IR - Earnings call transcript Q3 2017 | Trane Technologies plc

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Operator

Good morning. My name is Leandra and I will be your conference operator today. At this time, I would like to welcome everyone to the Ingersoll-Rand Third Quarter 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. President Relations, Vice your may conference. of Nagle, you Investor begin Zac

Zac Nagle

morning for is thank Ingersoll-Rand's operator. where and Thanks, Good accompanying the you the at, Earnings presentation. Call. you'll find on Third Conference joining This webcast call being website ingersollrand.com, Quarter for us

tables to website. are are in also some that SEC today's the to recording release. Please for our anticipated includes in see are this Safe our attached filings considered from Slide and to financial the not call archiving which materially that are go a of results. results pursuant to description X. cause law. our measures, facts forward-looking provisions of presentation also call explained non-GAAP of made statements news We may on This historical our Federal and Please Harbor factors are Statements differ the made Securities

are Sue please President Chairman this over So Lamach, and Mike to on Slide Mike. to go CFO. and CEO, turn and and X morning’s the participants I’ll call Vice Senior With call Carter, that,

Mike Lamach

to high thank overtime. today. strategy, Thanks, execution our our I’ll deliver discussing our everyone morning performance you for focused of joining Zac, underpins to ability start levels and of this sustainable us by

year move We what and we’re as and be also performance we provide broadly, thinking comments expect on business XXXX. end into strong our solid another XXXX how in in markets about our we out to close

summary are take some I’ll minds questions. And So, before topics we’ll of discuss our that brief in your close and quarter third on we the then key detail performance we know more address investors.

our We culture people of and advantage. are operating overall As strategy I our system, prior said remains business straight competitive source forward. on believe calls,

are the reliable, grounded of most most For business new that are In importance is on our another efficient impact sources products strategy orientation and sustainability growing that case, positively global and by of the in is emissions, resources. models excel and conservation many digital, trends delivering natural friendly pressing technologies, durable what known food healthy energy it’s resources a challenges. waste, the We virtually towards two exponential we world’s enabling which to level we’re focus or in efficiency We energy environmentally greenhouse enabled business an delivering at and rates growing services number which anticipating businesses it’s markets. in value participate. of increasing sustainability market We us, our addressing reducing dramatic of and that do every the our at which and maintain investment productivity It’s we reducing number for customers. productivity and will and what for. world sustain leading gas preserving in one our generating brands, in

business flow our Second, free we incremental strong operating margins and top excel cash line system. through delivering at

Our technology strengthens week acquisition improving strategy. our underpins telematics high do. business later of of interest One which an operating Sue portfolio, of free capital we and levels continuously component everything powers consistently enables is generate flow, we connected entered strategy. dynamic capital strategy It that our cover is of our the topics important example allocation that our system us this allocation within to cash will this into call. our in

the Sue and minutes. few details record continue position of for strong will of year-to-date XXXX solid a a the well quarter Our finish going track discuss a momentum in results strong performance and XXXX us into

key we’re thinking where So, year about and attention I’d like aspects in discussing to business at to are turn going forward. how our of stage this my the we

of discuss expectations, Moving evolving. landscape up how XXXX touch get how last relative I’ll XXXX, the now, call. our to format Slide to through is started be earnings guidance read we’re may but our QX shaping want that clear our upfront the I areas XXXX X, to will midst the XXXX for with that a going follow we we the planning get in you’ll of some on and so to feel as to are is quarter

it into time. many going investors on of I complete So with targets we specific to are keep is Q&A to any so in us on it’s that to don’t session. XXXX we’ll quality on expect. this that hit focused, important our process XXXX in at The noted go areas know detail something discussion minds, for high discussion important if order we key planning all the the here, provide I’m most you investors not cover to but the

important. the point most I’ll is first make The probably

in on adjusted than that guidance all are what when at cash flow using of we goals, the X% envision dynamics, bit the achieve We're the been these strong. team yield year. system strong of tools deliver we have revenue, which free and is track business a against our growth billion. $X.X about gave there, the conditions guidance of given of approximately market pulled we I’m has set out together some allocation free XXXX, consistently our operating different in X.X%, challenging get growth, and revenues EPS, and flow to in market cash it and revenue back January. In evolving the proud to We EPS should to capital way beginning orders

into have the healthy looking balance on XXXX. market markets The been for solid. continues outlook to be end Our

Our strong margin with are performing in and expansion order XXXX. HVAC well businesses

transport we despite revenues is margins with markets. modest Our in and business expect challenging resiliency demonstrating the decline the

satisfied that on ahead recovering order a nicely we with we’re operating leverage. and XXXX is for in business of well of industrial lot expectations. Our expansion growth our our not to One things working are There improve margin with in is expect us. area

our for XXXX. drive by a still in Our we in rooted are notably markets at did our inflation, margin accretive environments expansion portfolio and carry HVAC in persistent we’ve make our penetrated EPS. which in expected but most in progress to China, were particularly growth business is enterprise the than commercial present business as margins average key We and negatively margins in accretive XXXX expanding you few including low This business gross ability mix of is when model impacted underserved mix. spread versus our a to shows lower it it not factors add moving Rather for enough mid-to higher impact incremental anybody, consistent the highly worth believe in long-term. has than we’ve up the although applied designation bridges business these price price I are as to as our pronounced compiled, into in of price up the probably and equipment impact of but from The the way would tails XXXX, service kept sales newer profitable this class categorize the its this cost versus some our confuse noting distinction shows in markets is price a in how in all bridge.

