IR - Earnings call transcript Q3 2018 | Trane Technologies plc

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Operator

Good morning. Welcome to the Ingersoll Rand 2018 Q3 earnings conference call. My name is Julie, and I will be your operator for the call today. The call will begin in a few moments with the speaker remarks and then a Q&A session. All lines will remain on mute for the duration of the call. are one you follow-up and advised, question. be limited question to one Please I to now Vice with would And that, like Investor President Relations. introduce of Nagle, Zac Zac, may you begin.

Zachary A. Nagle

for and call. conference call presentation. where is our for Good you'll XXXX on This thank webcast at operator. third quarter morning joining Thanks, us website Ingersoll being find Rand's earnings accompanying you ingersollrand.com, the

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

are slide Joining to Sue CFO. go me please Mike. on today's over turn With that, to President Mike Lamach, Senior it Vice Carter, Mike? and and and I'll and X CEO, Chairman call

Michael W. Lamach

and the thanks value results X. brief and underpin Zac, fundamental review us create shareholders. Please call with on everyone slide quarterly for go the to Thanks, for our I'd today. begin business joining of to elements like to a that our of strategy our

sustainability excel waste for goods, nexus of excel urbanize reducing environmental We resource-constrained to the processes, First, industrial the perishable time gas while more all in at and food and we The by reducing our enabled our customers, our other and productivity technology. ability warmer as and world reducing emissions, generate at global and buildings strategy of business intensity continuing energy greenhouse becoming of impact. is to is passes.

Our outlined. grow the by above-average portfolio tailwinds economic strong I've secular for consistently the to in a company conditions, creates platform business global aided

makes excel built years to line consistently and at team flow. the management over is combined incremental capital and that margins, experienced returns business model a cash our strong culture drives long shareholder designed free have we allocation a growth, top that an term. differentiated high-performance delivering over Second, performance our winning the with system business operating sustainable. strong lastly, And strategy, dynamic our we When

Moving to slide are and and into exceed to on the earnings well moving X, guidance QX track to exiting for outlined we QX, QX we on execute our call. investors continue

Industrial in markets and deliver continued Climate our our and remain growth both healthy, have we segments. to and bookings excellent First, revenues end in

be Additionally, globally, businesses, especially continues across our continues strong. be growth all growth to broad-based virtually products, and geographies to and services

effective our metrics. and in other margin half versus profitability and to the P&L good Industrial managing Second, by and expansion management of as through leverage price expansion Residential inflation productivity our second approximately the businesses. are quarter, deliver all XX% we we our XXXX third achieved improving, elements leverage our results. of are target and We volume strong of versus led across cost and the margin In HVAC effectively the Commercial segment, business, healthy material saw

has become we of July. half increasingly year in second since The guidance our the updated inflationary

quarter. as forecast. to and effectively tariffs, impacts the to our and in continue inflation, these second the to of we guidance approximately material third tariffs embedding of other expect in additional In knock-on we effects are and the quarters fourth have impact, of XX% of We and leverage this our for manage the costs maintain spite

approved forward our ability increased strong repurchase total year adjusted between for Board and to full-year authorization raised guidance new available our per $X.XX, and This our have share another of share billion, of shaping billion. to In continued capacity $X.X We bringing $X.XX be our a Directors we dynamic to flows $X.X XXXX. capital for as in our fiscal is strategy. going up gives $X.XX allocation from up reflects authorization strong earnings XXXX October, to us cash us. confidence approximately generate execute free approximately

fourth P&L we're we visibility up move material managing we tariffs, another Based to growth. improving. year the solid is picture expand enabling into XXXX XXXX. solid major through us in and XXXX and us backlog for through our markets setting virtually into on seeing, of poised bookings also Strong also quarter, a As look margins. good end other everything leverage are inflation with heading and And the drive further finally, are

business executing in performance our us differentiated these in to the In use well, strategy in our We same and to manage and XXXX. processes to deliver risks XXXX. system expect this enabling operating we're tools summary, is

second our strong consistent on and out with plan to year is progressing The the note. expectations, we close half a

to forward our Please year Rand. Ingersoll for slide expecting go X. Looking and particularly XXXX, another good we're for industry number to

as quarter strong bookings positive growth Enterprise respectively. with and and bookings minus of where large These the reflect Climate on organic Middle continued HVAC there be was were chart. robust, were quarter and and indicated can end HVAC Commercial did revenues third East, the by revenues repeat highlighted organic capitalizing continued to strategy, signs continued third chart the double couple bookings in in XX% business the orders of our XXXX with of European orders respectively. in organic quarter. the revenues both that lumpy, and XXXX. XX% be also markets. orders in a one board, not the healthy strong way, on up The was and was on across up X% results the bookings X% digits. by led Industrial execution decline a the in strong The of

contracting, and markets slides the Institutional growth equipment. year. HVAC, North slide America key controls, services both services, and both next drivers X X. into globally with Let's strong, in the we're the on led the color continued go about thinking how seeing into for the remainder provide In slide with equipment. and sustained Commercial particularly strong, additional to insights number markets. education in and good of two growth and revenues, year The growth behind next by was the we're was gains in bookings chart growth and

As all on Other Commercial in be to solid market. continues discussed slide services equipment. economic the the board HVAC they in continue mixed, both HVAC China to impacting as remained we to Europe and outpace indicators Asia HVAC growth not growth to Weakening be strong, have the across date. year. China with appear do been in markets markets X,

global economic for market outlook and healthy, Commercial our visibility XXXX. largely into support remains and Our increasing indicators view, with HVAC key

the our sales HVAC, strong Please and of number in are to to Residential continue is continued to markets, showed the and remainder continued be XXXX. go to derived, growth X. bookings the revenue Turning of where into and growth XXXX through slide this strong. quarter, Replacement majority expected

for business XXXX, the year as Our known America represents trailer over to taken estimates well. Research The shipments American and North the growth ACT, globally improved forecast approximately X% also Transportation trailers beginning to for revenues North Solutions Transport Americas for XXXX. refrigerated Company, from as diversified be and their continues XX,XXX growth the Commercial of in has We've has order resilient. good market seen units, which

