion adjustment in the company's backlog.

Q & A Highlights

Q: Can you provide insights into the growth and future outlook of Trane Technologies' Service business, given its recent performance? A: The Service business has shown impressive growth, with revenues reaching $6.5 billion, growing at a rate close to 10% annually. The business is designed around applied solutions, and as these solutions become more complex, the propensity for OEMs to perform service work increases. We maintain a high single-digit growth guide, but recent performance has been in the double-digit range. The business is resilient and operates efficiently, contributing significantly to our overall performance. - David Regnery, CEO

Q: How is Trane Technologies performing in the Commercial HVAC sector, and what are the expectations for future growth across various verticals? A: Our Commercial HVAC business continues to see strong growth, with orders up high single digits and a robust pipeline. We track 14 verticals, with growth observed in 13 of them, including data centers and education. Despite challenges in the life sciences vertical, we remain optimistic. Our broad portfolio and direct sales force enable us to serve multiple verticals effectively, driving broad-based growth. - David Regnery, CEO

Q: What is the outlook for Trane Technologies' organic sales growth in 2025, considering potential headwinds and tailwinds? A: We anticipate 7% to 8% organic revenue growth in 2025, with a steady performance throughout the year. Residential markets are expected to return to a GDP+ framework, with a modest prebuy impact in Q1. Transport markets are projected to bottom in the first half, with recovery expected in the second half. Commercial HVAC is expected to continue its strong performance, contributing significantly to our growth. - Christopher Kuehn, CFO

Q: How does Trane Technologies view the impact of pricing on its 2025 revenue growth, particularly in the residential segment? A: For 2025, we expect pricing to contribute about 1 to 1.5 points to revenue growth. The transition to the lower refrigerant, 454B, will be reported as volume, not price, impacting 65% of the portfolio for about three-quarters of the year. Overall, we anticipate a balanced contribution from volume and price to our revenue growth. - Christopher Kuehn, CFO

Q: Can you elaborate on Trane Technologies' strategy and recent investments in channel expansion, particularly in Europe? A: We have been acquiring independent channels in our Commercial HVAC business, a strategy we've pursued for some time. These acquisitions are opportunistic and quickly become accretive. Recently, we acquired a channel in Belgium, continuing our approach to strengthen our direct sales capabilities and enhance our market presence. - David Regnery, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.