XX% with China and China order We’re seeing the impacts both enterprise our expected success better low XXs are as these price. rather increased positive order This of markets of pressure and businesses year-to-date in price margins growth on the in seeing than majority for the third is growth climate than in approximately is negative inflation quarter. experiencing and

irrespective here accelerating the developing higher and of XXXX in in plan controls of margin We’re expansion initiatives Increased on process the beyond. direct of and leverage our drive market conditions. productivity more will focus operating we’re drive to XXXX focused

here. we lower throughout we lap we begin XXXX, penetration also anticipate we leverage inflation Similarly in those the begin region lap as XXXX, the the for gross as see strategy, the we market moderating markets saw so so pressure the We on moderating to XXXX, reduced should to margins inflation China headwinds in on well. see in

broad-based orders with strong the end continue to markets update, and year-to-date our well growth. perform through Moving revenue

the Our continues our for XXX a Puerto healthy and The business markets across our to Rico, tragic to remain Execution third be broadly solid. outlook customers on unprecedented more disasters is the natural quarter least took associates markets. end XXXX. in on our in to toll at

employees, thoughts natural Houston. these on all markets quarter. We will will their and these with the the was employees, of Our in be it by out two in think impact the and Puerto areas estimate and we disasters we’ll facility, Sue market cover impact a sales building between see additional large third occurs sister impacted into an of out King when impacted disaster some to geographies. lost lays downtime Financially, are recovery our XXXX, families in the three next terrible over likely Thermo fourth the we and and us one in that Florida effected $X.XX are release the few quarter in at had manufacturing the these We funds detail Rico to the account years main activities that our in provided tragedies. as the our days three $X.XX lives more or take HVAC of of productivity EPS, in in X Slide minutes. in

new in out laid is but in was we XXXX strategy growth of and the driving in to these leverage and we as quarter. improving into areas markets gross cost lap the Middle equation price Asia us significant impact headwinds. Again, compete that’s see margin earlier, East the exceptional impact we the inflation the as XXXX, in to for our markets, move these So versus

to year. lesser single-digit strong segment seen productivity expectations. aggressive climate climate price industrial businesses expected Commercial topic, With in of across coming The out strong from We’ve versus with expansion industrial. this and performing growth we predominantly for an there call, we our in Asia and into our XXXX businesses areas fairly XXXX of bookings high order earnings to remain positive are segment. as see extent versus shaping been Things in driving ahead update that growth margins. the East, impacting topic next our quarter climate our also equipment the is has regard and level with at equation HVAC and what enterprise The segment, we both in the is remains price broadly. plans are We In Middle stage emanating to at as margin consistent well pricing cost, second last both expand QX. this on are outlined. the previously on in the are up cost

continues markets to commercial have going forward. healthy Our and pipeline outlook

on with deliver strong the execution and and excited performance strategy we’re beyond. about Residential overtime are Transport outlooks our in also expectations. that Our XXXX Focused opportunities lie track our will and ahead of

to more that this the year. through hope And in in I’ll So, it Sue, detail. the evolved this over to third outlook important how some quarter is insights point you has our into turn discuss now, giving

Sue Carter

X. summary today’s you, number to Please the Slide away take Thank of Mike. I’d begin to like main to points go call. from with

adjusted drove quarter discussed, with the in $X.XX $X.XX, we disruptions from solid natural the $X.XX per of Mike financial third impacting in approximately operating negatively and results results by quarter earnings share. per to disasters share As business despite

XXXX. by the items that expected timing that discrete tax related rate the the tax second half in XX.X% Our of of were adjusted hit planning quarter was driven of number the third in

year be full growth our expect every XXXX adjusted to business with our range. to previous continue or of the tax XX% and lower in both strong growth We in end unit. rate approximately Bookings strategic segments was

mid On side, another HVAC and single climate in up organic bookings quarter were gains. of up single-digits and digits share both Transport the in with residential low commercial

bookings Europe, Climate high-teens in higher, growth up Asia in were organic revenues also We commercial quarter. and also and organic East Africa. the drove Middle X%

continues and of Our industrial better guidance particular bit a had compressors. growth large path overall. in Compression organic the strong on performing than improvement steady growth and small with compressors actually across segment medium of our X% bookings strength and Technologies is

given of laid point and to on also to capital combination a QX were margins operating flat We acquisitions, on second $XXX call. our XX revenues we’re drove revenues. for million allocation an in dividends also expectations Flat basis spending including buybacks we on adjusted XXXX $X.X discussed our track approximately achieve quarter essentially additional as In priorities than better compares XXXX out and of versus and improvement those January, our priorities. share on billion we a on

rate we’ve at share the million of We on and our raised our August, spent growth. dividends. In $X.XX of we’ve earnings $XXX our billion per to to annualized our Year-to-date dividend also an through $X dividend objectives discussed in grow XX.X% or October, rate buybacks by share. above

$XXX approximately to million also or acquisitions Slide Please into go entered in We for spent commitments X.

productivity activity and third we the part our positive small negative the and and down residential and in third financial resulting from impacts in increased Florida the transport Caribbean, saw the vehicles primarily During Texas. costs. absorption positive hurricanes quarter, rental Rico also that We in and impacts days electric shipments disasters, the facility, commercial sales saw quarter, hit delayed Puerto natural for offsetting for our were were several additional and businesses financial other low increased

If currently the the expect experience, Slide some We strengthening for revenue to impacted spike we and that natural in month. share impacted of overtime share deferred to the whether follows operating potential Please increased our quarter underlying system X. past we’d are the XXXX. on in by strategy basis an by per overall and impacts the declined see markets any activity enabled business in go operating solid year-over-year business recovery our number a drive to expect from performance. regain Organic assessing given the to storms The $X.XX of us execution in business of earnings the fourth year-over-year, adjusted Adjusted focused X%. headwind to earnings points from per margins $X.XX financial underpinned disasters. these XX