XXXX. so ship to segments. exceeds was to in growth refrigerated we units Auxiliary strong both into the Our power backlog trailers, heading refrigeration should supply unit capacity and have solid capacity industry non-refrigerated

we with the will in as well. continue and consistent heading this production and Compression revenues equipment, strong XXXX. bookings in solid, in transport other markets Technologies growth been China. XXXX trailers, going American backlog As be healthy three, remain leading aftermarket XXXX, with Overall, and quarter key to with has delivered both In in expect we into North into particular industrial and indicators. good growth strength

the Management, of driven end the our and to We're negotiations into with our it's come see maintaining call are through resolution. products, some expect Overall, strong, ultimately U.S.-China services, also that impact Handling We businesses. continuing Small Fluid monitor too Tools, continue early vehicle. the to high-margin indicators we and exporter growth solid seeing growth and large year will favorable situation strong were what across and this signs vehicle seeing growth U.S.-China will Industrial but our negotiations customers, largely broadly next but of markets electric by carefully. Material trade revenue consumer Chinese a trade across economic weaken, China have, bookings and to we're continued success key year while optimism pause to as

Sue? I'd quarter. like on Now turn to details over to the to provide Sue more

Susan Carter

Mike. to Thank slide Please you, X. number go

year-over-year Mike strong in adjusted revenue share As margin XX% another and earnings continuing quarter business robust QX highlighted, was for with bookings per solid us, growth. growth, and both segments, our leverage, continued expansion improved

confidence the The was right when on which third gives second guidance the expectations half we'll provided would updated regarding how with our our call, us line out in play QX earnings we on our quarter that continue with approximately $X.XX, to of and share up a per EPS or adjusted to achieve $X.XX upside earnings revised guidance, range $X.XX. to line, $X.XX $X.XX of from trend

results more and growing X% outpacing recurring growth, Services on third in detail, product our performance XX% we virtually growth, and equipment was continue revenue Looking to a with category at bookings growth remained sustained major high-margin, once strong, mix focus with streams. geography. again every standout in quarter revenue as of our stable,

the net the been raised maintain able organic to levels cash high free because levels our We've to appropriately sustain keep this flow business of to XXX% to with our revenue the been X% able growth robust customers. to to date, continue demand part of our for enterprise. at income needs XXXX. We across Year the in adjusted and equal products growth of target we've to meet very up for for inventory we've

We and many strategy X% our value-accretive $XXX strong dividends giving for This our repurchases. quarter. a returning total to In authorized to we years, and our share and is growing have we shareholders maintain program. a at return returned additional to level of September, over an how as our XXXX, in sitting allocation through a of an it of to we've as over as billion, we're of $X.X be natural us commitment element to the share the X% shareholders repurchase more commitment the when in Board good working $X.X expect and at execute Directors result, to important through to a M&A. we revenue. capital cash strategy capital or and to flexibility through billion consistent Through deployment excess of program, share improve or X% October, form just over authorization we share level As also repurchases repurchases fourth with bringing share higher time, capital consistently our our demonstrated whether balanced on XXX% dividend this repurchase over to million demonstrating our us and dynamic and available

presents continue that acquisition for also value-accretive have pipeline opportunities M&A. to We and a accretive healthy

the Trane is are related Our JV. to number Please approximately year-to-date our ICS spend value-creation of Both X. Energy spend and acquisitions Mitsubishi ahead This primarily and initial is slide $XXX acquisition well the to Cool performing models. go million.

At quarter we've As discussed, improvement, share bottom. we a revenue XX%. organic was basis growth points earnings financial XX% top QX margin of level, continuing delivered operating of the enterprise growth, adjusted adjusted strong per XXX and to

XX%, inflation leverage XXXX, the manage $X.XX, freight of as we leverage strong improvement the versus tariffs, for wages. and of operating contribution slide or versus XXXX. go for the in achieved second segments, inflation basis income in other our new our Rand and strong positive quality inflation in excellence slide Strong per with second flat. business all Ingersoll of guidance very for basis execution which XXX XX. XX% to drove other quarter. in our inflation, also with Productivity adjusted operating growth and guidance as second approximately to approximately high board. both versus We're we XX. points. was continue of XX the the cost Please with drove to Importantly, business operational increasing a virtually areas to was in such clean results remains earnings that quarter. material go managing points inflationary Please of effectively margin share approximately by number material which The consistent improvement operating of and XX. had Focused through go our in tariffs, of quarter we across in is slide consistent the combined number Please number half increases, execution core quarter our earnings for of the Price other impacts strategy half

Results were with Climate growth XX of operating the slide quarter third and expectations. board, Please basis segment XX% very a adjusted organic number go Our improvement. across to strong XX. our with points revenue margin delivered strong consistent

the adjusted quarter. and points Our it in operating strength very margin of to broad-based, organic Industrial with and was business very basis improvement. also Similar clean strong a delivered Climate, results revenue was the X% growth XXX business

opportunities capital Please segment, to is helping and our for slide We productivity this maintain in our We returns the returns, remain growth highest level which leverage strategy XX. Industrial to balanced improvements, ROI Commercial committed that our both to the restructuring Industrial strong a We of improvements. cash Climate see to strong and excess projects, investments year. in and deploys to business allocation driven by continued shareholders. go with a consistently healthy segments high drive

at to commitment dividend growth. optionality above As a more we've cost-efficient in make our optimization maintain investments, and maintain a resilient primarily calls, or product These also business. our development with net have discussed a markets on and significant to increased initiatives We strong as to strong help new us We growing we evolve. longstanding expenditure and balance continue investments prior income XXXX our footprint projects. paying number sheet a will related of capital

a We below of And to through to Please the Year returned date of XX. and billion. our to when shares billion the calculated form in share of of Directors to over shareholders $X.X approximately share intrinsic in dividends have million $X.X in we buybacks. our Board noted October slide $XXX new as authorization continue buybacks earlier, available share invest to go total repurchase approved authorization QX, trade a value.

summary lot is I topic on and managing topic a a amount of topics additional how here. discussed inflation. throughout remarks, time our we One the so We've This of of second spend the fair interest the main slide are this is a are won't interest tariffs A it XXXX. cost the risks, in we visibility so how reference. of we've topic your associated our gives good all Please go of for included slide managing into presentation of XX. to

into into Mike the visibility in XXXX the quarter, our we highlighted improving. as move earlier As presentation, fourth is

into global our manage portfolio XXXX. up healthy for with hold XXXX. by the January. have markets, objective drive factoring tailwinds. guidance aided inflation XXXX above whole and Strong to consistently secular XXXX from provide and fourth strong continue end is to when also our economic to to us a grow should expect for We're average backlog impacts We company platform expected business set creates into solid these our effectively the the in to in impacts earnings headed full bookings call as last process done and We in P&L restructuring. planning topic we quarter solid our XXXX, tariffs The to we've managing late leverage, by is plan XXXX in conditions,

cost estimates. footprint it We related them have restructuring recently our and would updated to our announced, premature Until company's guidance drives initiatives these $X.XX, been initiatives $X.XX, up full-year which footprint optimization, include optimization announced operational XXXX in were reduces from ongoing efficiencies the to reflecting cost. have for to

Now closing I would for turn the like back to to call Mike remarks. Mike?

Michael W. Lamach

several the Please company to We years. over Sue. believe next XX. returns the slide to is shareholder strong deliver well-positioned Thanks, go extremely

tied firmly growing end healthy profitably. to is and attractive are Our strategy markets that

nexus global conditions above provides sustainability is term. these opportunities believe and continue which long efficiency create services energy less growth for over Ingersoll average secular a growth to will for tailwind the is megatrends, you products the economic megatrends less cooler, getting and the and populated, Our at world of Rand. resource-constrained, portfolio Unless

high-performing an we and a incorporates excellence experienced management operational into have do. everything We team culture team that

and deployment And are flow, differentiated sustainable cash capital. to our a are model lastly, generates committed balanced business powerful culture our and system and we operating of business Our competitive dynamic advantage. and

with the I take strong to and shareholders Operator? a your be of will questions. over excess deploying Sue record track cash years. And have that, We to happy

Operator

from Research. Sprague Jeffrey first with question comes Vertical Your

line open. Your is

Jeffrey Todd Sprague

morning, Thank everyone. Good you.

Michael W. Lamach

Jeff. morning, Good

Susan Carter

Good morning.

Jeffrey Todd Sprague

a headwind this what guidance. help that. do with it's if us And obviously, go in more understand about I what is the idea follow-on we're that to out would this bit obviously, to little specifically us how we of take was against if your you thinking I are going about overcoming means can give you you think But and XX%, tariffs. thought, wondering actions List then that what included at XX% some you X there?

Michael W. Lamach

XXX less and a million, XXXX than XXXX on close we're would to but $XX view say, know to and X, million. price say, in been inflation. been incremental, And over headwind around, Lists Jeff, X, has million, going toward to would an be it material $XX our $XX going And always everything $XX cost with million. we're that cover productivity have for X we probably of cover and a other bit Section combined little

we QX. that will it's through systems that engineered did seen any compressors, So did and you've in the we see and company, Price in air QX. still it's is in the it in the that XXXX. of into flat through or think We system, building whether HVAC produce it We QX.

a strategies I that, historically it, feel years. over in got the impact handle that on the that like had handle can So of few managing the last we've with the company we've

Jeffrey Todd Sprague

thanks that. in lot of what and wondered your the you priorities like exactly on such are, on I the be consolidation for. you been the talk us looking and if a separately, market for what right a Great, industry. is update your And about whether for then there's move, thoughts you'd just think could

Michael W. Lamach

Our to be fundamentally of last We're the heart in do which strategically. great don't changed shape the anything. years, views few haven't need at it. would over We

game and would very So of anything how that, played the we'd for clearly all above. theory and the we point imaginable competitively to us react that's would of make need said a shareholder's compelling would that know what we've from view. Having on do us to sense be all

time. in that, at on more there's nothing really point on add So that this to

Jeffrey Todd Sprague

thanks. right, All

Solid quarter, guys.

Michael W. Lamach

Jeff. Thanks,

Operator

Steve is JPMorgan. next open. your question line Your with comes Steve, Tusa from

Charles Stephen Tusa

morning. Good guys. Hey,

Michael W. Lamach

Good morning, Steve.

Susan Carter

Good morning.

Charles Stephen Tusa

this all on we total, the year? is follow material like quarter first done, of your year, guess then the negative flattish up for price inflation bps when for year. rest in just in equation said and just for guess, ourselves. negative level-set Jeff's correct question to is, I and I I Is modestly here that so wanted the XX the

Michael W. Lamach

where and was year. back of back for the flat of year, going track the that's we it half to the the Fundamentally, through flat we're half is think

Charles Stephen Tusa

tariffs $XX just was covering thinking pretty like like that obviously of that year, inflation base guys are you that? So alone, from what, this with just X.X% guess some substantial million I something about price there

Michael W. Lamach

Roughly.

Charles Stephen Tusa

in should bigger tariff-related correct in we about million not at the way what arguably, in of so severe on $XX Yes, a million Is the that as it? that that than $XX just number is XXXX. inflation think context much stuff obviously total the And was look XXXX. stuff of the a to basis in year-over-year maybe

Michael W. Lamach

It Steve. is,

of the is more I put of some think anything has it's that in of again, the U.S. around all contemplated retaliatory little pricing has imports. to China changed, what some that been a taken bit we've If this. the approach

margin – that I the of the a change process. basis price point strategy XXXX. over we would XX or target we'll input of same if think from costs that put all in within time, planning costs expansion, planning land on didn't XX believe in in the that's would perfect we've deal got XXXX for normally If where points this that we material we effect into inflation, to I process. information with had

Charles Stephen Tusa

Yes, what you $XX correct, that including $XX million, just about, the you today? including know talked million, the

Michael W. Lamach

Exactly.

Charles Stephen Tusa

Sue. ahead, Sorry. Go

Susan Carter

That's right.