XX QX, although represent it level is price short up X. the commercial growth accretive the the our XX% in approximately XX% go As year growth year-to-date strategy XXXX. underserved with Mike points the large our in the commercial of per impact contraction low year-to-date basis margin to this spread QX. earlier, up and Please share in China in to is markets of in for China enterprise number full expected of Slide term, In HVAC of negative discussed still very bookings strong earnings negative penetrating low is HVAC resulting XX% at and to cost

in with declines of Latin this in growth and both Industrial were year. HVAC Globally, not growth the organic with saw up was and compressor growth gains APU digits. single declined enterprise. to up XX. X% bookings in was adjusted Industrial price and up aftermarket previously improvements were and Transport have negative high success more with Slide continued portfolio markets in cost our bookings by North bookings versus growth was personnel single were technology the bookings in Overall, Latin in that America, and the with than revenues. Latin up up span up increased driven to mid growth Industrial inflation anticipated forecast impact from digits. markets, in to expected As in Organic and bookings cost low In disasters gains were did the quarter Climate international single America up organic were of by Climate digits Outside in up driven North covered which up X. industrial trailer, growth and spread. in by competitive quarter material In and aftermarket single in the shipments Asia Africa. organic operating QX by slides. America. China Outside basis Asia in XXXX single products EMEA including HVAC more negative Slide broad-based were business, and vehicles. up regionally in growth driven than as single the Industrial and natural in price digits single versus our prior of Slide offset discussed go in points QX the to of East digits volumes we’ve the number Please with mid offset North Middle up was the cost low and go in America America high-teens America, businesses. Europe, high businesses, segment, North organic all services. and Please pricing with mid-teens Asia. North was in Please revenue America marine. discussed, Middle and X% America spread mid truck, our North Latin strong on price gains widened price and digit compression Car and digits Commercial low of In revenues China was penetration were largely XX equipment single organic North teens netting and low inflation, single digits America. on bookings low expectations. in Commercial East Europe, America organic of the than orders these had productivity main strong primarily line greater bus, mid slide in and Club North Bookings earlier year a volume, product single impact the go mid and Asia. quarter on The down America low parts and were third revenue America for segment, single single Middle with in this our were our bookings margin were our We material we large low Performance positive was up digits a digits. points XX. and we QX rate largely East. higher cost we XXXX digit by X%, digit, underserved repeat number activity in Regionally,

margins strategy basis disaster have in combined Middle impacts this spread our or been also attributable cost price declined go natural covered We’ve slide versus Please XX the Excluding China roughly points. the the Margin on of to the to negative largely which and XX. would Slide negative approximately slide. highlights climate, flat. prior in East

continues Our improvement un-relatively strong and to expectations and industrial margins revenues. business in deliver outperform bookings flat our

track continued flow on Working for go the strong the a the quarter XX. fundamental $XXX to Please for focus cash as revenue XXXX. operation by a profits. capital to percentage result. largely is driven improving Our third of of our million as yielding was Slide Free expectations remains business on

unchanged Our guidance $X.X for free at cash billion. flow remains

go to optionality strengthen XX. Additionally, continue our provide Slide Please as continues our to markets balance which sheet revolve. to

employing powering Continued made priorities January, strong the our earns they our capital In XXXX capital XXXX dynamic best strategy, unchanged. cash out and allocation we is allocation capital returns. in it flows remain where

maintain our in business to product investments is Our making and ROI drive to position. first leadership priority our high productivity

evolve. healthy sheet ratings is maintaining balance area markets as and our with strong BBB optionalities second The a

commitment that above highly In year, dividend on third reliable at million million paying achieve spent priority and earnings billion of between committed growth million the have acquisitions. of repurchases. these to end areas strategic competitive committed $X.X approximately areas $XXX The is grows are XXXX, The on to $XXX to and billion we we the committed and a has Year-to-date, expect By two of acquisition. January we’ve for spent repurchases approximately approximately $XXX or overtime. this acquisitions commitments. share quarter spent rate or track $X we’re fourth to these share or been to spend to

XXXX to priority forward look we go strategy As beyond, Please Slide XX. to the and same. overarching remain and our

we’re revenue, and per our maintaining guidance. XXXX, share For flow earnings cash

For modeling purposes, guidance rate which at end wanted tax also the lower we our previous come or provide to should approximately XX%. of in range

For fully diluted positive share on the received of in you interest know to based the remarks. million expect feedback XXX go repurchases full year, covering Please Slide to topics in key XXXX. on to share We’ve our we we approximate XX. prepared section

slides. So, topics the these I’ll a cover of next of few couple on

is in first The growth third HVAC topic quarter. order the

Our XX. for growth record business difficult quarter, good major comparisons HVAC continues high against markets HVAC Slide order the continued the order share markets third growth commercial to in pipeline. up higher Please market especially North orders acquisition steady We order see In with teens. with overseas in remain go XXXX. the were strong to year is improved geographic compared all The very and last by America HVAC improvement. healthy. our topic also today regions. of last had activity its Residential

signed acquisitions in expecting million close XXXX. have to discussed, approximately we’re in or million on to previously $XXX on agreements As $XXX

We in on already us existing Celtrak for XXXX our our our electric technology small expand allow and in This acquisition are many services a of provides it investments into vehicles acquisition will entered the we expertise addition complement company. telematics telematics and businesses. business our recently, that agreement an Most today. to add channel focused to to core

it Now to Mike. over to I’d turn like

Mike Lamach

Thank you, Sue.

equipment, and revenue Climate business remains areas Commercial we a for So controls summarize, on strong, deliver building closing focused which segment with Slide and and To our by XX, our led Residential our expect valuable our Ingersoll-Rand. thriving, growth, EPS free system service. on adjusted to and have HVAC XXXX flow, plan on more growth businesses utilizing cash operating

and Refrigeration business is in their challenging Transport executing Our a against delivering high the agile strategy and diverse is and expectations market.

is spread business XXXX Asia of for to merely from versus expectations our is Industrial cost strong growth our Our from ahead price and improving of China. come in in negative expansion. growth very XX% margin expected

to XXXX. the in as headwind and XXXX XXXX they control We the well, directly lap XXXX irrespective expect we’re inflation inflation. moderate balance The margin over market moderating of both Nonetheless, of accelerating should more initiatives conditions. drive pricing see into to markets expansion our heading as inflation productivity

beginning achieve capital priorities the laid XXXX. at We’re we track of allocations also to on the out

billion expect We deploy in the dividends, cash of and to roughly buyback $X.X form acquisitions.

culture deliver together, formula that, of financial tremendous performance. talented continue top be our I with And ever. taking and have now tier with your depth We remains strong people confident Su happy a as And this that questions. will and to and operating to I’m take we'll

Operator

And [Operator first Andrew question your Instructions] Citi. comes line from Kaplowitz of the with

is open. line Your

Andrew Kaplowitz

get cost? were Mike, think versus are color I specifically little about more emanating on shift but Middle the and orders issues regions talked on kind these lot international price in versus detail know do markets. of do XXXX, you of to company of China around still your difficult where longer your will could be you you And and to reasonably applied want and arms cycle you a as overall on high? it East. give don’t significant the price especially the from How how these HVAC you to cost most gave issues inflations competitions what you

Mike Lamach

will for to China is Andy, what that maybe evolving. think of I it’s a you. lot think how And questions strategy us we're I for and historically our answer best with start

design X nationally. is and larger and we’ve region the X X in and product cities. would that quarter. service Tier ducted as years this have those a today focus localized some formula subways leveraging that Historically, still Tier HVAC the space the and infrastructure X a It’s design the done tail a X, operating that both X basis year What often China two the cities country in in these Asia this by company and and First are and have Tier train across successful it of been well. Tier verticals been equipment, projects. help of years grow We’ve we all, follow highest electronic margins there. successful that. And very grow as We’ve and drive also a margin markets it’s we for and unitary which applied. those three is we very city as high and that of penetrated large is airports, been know a on we specifically penetrating We’ve manufacturing largely around things very even for to we’ve last of us. you’re launched that many over penetrated a projects train our and in know seeing share SG&A as ductless cities We we’ve been and as base and extended space in Tier basis those and we’ve applied a Tier of with

those, the into PGT January. XXX In unitary we of put marketing XXX just the very over the selling strategy And We to put about and years. fully in has sometime. ductless, last two been portfolio. XX product to people been localized So, duct added a we’ve put We a a applied onto in context, since and place there successful. street months. We

it’s that clearly pipeline around what the year time So, pipeline. at have last speaks XXX%, seeing it the just three we’re larger is same than in times project been China would for up so

apply now the market year-to-date, able excellence been twice the in equipment we’ve growth. mid growth So also we’re XX% unitary, rate had mix seeing We’ve and of the XXs that is in revenue to actually plus. We’ve bookings XX% Unitary margin seen growth unitary. China. of have we year-to-date then in it’s grow business the service

it's the but successful strategy again, is what accretively successful is it’s unique classified nuances been -- we -- will just in way, strategy to the Latin for similar Company. and we By us. So, every doing China this really price, it right to and as the to we strategy that we’re a have successful And would or how the growing be become a region know most conduct. there that so very has world, America. are of Europe But we got long-term

Andrew Kaplowitz

color. the booking. then you talk helpful HVAC comp just digits it. a against North tough Commercial And shifting single gears were about American to They up That’s low as

to single little the last quarter, a been you’re give are you it's like HVAC in improving American good color regarding be more us slowing there, HVAC but about can moving overall in talk you I up booking think When HVAC unitary. still compared result seeing HVAC North going what see to It's you Commercial should American so runway a applied applied North do low digits better forward? market?

Mike Lamach

very mid when make single growth starting the be positive first at five see say nothing digits would North bullish would years we’re America in ago. has to to that Outlook less months I Yes, than talked everybody that changed Low gains. point, we share continued that drive going Day. ago digit to Analyst us we and the to in end markets we five were single continues commercial

last at year the pipeline today was it project actually time. same stronger than Our is

and XXXX which inflation to we and going into be We think the more factories consistent which lead for is price that five on steel, much about what expected the We is set to longer difficult think with also fairly us it's pricing as is to in to how costs ago. cover items. much very opposed copper the months related easier

more for us. be that think we would So, manageable

still CAGR ago, XX% months encourage period where with a five period, three of that year over much was for very that X.X% we’re us. to saying to X% So growth the would XX% EPS

recovery growth rate And Latin space us. there. that’s some don’t for in a But the and We’re seeing in quarter. in you’re they’ve about important the we’re market America even forget seeing mid teens America billion strength climate America. that very globe not in in underpinned Sue out, that only confident fourth for that pointed too, an the that’s across done but what Latin $X.X finally revenue of lot in us that’s North seeing a

Operator

comes Your Morgan Coe next of Stanley. from question Nigel with the line

Your open. line is

Nigel Coe

I the price just go to Hey, Mike. and cost. visit back want

and impact as China. So, just comments mix your Middle impact so a XX called bps the on to East accurately out, me that more Asia Is you opposed from impact? cost give price

Mike Lamach

But clearly players some done Yes, what if Nigel, is seeing market. definition X local have discontented out it's more you’re of that of that using, seeing the we and coming that as we it’s cities you’re generally same in equipment and we a Tier the X mark even machine that that have say factory very use product, and the Tier and those done price. assembly specific processes, that

So, it is this consistency but bridges you been everybody at straight max point we example. is keep for it something it you look just its at China, again we’ve than of for that time. past talking if move prices say in to But the price, for what about, on classify of res sort more

we’re residential On that. we business, considerably, share managing American the grew we margins and North considerably grew

the completely. If the we’re and covering covering excluding commercial from of but to and you side there, largely go the course Middle balance inflation industrial Asia, of business there East the inflation that’s

in is it this bit China. East really a penetration Middle to different. isolated is So, we’re seeing

fewer of that got fact over this projects you’ve you've the Here same competitors just number fighting there.

have bit a you’re there to And competition more well. as going so,

Nigel Coe

Okay.