Rand, that we're you wanted $XX if point the talking and would from million that impact be on dollars in the just to about I $XX XXX. are So just total at under looking Ingersoll were million Section the out the

XXXX. and impact was XXXX, $XX XXX million we there's in the So which the guidance, Section July roughly built that about it's $XX for in, in million also

were trying our other XXX So cost the we I also actions of want the in equation. mitigating track material that price to fact to piece our pricing and the that overcome of don't Section lose for

Charles Stephen Tusa

everybody Yes, dynamics more what because the just pricing wanted obviously that to everybody anyway, successfully, the all-in a understands you've XXXX lot than covered I and just I are – make to – remains strong. sure make wanted million sure in that $XX

so and inflation, you far productivity improvement? significant quick something is other talked it's year improvement date, through talked significant can quarter. fourth other in What about carry on the about that Is you to one, that one been Just driving XXXX? but the into weak that a

Michael W. Lamach

that's a Yes, good Steve, point.

on know basis Section points to expect the of thanks for XX XXX, support, and XX clarification $XX First still XXX, all, covering of people that get that. million net to Section for – the all we're of that

which the fourth As way it the it's to the relates increase that same a into projects year, productivity quarter. long, productivity, year in is there substantial been be just will discussion load the will all

these projects fourth were the reduction footprint or larger quarter. of in across the bear Some that really complexity moves company fruit

underway. up pipeline. They're So in quarter. projects it They're are is step a defined. the Those a fourth implemented. It's

comes So estimate. projects it's into hoping fourth We've not the quarter. that that that got we're productivity the support that

Charles Stephen Tusa

Can that into XXXX? carry

Michael W. Lamach

We And logistics we'll cover future. primed as that inflation. will key is system just XXX%, some through is a in have pipeline haven't ready the XXXX, XXXX be if need we yet. in But again emphasis here like And back the think price from health do and sure we anticipating is operating the the do ourselves we've of do pressure, continue to for what and at all what Anticipating which in productivity. productivity making wage anticipating what time material can go still, the of historically we the that company, the do into done offsetting question inflation, is done XXX we XXXX. we with inflation, of going look the pipeline is coming for other be we ask all you the the what the year XXX% the to pipeline to exit stuff Section we'll perspective

Charles Stephen Tusa

thanks. guys. detail, right, All Good great execution,

Michael W. Lamach

Thanks, Steve.

Operator

comes your Steven next open. question with line UBS. Steven, is Winoker from Your

Steven Winoker

Nice progress, see the Thanks, good morning. to everybody.

Michael W. Lamach

Thanks, Steve.

Steven Winoker

half, clarify. XX% flattish you're or is I going that this that Maybe not? inclusive operating year, to of just want getting leverage That back, the material in second just price that inflation

Michael W. Lamach

all It's in, Steve.

in. QX. the year. XX% that's a anything QX, number, coming back mitigating is and saying that it's for all good we're of half the So in

Steven Winoker

and headwinds, context In Okay, And referenced that that's that words, that other put the dollar of on those that U.S. volume import about talk just the actual just $XX you or in the volume on? you to maybe can base million just China great. maybe

Michael W. Lamach

call coming that direct we because to what's pricing separate Steve, opportunistic from supplier make. tariff. probably It's At price. the difficult a day, through as to know the more in isn't of this the a should what going detail analysis how not lot so what a on of have that and very of think right analysis end then be to that offset important we numbers to is the and with productivity

would be So pull to you in anything call reasonable. the it out difficult and give

Steven Winoker

challenges Okay, supplying resi you direct seeing for fine. are And you guys? growth a is And from then supplier on any that channels? side, other meaningful benefits their the in amount

Michael W. Lamach

relative and business, – been share quarter there four you don't really exception has we that years continued But expansion past we clear don't the competitor. about to residential any quarter. for substantial it's as this the was the and gain know, margin Yeah, other talk that and last in no in

Steven Winoker

Okay, all it for leave will right. I later. Thanks. there

Michael W. Lamach

Thanks, Steve.

Operator

Julian Mitchell your open. Barclays. is comes line next Your Julian, question with from

Julian Mitchell

Hi, good morning.

Michael W. Lamach

morning, Good Julian.

Julian Mitchell

just Good stick questions. trying to morning. I'm to two

environment high there. wondering first but with QX, look you're out as inflation, point, the more incrementals high that, have you incremental current on you margins productivity macro mid-XXs, allied are in growth? volume stay so the cost just margin incremental the just with to what's right tariffs, moving XX% level for consistent high The QX, in the And the saying question

Michael W. Lamach

today, breakage, part. look first, of part Sue the incremental guided healthy XX%, margins the that's might room all and should second saying for what that that we're always gross and the to always with business, the back all run. here. we margins, in room in the volatility about allowing some do some And I me for think create that But as we've you think but we're Let like we business the environment first that for think long the come on allowing investment said things a

if of compressors an certainly mix XX% back being as higher think leverage good coming we're go performance. the continued particularly That's we do equipment. larger we're into with volatility I I But higher, as pretty leverage the saw higher in, could environment XXXX that than toward in, think well. So is incremental supportive example, services

I committed that I think good for is think back to And that performance. the we're year. that of really it's something the

Susan Carter

the all we Julian, go side with and the on your of And, question, interesting other that part fourth through the see. quarter pieces of first as of the you that it's

was effect pricing went in guidance our we So the as through July. in

adding the are tariffs that of know bit the have we a in so We didn't additional there. that of when impact guidance, impact gave we little July you in

fourth quarter. it to investments at the part in And I cut think was not footprint productivity. overall invest trying some additional to when any those whether You continuing incremental fourth But have quarter whether of the and the spend, back we we're margins, other look the or in business. good about in bridge also – we're it's overall those the in products when new

we've quarters year. is it's that the to spend compared fourth continuing in some throughout we the to so quarter. Again, higher, investment it and good are got not do other an And in outlier but the also year slightly

Julian Mitchell

compressors. my the of those segment question second like, backdrop is There more be it. some demand. would large the you have though, of the for around sustainability be to Industrial seems around Chinese then And just only around It seen Thanks. sounds exporters weak question spot marks

just could, that or you're the if focused that's are If you watch any case, areas confirm on. there