Mike Lamach

speaking, got think there. cities. on how density inflation, environment really the a to it’s We copper margins specific the of XXXX, getting in global good just beginning lock of some that portion Tier generally of Asia, more matter we with like in We’ve a understanding we X scenario. of at from year. environment. a pricing we’ve grow we’re And it’s these cities, a a X, year these, In I feel Tier service steel And material clear know to additional getting the scale terms that manageable moderating can got that

view again So, towards it’s a long-term China.

we’ve in leverage. in think seen I improvement XXXX China

Nigel Coe

Right.

if to say less think that North about competitive, of I is Okay. about and think But, about you competition it’s into the America, go is pendulum just if away mean, you pricing, good -- becoming you think it if have of moving maybe more that’s rates. China that pendulum how would kind Europe, of kind because competitive the have, balance? shifting? you But, obviously you to if from about problem

Mike Lamach

these more portfolio structurally growth markets. Europe Yes, introduction the before last on about years. there nothing wireless We’ve really portfolio Europe. product few It’s high-teens our growth out about over around businesses the controls remotely, next double-digit substantial new building different growth connecting had street. involvements had more in We’ve in competition service is feet of digital or generating there, in or refrigerants, in the

cost, there it’s So, cost business the proposition are on efficiency the a our to that that maintenance always has product you ownership all. at over differentiate in energy changed liability but not which of about environment, the total value and the able nothing XX% -- it’s long is is haul, equation competitive initial of to been and the

Sue Carter

Nigel, And it's Sue.

I Let a got. and it that think color doesn’t in we’ve on me the that, the pricing of is add important out come to little bit it really detail all

So, about positive is. actually talked which the prices we of segments both it in the

the of year. world. build have in it achieved that Again, pricing the fairly know pricing positive areas there that other to basis the we it’s the a have there piece that we terms higher Asia. but last significant. pressures The than we’ve from And aren’t and headwind the been on able really have eventually does in in got, we inflationary year total, in And is it price the and positive year-over-year a dollar is

than pricing in stronger to it acutely that was want the don’t pricing I that and So, actually it’s we XXXX. and is XXXX, have strong anyone in we haven’t actually not think achieved

Nigel Coe

point, the important come? important price starting SG&A, we the Mike an the between that If talked of PR, to Sue. in these improvement. thanks delineate G&A of see some an productivity that That’s on S G&A And follow offset about you and productivity area talked you some is we just good in by G&A ramping investments, X% coming as up on are inflation, to about of to so through? pressures. sales But they're masked material the news And the

Mike Lamach

be in will you indirect tell to will productivity year. XXXX, led be management that and going it’s operations, and going $XXX and million do product we Yes, I going we’re PGT be to with It’s direct regard. that like generate direct both in plus that relatively to to engineering material, Nigel. every

detail which overtime a us the reducing the impact. we Company, an going different understanding and sort what’s line quarters over starting in G&A to across XXXX excruciating be think of G&A strict as a in couple will for spent of show ideas on I XXXX G&A and around up certainly and the period, benchmarks will between multi-year have XXXX

around we like advantage. able logistics consolidations of we’ve warehouse done opportunities take to things We also that in see and lot around are a what opportunities with lien automation

we’ll in those XXXX to well. I as think, yes, start see

[succumb] that in So, to in expect of what asked able ‘XX offices, it. that we'd in leverage to projects to ideas. from people pretty system, there get into roll be I’m build I’m ’XX things. what’s drive, normal projects couple to these program We are and productivity talked we program bigger two levels conference we’re and that saying that the hundreds the of office about likely into fact I’m of very to in talented you the operating those the high addition glad literally excited me be I up about think ’XX, and But question. your more and at having

Operator

next comes with question the Morgan. of Steve line from Tusa Your JP

open. Your is line

Steve Tusa

what’s markets pre-buy? markets those slide outlook kind On on core quarter just commercial of mentioned regulatory side, And your forward? the had in growing. of in expect the this you you kind any the of you do unitary are as going transition markets? What unitary last And then for XXXX, kind that of ahead seeing

Mike Lamach

you North quarter know the nice Yes, growth America, in quarter growth again in in the there.

point stackable we’ve I to this customers But but is are say. talking much great be in if sure and don’t we’re could I time. there take we There and that anticipate was, to if about be pre-buy what of built inventory going it some, on. we want mean be a that will to that in they fact for one don’t So, anticipate at there

Steve Tusa

residential, you what last that channel about in you building give quarter. radar do of exactly you’ve an last Okay, kind like of least ongoing What a that and at in that’s the relative you’ve the guys I a different know of to could guys first to out that you if that the mentioned that? us of channel haven’t the been year great. channel also store stuff time for talked don’t And you under outside you Lennox kind these before lot. then fronts some -- you’re bit Maybe has. I’ve the year are on doing strategy from if heard relative clarity digital just the doing maybe already mentioned

Mike Lamach

Steve. we We’ve and thanks Generally about want today. got part got up we them year that got the to adding Yes, coverage of last stores need, generally XXX opportunities finding them. we’ve speaking, we’ve transition some where were through We digitally. we’re but

all there books you’re past commercial brick-and-mortar brick-and-mortar more be out that doesn't replacing much rather customers bias have on this What particular now repairing. but it are there. in XXX stores there So, to a than is year with is, are of unitary finding than

So, people time really do But this put at on you’re replacements. for bit mix. reason, in pressure I seeing that's think doing little point right of that, a wholesale the

Sue Carter

also both And overall our out for residential the fact, and for that the XXX stores would than And parts is Mike terms markets little in stores. heavier that stores, mentioned parts commercial the the Steve, point commercial I of sales residential a as. in of those context in that

Mike Lamach

as as of other. a the know, Steve, or one contractors And you lot don't identify themselves

Sue Carter

Right.

Mike Lamach

customers. say one presence our sense makes we'd it So, that to

Steve Tusa

last years? And of fast how That makes I the did this was many last sense. did like -- how one point? What a add over couple question reference you in that guess XXXX -- just grow how fast

Mike Lamach

been the time. you'd something a and an of XXX for we’ve we shaker coverage mover the That’s But, working the out important our around business not a this Yes, hasn’t a of being that pull need. are X,XXX we large maybe and part think long -- see, business. to they and at been we’ve that company got is

Operator

of Kwas Wells Fargo comes question next with Your from Securities. Rich the line

Your line is open.

Rich Kwas

we Mike, picture within climate just get to your think next for as year. just mix thoughts we as on, big of want

up this Do the think margin back XX%, You’ve does with year-over-year you get year? of basis growth that price place particularly as the shape order on think XX% had lower China, growth and you’ve get we for that talked there in incremental given initiatives into in about headwind on How side strong the in a very about a that some you climate the do mix comparison mix the to -- you changing? that in normal we markets. the developed brings

Mike Lamach

moving XXXX. on again that but top you growth little a a the of Rich, a mix we’ve in to We do applied be coming us of leverage unitary product over the think will no of planning bit Yes, that. inflation lower more I I sooner, is I world business. got in portfolio the the And gives and great base pricing get but back service in And time. got from a pipeline world to manageable the built perspective. in of know has to that The margin, pop growth supports mean expect happening normalized should specifically. you margin a have that more we’ve steel little doubt the long not agnostic good that copper, this easier have up XXXX but from we'll an to for period as

answered can the question more historically I then around leverage to bit around Nigel Company, a get of doubt rooftop we do last, So where some the back that the bit consolidation the -- and if G&A to more in been. the no will we’ve a

Rich Kwas

XXXX of change know on, impact this incrementals emphasized within touched applied as indicator generally versus the How terms ABI numbers regards how think the But you've in the it then that margin, cetera. top impact lower et in for be and being but about on offset but potentially XXXX higher to… institutional to business. up that on meaningful shaping and is much would overall path call, given think rate And you no enough you've earlier and year mix ago versus five with I do line the the months on growth margin? seen the Dodge given about we direction, some forward the you’ve regard the just moving moving micro with here in right think some just I wise, of to

Mike Lamach

Yes.

the I But, account where would our that. that And do about of good at know it negotiated company top and the is phase take been would data you be one analyst side be Dodge to what to pipeline for the an pipelines retrofit of data. we’ve we’ve Dodge It’s and -- reporting how Dodge high a ABI take And would So, that issues time. for about a can XX% perspective and value. to where for performance that’s in contracting rates we running I’ve there level to done. what visible the of really gets that XX% market said market, confidence the of -- the about reported to well looking of close are a of benefit always frankly XX% we about a investors long that piece in is those added It’s in probability is that is negotiated those the of consider from got the projects. process assign

that see have ’XX is to $XXX deal well. us, a These to including a those, projects so great happened have of in will strong I those, strong $XX for to number little bit going they’re range we little we’re what a that XXXX a possibility million There generally what when of fact so, going large there XXXX, they hit. is we from XXXX in good look and very good numbers projects into generally I And guidance. for to the we’re move bit at going at, forecast. excluding for historic in pipeline put wouldn’t million even We a see us, But pipeline. see a into the But as that wouldn’t put a projects. very a I and similar runway XXXX, our up of apiece,

Operator

question Your the Suisse. line Julian with comes Mitchell from Credit next of

Your open. line is

Julian Mitchell

a segment for Maybe change. just to industrial switching the

equipment down the pretty quarters. though in in good growth tech year-to-date. you orders had have been say compression three equipment The sales substantially last So the

into So about that order accelerate? line the within of wondered we conversion different I equipment revenues the when start should to how tech, number just think see we and compression revenue

Mike Lamach

that point data for tell large I’ll good you really is we’re compressors. that us know call this towards One very indexed very you on

you in in in centrifugal year, of that booking And pull-through service mid-XXs, know mid-XXs technology growth and with during And the the along quarter. is that one space. the carries We’re grown has that grew again overtime. number XX it course to third XX% on that the that compression in

beginning So some to XXXX larger and we’re feeling XXXX good even about what for shipments around shipments early formulate that means the of compressors.

compressors, that’s backlog as expect that. being see to and kind the leverage to relates for it that So change built exciting we it's large in from an us to it exciting of relates

Julian Mitchell

bridge. Understood. just and And margin other your in line Thank inflation you. back then circling on the productivity

You historically about Is next productivity type expect was points you XXX tailwind of XXXX, measures years basis know on we about that for it aggressive XXXX more think should tailwind about when in been that the that have line? good, a when talking a year. that bps XXX from or XXXX you’re

Mike Lamach

get as and fight. carefully then I the out have that there. then bps figure punch a we how back theme about be setting of and here. to plans boxer in the guides your the sitting you positive how disposals and you without would That’s my about you And win of January tools take and works into at analogy to December, great November do about XXX to take think general use to all sort spread setting being Julian,

be additional going consolidation sure would some that. our be we doing we’re additive to in that around sort would we’re want that in ideas to So in idea, putting levers G&A make place and is of like then rooftop

expect inflation, measures to. the the of some counter We’ve that our it way in wouldn’t additional in got behave we pricing event Our place.

Operator

the of Sprague with Jeff next Your from Vertical Research. question comes line

is Your line open.