Michael W. Lamach

The customers we is our to air worlds all the companies going Think Julian, or well. clean on. we're truck. HVAC of just are water, Industrial right compressors cycle own trailer that sense but on other totally HVAC in expand give desire factories. with industrial that China your you've what for and going fact triangulate and trying that let And with greenhouse Compound as think really a and air, to with refrigeration with XX% have two for to around a only about commentary it buildings. diesel earnings broader that a me course, question China's engine a gas refrigeration, Transport with reported of into process different business XX% take business versus this clean happen a Compound to powering emissions a cooling now. where not the got

do with clean and be clean might in and air, going from narrower business economy, water, industrial economy. the the to a bit diverge retrofitting it anything a China the to Now built is good the environment

the a rules is they're are contact that we're the pipeline. supply think that are game communications had else world going customer and a with somewhere to we be customers, On and bit to before in U.S. the seeing, This point of economy, Chinese we that is of going be this and term. These is going export to have. the what have industrial for bookings. customers long in pausing the This are supply would though, understand what that model play to eventually. whether the

will its the Inevitably, So the U.S. what's happen. from outside in going a with think exporters midterm/long of this a is model bit happening excess China tariffs. based term, markets that China the that's to negotiations pause with export But capacity to current for there to find way U.S. I other around on

is that the it's so of short for And also just an could that. that that that anticipating run very customers so quickly we're and could are impact But quickly very change decisions the when something make there some these in positive. opportunity,

Julian Mitchell

Great, thank you.

Michael W. Lamach

you. Thank

Operator

Your comes & Khanna next with Cowen question is open. Gautam, line your from Gautam Company.

Gautam Khanna

morning Good guys. Thanks.

Michael W. Lamach

Hey, Gautam.

Susan Carter

morning. Good

Gautam Khanna

QX forward in XX% to how to of little bit contribute price first, Just bookings much did in about the $XX a to QX, think pull the still Climate the you do And $XXX disaggregate quarter? had bookings a organically million? that growth million

Michael W. Lamach

a you East But was Our wouldn't really a spot. chart the to Residential, red tough one there. and dash, pull-through only have estimate really strong was the the across-the-board up Middle whether showed really Commercial happened off find just is Transport, little The on a which that changed It soft everything extremely strong, can't world. be across bookings, comp. it's

pull and green unitary versus apart at everything Commercial strongly well. services, you there as applied If the in look versus

color the is So good.

what nice America you're around We're seeing If the doing in course particularly us. you Latin with in outperformance recovery of go for world, Asia-Pacific, seeing we're in China. of parts

across growth all it's rate, So to things are strong those board. but contributing a the

Gautam Khanna

XX%? the number, that in basis net a on price And Okay.

Michael W. Lamach

remains strong Climate in the across price So board.

short-cycle have there residential commercial, the effectivity. price course, very in inventory quick to Of in light or

system. systems, that's through On the longer still building engineered applied the

course, Of power America and we there, be North considerable built considerable in the trailer At XXXX. for this unit building going as backlog shipping market it's in America. in market well through well backlog auxiliary to as North point, the

in it. effectivity So in when those strongest see ship ultimately think ever But seen products is well. I to Climate I've price going XXXX, the price carry-forward you're as there more

Gautam Khanna

One on consolidation. on comments follow-up your

to plan capital the Mike, going you that balanced of we more to expect large been any slide tuck-ins, unfold? you've something of in really the I It's you underlined or larger part acquisitions what Just noticed for aren't allocation actually of doing, see here? be case, should on X. do it,

Michael W. Lamach

we're ROICs, grow methodology and thing maybe equal time to and making quickest a net margin the the should ROICs think bigger that at over about that long sure organically and and see business, everyone I to the We talk that dividend discipline over knows now. around believe not where the expansion is just we've fact allocation to highest we so changing we've or had Fundamentally, time. we income can share evident with time. in first the in the the for the that's had capital invest tend

end able on of value So it's $X.X that been the XXX if that, for always the we're pipeline. so we're that. we've I announcements we are then of that, look, seeing bit disciplined company, about to available the Dilution, bought we And since control to day, be to little that there's going like that to million invested through to we're say economic control XXXX. that in investors on to capital, weighted dividends. to buyback that billion looking average do there sure shares. come clearly excess shares we're we'll bought cost capital continue generate we've a or And of our we back of at building at seeing want the return dilution. back with And continuing make make

So been big a that's equation. of the part

I'm look those would around us. understand be. we it's allocation easy of at you, said risk. we're anything. in look to If to it to it discuss that. could need through and point same would doing investor's don't things really our less view, to So do the things, was Bolt-ons, an that incredibly and that. going transformative long-term we we've role of that large create been in And that, to worthwhile investors capital. economic the hypothetical, We're to compelling as us sure from continue certainly and for at strategic, want to we on this details do not point value, looking that at what I But it's do do more way however the to time, all

Gautam Khanna

Thank it. appreciate I you.

Michael W. Lamach

you. Thank

Operator

is Your Josh Josh, line with Pokrzywinski open. your Stanley. from next question comes Morgan

Breindy Goldring

Hi, Breindy on this Josh. is for

Michael W. Lamach

Breindy. Hi,

Breindy Goldring

Hi.

given outage You part we see of is of would it on guidance, in mentioned in share that upside the share gaining had in current there? a you've impact where share required a that shift some And know could industry. should greater the And Residential. came one your been that included that some share your that XQ, that have recent we competitors be gain in Is some from? or gain

Michael W. Lamach

we five redid or every a we res. make product for We years our price point. sure you ago, partner to five able that about product, opening a will. years channel be of to modified the home product We have if line ago the Breindy, every for in most entered channel and structure four

our don't just share company. We about share and So for just keep that close expansion vest. all of think given shareholders that a then story best competitor has specifics it's we to led talk the between we shifts any gain to that margin of And long-term the competitors. for our

Breindy Goldring

Thank fair. that's you. Okay,

Operator

from question Nigel, Wolfe next comes line Research. with your Coe is Nigel Your open.

Bhupender Bohra

for is morning guys. good filling Nigel. Hey, here in This Bhupender

Michael W. Lamach

morning. Good

Bhupender Bohra

guys you me? can hear Hey,

Michael W. Lamach

ahead. Yeah, we do, go

Bhupender Bohra

Nigel. this Okay, here Bhupender is for

to mentioned contribution here – in have Thanks. driving I that software give from strength digital services, place? in just the So in wanted think from service on you initiatives actually about of growth that especially what I some Sue focus Could you XX%. the and is some color quarter the

Michael W. Lamach

years XX% It's a more try decade looked a drive if the it's historically, up been that Yes, you for strategy. to services. long-term of a to strategy the might and have look Commercial, closer and for HVAC, would our we're which And it's Industrial at for you all much company. if business, be into businesses, company the service-related And ago the we've today, like go to been mix in back executing air XXs. the the XX% company compressor

strategy. I long-term a think So a system a been It's event. it's It's things. that of not single

channel, out and to this been hard So people systems handle leverage it's to at for We've – technology people remotely. to more are see investing a to get customers by skill and footprint, and technical our to people it's investment in or good come set. tools it's had in the a help it's ability because direct and around the things

of assets the every it's buildings connected has value the us today. connected performance or And the the received. has different report work or either we diagnostic equipment that XXX in time of is of connected one X,XXX I it. it company lot helpful in It's report analytics or then, customers been a buildings So have where and data course, the or or of improve the time the And next been that. process using of connected number background numbers that to the a to I out industrial propositions, selling number up buildings systems fastest-growing building very well across

solid So It's digital. connected more the whole just We a investment that continues to be us. would say for than it's really digital, but experience.

Bhupender Bohra

here on and backlog, regions, guys the commentary. how basically would geographical takes wanted I by HVAC commentary at you you Commercial the able XXXX into... comment to just follow look you here. great have that's going be given – Okay, look visibility up When on to some actually puts backlog on

Michael W. Lamach

are in interesting, We've about see that all coming any projects are large of past out set is actually flowing included projects for talked think backlogs there. institutional we what reporting projects. we've It's large XXXX It's haven't in. year, up that These potentially scope We that think XXXX. larger the and to to some the starts record That still visibility these large they're alone be would backlogs even numbers What this through. here into been long-term let XXXX projects. you even continuing. very year are very on still to in strong

So is industry is Thermo backlog under-capacitized clear that for there King, great. the tractors. there. and for pretty demand is The trailers it's

a as as So We're able ready. that APU a demand. we're or meet unit, a trailer tractor to an refrigerated needs soon needs

of large that's tough And We're quarter definite coming here So see we'll year. XXXX. what a off then balance into wait backlog build the the happens compressors, going and comp, for a great but engineered to how XXXX compressors, visibility large relates it sell. these we that large compressors But as as that plays us XXXX, that out. gives we'll of into four see well,

Bhupender Bohra

that. below actually average, comparable just industrial sense you of... large think more just segment I like you compressor get average brought a or sense Just the in Do compressor the because wanted Okay, a the look they be that? business, get or be to one to fleet if of China here. you to margins the at would would

Michael W. Lamach

They're above. to above. They're They're average great. They're excellent.

is air world's China the So China are sold the important us, the compressors for half and China. important compressor compressors About for business is for market. into globally in

terms to somewhere. that about on think is it capacity which can one that road, to important that And going as eye there China. belt, quickly. an in keep be where But Maybe where in decisions cautioning may you, China in are said it's one customers of go go goes of pause capacity timed So brilliantly that's somewhere. along up. in be you I was That end that run, that might the business. to will capacity aggressive. I these But a They'll make could some short

Operator

your comes Scott, with open. next line Your is Research. Davis Melius Scott from question

Scott Reed Davis

guys. Thank you for Hi. me fitting morning. in, Good

Michael W. Lamach

Scott. Hi,

Scott Reed Davis

I darn one the quarter, remember. sees of what last really little a something – over think there. can daunting the up I reconcile back quarters market pretty guys bit. Obviously, stocks to you've And something seen sees month come XX%. so you a homebuilding want drop it do best with – How good thinks or I up the out you have

a How You've construction that reconcile is that get non-res even fact with healthy see fear you there hard. seen do anything you that touches see you still the out fairly environment? hit that what

Michael W. Lamach

great the world's from going greenhouse the greenhouse buildings. years gas XX% that business. a the ago of again, serving, XX.X%, systems to we're be think launched to space you emissions emissions technology And XX% gas eliminates in we've two are that's applied HVAC in markets if about When by happening

trailers If you a cycle a again world running emissions, air, we walk those you off cycle about and be eliminates center gas emissions. with are that a diesel electrified refrigeration process and using gas plants, cut XX.X% cooling for reducing greenhouse looking greenhouse that to refrigeration of engine think can industrial in a

lump can you selling And into don't know machinery. that I just us business so an Industrial

that's businesses look I in. differentiated channel a to and the service We great in at we're to that's happen and differentiated, model that's a technology differentiated. think you businesses with be have

I is a think story. long-term great this

and see investors hope disconnects you supporting businesses these when well, a entry in of got record saying company in with track ours point So there's a the great executing all a there we market, very allocation that's smart like great this capital out that. is

Scott Reed Davis

seem that maybe to the just and just pretty differentiated you of partially feel you you past, just front the get the again, technology? the curve price/cost easier up you and because sense, catch bit, have back Got get there news answer you, Does a gave, in now to Sue, just a it's been to easier to partially just it seem quickly? it And tariffs out up been do that Mike at or some guys because point. page has of it's than fair least price little a to because easier

Michael W. Lamach

get you If of XX% XX% total compressor could applied think so where to systems, if refrigerants, the the purchase the the advantages and about cost air price, that easier It's see large on, the systems, proposition customers allows actual got to and advantages, value the forth it systems. used. is so lifecycle the engineered refrigerant energy, is the That's you've maintenance, large efficiency price. et be of cetera, a the

able footprint best you is really you products, for commodity dealer why to to HVAC SEER the operational can of get be model. But more helps. as sliding the levels, this most and us cost-efficient distributor that the where So survive into technology it's important dealers into so and matters best operating and residential have that get with and and to where the standard matter certainly the we that in excellence

price, So but differentiate there's advantage. you're on to is mixed where technology around able an models clearly,

Scott Reed Davis

Sounds good.

it guys, I'll good on. Thank Okay, luck. you, pass

Michael W. Lamach

you. Thank

Operator

your Your with next question Andrew, comes open. is from line Andrew Citi. Kaplowitz

Andrew Kaplowitz

guys. morning good Hey,

Michael W. Lamach

Good morning, Andy.