Jeff Sprague

Tier want Mike, Tier back its as I X just a China again maturation to just the and to and little come bit X strategy.

those companies Just a in. interested are of sorry. Where you on for those I for am cities? product points -- couple I’m development

You markets. mentioned serve to those product de-contenting

markets? address happen And capture. actually of capture have you service product are I’m talked seeing service this. You about needs that wondering, effectively of the opportunity those kind also in you’ve product to for or just a redesign refresh that kind What

Mike Lamach

be controls marketplace. to all ducted in the applied the clear, and and got the of market place, and in And Yes. product now Jeff, the we’ve ductless

happen So, X, Tier into get X functional is, certain specified we’re there. cities. fully there will What we'll the sets by are others often Tier feature

explain to you'd and margins in we’re find ownership try and you total and overtime, that Beijing typically. side initially, the you the But and and that cost successful perhaps around got carry pretty find of Shanghai tend value feature lower You something to that. with

not take the again X, fact, now actually back on that, other you the In is which around product on coming this that unitary efficiency space with space, around X commercial high at and unitary the development unitary is the if going the the way we go have that. space, in in And some Tier residential all cities all. product Tier

growth incrementally So, point place, then few the overtime where very you a execution this. product just by operation thoughtful teams, growth about as strategy street, putting management feet don’t team the excellent in rate you’re doing on ground the quite of forecast plans. it’s as product to your manufacturing a XX% the on And all plus result there, for a

a in which generated really those out not have half China a doing. team world sort And of us but and objectives in base me everywhere don't going makes long service goals been it solid you footprint In it’s strong has five years that’s chillers to of of even next digital run, to around sense on unitary, of like changed, is And but execution. direct we’re stretch China, the it’s things, things, be for and to that applied, side. on set plan chillers and world’s the of years. have the what for goals, sort in the building commercial controls, but and the sort they’ve last top to though those half -- You does the is go the gone the five it full and

Jeff Sprague

thing, capture how that And side out? is of on the service playing

Mike Lamach

and goals lead Yes. America more XXXX, over move things to Today, continue Europe around years past. All having to get doubt those it sustainability range, alike look that. and and much in America to or they North efficiency and advantage have really that XX The XXXX, China would about in Western that maintaining will the When North next sophisticated, range customers more in XX%, X up, XX%. say no I look it’s equipment. the XX% back been in around equipments it than OEM energy XX% stringent to more Western in expectations towards the compared Europe the have been the

Jeff Sprague

space capacity fairly much excess your reward? and is that need some. balance in are you physical growing needing orders How risk is to winning mean accomplish actual your But, they to and manufacturing add do therefore concerns business this? I certainly that capacity there just how you there the

Mike Lamach

out. Yes, today to got We’ve have it the substantial a need continue we lien to we additional factories to build don’t footprint in and Asia.

margin dollar we’re going need. So, we’re more running hypothetically to the are of -- lines and we run less scale space can faster and less lines the get per space. And are faster we the the

So, I thus at China needing build future. plan in the have any factory to don’t the point in the

Operator

of the Goldman Sachs. Your next Joe comes question Ritchie with from line

Your line is open.

Joe Ritchie

vendors price maybe from trying typical you the were morning fourth being its about to type Watsco this XQ XQ? like increases event? should starting the to in advertise back like pricing So price as Or quarter. going We some guys think that that we second. pull heard in of for to a forward Are

Sue Carter

forward Joe, first different normal. normal of that we’re about a that the cadence No, but fourth some having some think might of quarter and there is follow the than I discussion I mean, be our we quarter, in in which no on pulling any schedule

Mike Lamach

space, inventory us temporary res in three time manufacturing just to move again just market enable them have that the to able just many in itself, of res and to grew the the able market The factory our and impact the losing skip wasn’t into the Puerto lost to the impact to or of not there. we our confirm, means to work for at in in work the of the plenty lost we didn’t material were And it facility. And quarter. home, the water. was up and running come It we the and well exceeding to factory us difficult to to they The Rico to positioned was inflation, diesel, build of everything, who that was it really are we’re to with with was employees weeks margins so will be Joe power come in for space, price and hurricane is res own fact plenty had products. it,

couple there up, it’s stock missed back back bit in build we’re for But the up there. business. a waiting just We we've in have we’re business running for advance of to we at open and that, so terms weeks, for ports and them just for largely wasn’t res haven’t out. rate to it us really thermochem little back of plan a to skip to customers shift beat So the we ahead our been up hurricanes where to in

Joe Ritchie

That’s year guys the helpful half. second you the refreshing two I my color, investments targeting just of this thought were out here in Mike. perhaps Maybe that is first the and half times roughly of were but my memory, follow-up

second call to to of we So, million it $XX closer like be in it the thinking going spend were was half.

fourth bit? I this so quarter, think about you’re spend should XX pretty you the on quarter back an investments in or pulling highly loaded we being as little uptick a did with think about

Sue Carter

interesting an area. Joe, that’s

actually need we Mike a and but going back tell pulling little is how to out because you bit, cut I saying, are that’s not let and investments. coming about We this me

are those you have And pull what conclusion are any investment. the as that IT our So, in the to mostly I the actually higher it's coming that little expectations the but going that But and not stretch. the a are near third not that more projects fourth channel, in, our the have we expect at return and businesses type the would XX to closer are no not investments projects projects, a returns looking are would actually the of be products again math and you than new they quarter, as investments then quarter would to by the development in through some we at tell on company.

and maybe the those SPU And them back again it’s for they'll in back ones cases to on in half pulling XXXX, the supportive the perhaps reasons. very business going those the so, some up on and additional off of down table work they’re that show but do driven year of pulling and those we’re really investments

Operator

of Merrill line Lynch. of with Bank comes America Obin question next Andrew the from Your

Your line is open.