Andrew Kaplowitz

quarter place of able think service to last actually growing the at in close range mentioned that in that was while, a given talked growing accelerate And that about market to that. multiples so and that the HVAC you in? X% could I market growing so, you rate? was From or you tell, what still outperformance Mike, you that Chinese model thought pull-through Ingersoll you service obviously direct beginning for the been about to but have in have also you your from market now you kick is

Michael W. Lamach

it the in the as to the enormous from clean in than going doing levels, environment this. highest time lot them U.S. or that in and XX larger not and built in, the economy find relates might over in China air industrial China the built I that standards, differentiate think The make times China is so you're built go A in in tariffs HVAC and this Yes, environment discussion. built to environment level efficient, efficiency of to environment was of the more retrofit at opportunities code, China

pleased narrower the is really working rates the penetration at us would that be to of that industrial a is we very are are that but what's made. which is services in happening right we going high, and with the with with linkage we to thought. did And what strategy, investments equipment market for lot not of was what of potentially the what's that, last This place have not but the think made independent side than good it's happening a into do only confidence pace giving that only the we're in put it that time the we I it's and year So faster a long strategy the why happening economy.

to there, China happening we'll think what's about I good and in specifically. feel I So outperform continue

Andrew Kaplowitz

institutional question HVAC. North Maybe America a similar on

some performance do that the more that the performance-based is in just But the know at could the look contracting. sense in us color markets give you when So your – strength, itself. strength market you I obviously, on you of some

came to jobs billion, $X has digital improved. applied your big Your

has really look So penetration there so in outperform that's versus accelerated XXXX and based because to on see? you're results good market? visibility actually into market what this as you And going the you the what XXXX,

Michael W. Lamach

it place, in probably tend I addition that. then to to customers to relatively of half equipment, create it and larger $X.X designed, business larger to a American the cycle that efficiency. institutional now the put relates campus it's take complex of the it get to demand projects to that and create and of go earnest, think split real of you're larger as is some it be service still is go take started environments, $X half is have opportunity you billion around installed engineered, the base to to HVAC a and is What to mid-cycle energy got going And and equipment, that more in last in billion North happen just later more If you solutions the early cycle demand time year in Commercial finding in around replacement, XX% and of that implemented. said

think I next enter in phase or two. so we here And that the year

Andrew Kaplowitz

Appreciate Mike. Thanks, it.

Michael W. Lamach

Thanks, Andy.

Operator

is Sachs. your Goldman Joe Your next with open. Ritchie from question comes Joe, line

Evelyn Chow

on morning, Chow is Evelyn for this Good Joe.

Michael W. Lamach

Evelyn. Hi,

Evelyn Chow

getting seems to XX% progress bookings on If are seeing the compressors think mid really the like you're incrementals number of on incremental and year. about in have nice start What we'll the all incrementals, to those the us type just we've from we're seeming range that for It Maybe offsets mix the about enterprise? high XQ it get grow. like price. to seen of XX% large to I down the service it, talked sounds throughout Industrial

Michael W. Lamach

the leverage business. doing level board will fourth executing it well the they're level. It's at in high the the is as XXs into the They're field, so throughout They're the investing at higher well, in quarter. continue running plant though. and across Industrial and the executing it and XXs, than that. leverage to well in operational They're service

really substantial, been of trying as portfolio year place. relatively some in think upgrade do over the that last the about in to what fact, to been the so have you with leverage of they've kind And product investments

for and to run, of lever in it and long well expect building they're So And think north XX% we've continues always XX%, I to leverage we'd this that it get north XXXX. of is said costs in off do come we back if they fixed to point we tend so larger some these very that get high time, in in have at leverage larger place. compressors, those, the

Evelyn Chow

there XXXX, turning thought any that And your working That's or capital some into mitigate, could great, instead normalize Mike. Sue, XQ? would any And the of inventory inflation spend an on and pre-buying then maybe and letting if how us into maybe of you you either be you to as that, of million provide just addition on to that color $XX might potentially tariff-related then metal bought ways hedged is much XQ great.

Michael W. Lamach

to inventory, you it comes down supply of pre-buying are sure really than time as It tends to every as to make as the want more you fundamentals that lots think at long-distance I we lean possible. suppliers favor look lean suppliers. run business as versus is want and to localized of possible chain the short

throughout the on continue we extension base journey think at or supply around that, I so efforts of we've that the and on company lean And there. been the the lean our look

don't in I – the there any pre-buys industry. other see doing front than that where on won't us I are So constraints

around are So larger buy But make we circuitry materials, that constraint to we boards bill commitments. a or if continue that diesel there's the buy would way stuff we those or the and semiconductor a constraint or run-of-the-mill places possible. engines, around ahead run for leanest in the of

Susan Carter

each on commodities, XXXX, you and when all purchasing think obviously not that every I doing the only the we're and X Tier of about strategy Evelyn, XXXX materials and but And, think buys components. some around for our and impact the quarter

volatile of So think would first say half of and XX% second then I if year we are XXXX. so think important to the XXXX, assume be committed about because I of commodity, today XX% that that, might higher can where of or is I the even is and and the more find lower that it less things whole half a or the then why or a in would price. great other inflation yourself buying out slightly materials, goes say you comes that buy think a you don't But of that the is bought percentage you you – because copper, tariffs the around of of were it's you equation, I meant our the of if sudden a And commodities a and idea, you some buy, piece say think go and want that all really have something away a whether revenue. speculation and you you'd it's discussion for how maybe

you us what X.X% the deliveries year that's natural a I we it for working materials customers. goes, and capital is X% really rate on-time go to do for think comments to and support you're where to in, to as routine, a better that And think following exactly around right following as our really my that. have process, you off buying the making in level we layering about be and able that support and and you're a the throughout materials your blended the sure

isn't comes unnaturally while inventory just to because for from down really So QX, normal cycle of it the down. us. it That's QX forcing it we're

different, natural is go. would that So if to at way the I look is that think certainly really have we'd to following opportunity buying ratably But processes that. an right our be something there and

Operator

good comes question Walsh (USA) Hi, Credit your morning. John with from John, next open. Walsh Securities Your - Suisse. LLC Credit line Suisse John is

Michael W. Lamach

the ground into lot we on Is or Hi, have going It sure there definitely than have or the playing service a would you a make year? what's quantify versus you understand like the XXXX. around even But a given John. LLC out historically visibility just So Credit XXXX would point more just I Industrial had backlog - want as (USA) of XXXX. to applied visibility around you've finer historically to way being in talked John into today put Walsh see last better visibility I stronger, are of about compression. way the Suisse into growth, maybe covered. And Securities feel dynamics maybe

Michael W. Lamach

have you going there's is, business to continue. The as service see what service up going to downturn, And the in people is it you because merchant go services you're asset being visibility lives. fact, more get a believe if to extend

the demand about run. So you nothing of mix take really long I correlation better to establish visibility over changed the That helps. And if the a that then other favorable. you we the of metrics relates see to be the there businesses, than tend And service forecast they a as building. would to fact it equipment that is thinking that understand and can from has backlogs think can a use growth still way that the you systems

asset business Unless indicators and pipeline, metrics So that's this to different a good shaping different good point to between what's dramatic about event, the like the and for we year. we the all in we John customer regulations. to before if Suisse replacement, if Securities different mechanisms as But feel business to these segments money the about driven be backlog, and the (USA) then Walsh obviously of would able products U.S., seeing financing energy growth, you. at that that indicators some the new what's shaping the there's it in drive pipeline there around age are of new the Credit seen that of energy enters feel leading new code or upgrades? a that breaks, up. the dramatic you not use, are the - the this or and think LLC some retrofit changes businesses that's business, something you're geopolitical XXXX by the Thank And as in be at helping of even any yet up we're in XXXX fund seeing event not is market is demand today, that Is are a due market? that

Michael W. Lamach

institutions have which Then asset can capacity that deals. The of vast an at has plus their a have few – traditional assets customer is itself through toward may contracting, performance an that this come return. they all institution is own lends times, financing, going can it's not the the there's one majority to that that

largest being of often is institution generally their an maintenance will hold, you some about assets If buildings and utilities to of budgets be one the that think going the fortunate the of them, it's operating driver facilities.

their a that's performance great way other improvements that and getting contracting at areas upgrades facility in then of place So always financing as and they at would the use use facilities.

LLC real no Suisse about Okay, customers changes today. that Credit So in Walsh John though - think thank Securities you. how (USA)

Michael W. Lamach

Thank you.

Operator

Your Fargo. your Rich from last line Wells comes is Rich, with open. question Kwas

Richard M. Kwas

would Mike, the necessarily backlog me, Mike. XXXX, with the can't understanding for is couple your a you've in say mix knowing or just everyone, morning, what cycle in neutral, know what short good the Hi, still better, seen mix stuff you on and XXXX there's worse mix predict, now for than you business you sales? of

Michael W. Lamach

We're every now. piece pulling together

early we But of model work mix. We with be you what it wouldn't I'd the understanding want business, been advice growth EPS a have point, modeling this neutral read get that's yet. say leverage, But P&L, an it's look you're at haven't point. We cash to better ROIC we I'd mix. that for is the running to if and whole historically, our looks this at to we'll business don't anything, taken comes flow in to At on have figure like. back where each what mix any out

Richard M. Kwas

then So institutional, positive think service with be thinking I it XXXX right? been And mix or that XXXX, a to having Okay. a be will does probably you're up neutral? end better year than

Michael W. Lamach

of the overcome a business on And hit, the service run, little gross in the it's a systems. the margin run where that that. gets tails bit positive because long engineered service eight-fold the over built business you on but is a run then short of Long it's get with top

warranty lean the So even But margin. years, story. as be starts, you negligible, would toward a toward you're service compressed as little in the good modeling out tends the a it XXXX, lean it but very it's bit to more period,

Richard M. Kwas

are outpacing of revenues in us on compressors, is noted orders. Okay. terms service? this compressor quarter that service? And then level-set on on one You Industrial, can you of on you growing, Where equipment last percentage on

Michael W. Lamach

about the business. it's XX%, About half

Richard M. Kwas

business. Half the

Okay.

Michael W. Lamach

Yeah.

Richard M. Kwas

Great. All right, thank you.

Michael W. Lamach

Thank you.

Operator

have We for turn will closing question-and-answer back our session. Zac over the of to I reached end now the call remarks.

Zachary A. Nagle

us joining today's to thank like everyone I'd for call. on

As of will the weeks. to we next days in the the on over hope calls always, you New available and I We'll so take road York several and some be [Lawrence] the coming Thanks. be questions and and in Shane today to and mid-Atlantic, soon. very see certainly

Operator

you teleconference Thank participation your conference This concludes today's may now and for disconnect. call. you

Zachary A. Nagle	Ingersoll-Rand Plc
Michael W. Lamach	Ingersoll-Rand Plc
Susan Carter	Ingersoll-Rand Plc
Jeffrey Todd Sprague	Vertical Research Partners LLC
Charles Stephen Tusa	JPMorgan Securities LLC
Steven Winoker	UBS Securities LLC
Julian Mitchell	Barclays Capital, Inc.
Gautam Khanna	Cowen & Co. LLC
Breindy Goldring	Morgan Stanley & Co. LLC
Bhupender Bohra	Wolfe Research LLC
Scott Reed Davis	Melius Research LLC
Andrew Kaplowitz	Citigroup Global Markets, Inc.
Evelyn Chow	Goldman Sachs & Co. LLC
John Walsh	Credit Suisse Securities (NYSE:USA) LLC
Richard M. Kwas	Wells Fargo Securities LLC

Trane Technologies (TT) 24 Oct 182018 Q3 Earnings call transcript