Andrew Obin

of on a management sort question Hey, succession. just

changes had recent the You’ve some at top.

like about the the just to some but what directional transition think what’s you. I and Company Gary you think Didier this And this of operational has been was happening us Robert, I top? role? sort Gary’s with not as tell scheduled probably means Could of at Thank expected. Michel

Mike Lamach

which January will probably got step Robert to It’s begin partner talk mentioned Yes, to of good long on and put pen great opportunity XXXX retirements, in you company this the and step good for catch on. had we’ve Didier September have and both XXXX, about to a XXXX a who some all XXXX. back Andy. for and of Robert changes, that up plans thanks January been we there’ll some be and paper of a time, in and out Didier

here involvement from we long September, able time benefit then So, At at September, consistent and is SP for strong had combining the to Xth very yet. point, for begin early pointed leadership two Regnery now what’s those actually roles. happened we’re level their And EVP some really time. that the plan of we to the Dave we’ve as

parts role great were doing a the obviously ago of EMEA. America about place in one At Dave moved capability, into or years Company, has confidence same the lot and of a the point the XX in and and with that changed Donny at Dave’s not We’re we of so and role. HVAC role. Company years the for in Dave’s every part managed different North business the and put We there got job Lived we and the I’ve world five at in same another. Dave time, Simmons

Day. trained have would commercial North part He tools. power and organization material, at fluid, all before met a was the large that. you led Donny of our handling, America Donny, Investor Now, leading

Before and that, the back he way segment TK. was climate all in finance both going the

intention for to a Conference, strong He the been Company Gary’s the Bingham. Analyst Jason controls retire had business he’s built President So, and years Donny if you couple got from weeks A Company the the later, Concurrent billion going tenure overtime, us digital business. and running recall. for Supply. $X our and Jason contracting to XXXX, of at at into It’s back stepped his plus a commercial, Jason we’ve with background. Gary with residential the strong was XX September. announcement, is into that announced role. appointed HVAC end spoke of also

business So, business. he Club planned also water, then, is Marc Marc we our retire in a and in XXXX. fish runs the to of really January going res of Car Dufour. is retirement the Marc And had in

So, Marc's same years all of the us. Mark Club our there at met would one running speakers we announced the around who XX over with have time, is was Conference, for retirement Mark again us time. Wagner Car that [indiscernible] you And of period

them communication us and leveraging succession dates executives talent, really willingness total Company it good work plans to so in work the and their with a have continuity. everybody strong could good senior The for that it’s around timing. tremendous very So, around with very by the

for exciting. have very couple its We’re good and these this got in point and a of been pretty we’ve month about place excited now months, guys the at changes that

Andrew Obin

and on I’m just sort I of And a the dead here. cost beating follow-up apologize horse question

Just have so strategy, spent we slightly than would East Middle slightly awhile. know you’ve had in investment the that I on. lower planning and that lower China imagine for spent quarter, we’re you

apologize China up sort is why Is I and going this on than top sort weaker expensive it. missed was Middle earnings of I something little East bit missing, of we with that And a there than because being Or more So that surface I’m that just and below we’re you’re else still it shortfall? expect? if the expected? of

Mike Lamach

points X, margin. Tier are larger it would put of I about really that simply if and the Yes, projects gross say and infrastructure the five X I some lower strategy Tier caring

there. a at up. the Let’s mix has rate takes mix, But X plus know people twice sets those we’ve XXX Tier ramping into ramp people XX quickly. grown awhile And historical the business fact pretty And rate the cities, % X, to that growth the rate market. other that of margin say a up just the again it Tier the put again adding that applied for then you pressure

Sue Carter

element, that. other is the And Andrew,

inflation that China escalated had has Asia, has specifically the material throughout year.

being about impact by fact talk it commercial HVAC we Asia and a persistent, by at residential. when in followed persistent followed that if biggest North So America very where Pacific occurs, I is look it’s

in what had earlier and to bigger also they’ve contributes thought that that also dynamic. was we that So, the headwind year that than

Operator

question Jeff KeyBanc with line Capital Markets. last the Our comes of Hammond from

Your line is open.

James Picariello

Hey, me is guys. good Picariello Thanks morning fit actually. James for This in.

So million spent. just year-to-date, it XX has been actually XXX on commitment M&A, you looks like million mentioned only

to to an the million safe to between it assume trying is get represents sense So, to Thanks. most bridge the actual there? also, XXX this that telematics do timing What’s a asset And range? deal, close difference? then so of X that how of and you the agreement just

Mike Lamach

Yes, James I think month. transaction of the four the will we've closed four close transaction or end by

the would And been off that in our There that in well will is between, that end being the I be in space added of million. be the million telematics of could have core to. million flight The and the couple to off technology out assume lining but the it of of things could group. would number wouldn’t flight portfolio. that close XXX the by say the slightly, there, But is have $XX up be as between timing largest which here really or ranges it quarter are a laid those and nicely $XXX is there channel balance all and and of best stuff the month. I a to So of guess of that

James Picariello

and storms maybe timeframe? prior what next through Residential trying what over really and how that? to one assessment just opportunity. the -- has be Just demand, Thanks. Okay. then even typically beyond And year early opportunity then HVAC have last get How your replacement on pulled the of that could

Mike Lamach

can is from depending boom put the rental people to easier provide service followed for, locations can than to to and we of Yes, a fluent, Res, and is you insurance more upon between and the by without tail, got quick. criticality in those everything those states. move quickly maybe great tip things replace. which service commercial predict bit a step little we into able predict insurance the space of who you’re very Commercial, really you what be immediate of a requirement able the people are to -- with that is it res. out And then conditioning

the are you’ve it’s insurance curve as and buy probably think may that. to bell which process can to got waiting is this well. step about of of in body actually that other got I take folks be event, insurance time You’ve curve, And should bell of not XXXX that the sort for point able without part that some the at and people

happens. So, three year one years before take to that that will

see years, growth, growth but one So, up. it you as year us, show year usually of to of or a that over one two generally for so two usually years to the net takes result it

James Picariello

guys. Thanks,

Mike Lamach

the res On on is, quicker. on side, that side the commercial side -- it’s the res

Operator

to Mr. I remarks. call closing Zac will Nagle now the over turn for

Zac Nagle

to Great. joining everyone call. like I’d for Thank today’s thank you.

have we to the XXXX. may questions coming usual, you be take you the coming that seeing will forward and of road any we many Thank over you. weeks days. into to And As on around today in look the or

Operator

conference concludes call. This today’s

disconnect. now may You

Trane Technologies (TT) 25 Oct 172017 Q3 Earnings call transcript