IR - Earnings call transcript Q4 2018 | Trane Technologies plc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Ingersoll Rand 2018 Q4 Earnings Conference Call. My name is Tiffany, and I will be your conference operator today. The call will begin in a few moments with the speaker remarks and the Q&A session. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President Relations. Vice of Nagle, Investor Zac

You your conference. may begin

Zac Nagle

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

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

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

Mike Lamach

Thanks, for thanks to on us call Please and go slide three. joining today. to Zac, the everyone

quarter begin our strategy the shareholders. and XXXX discussing like our year financial to underpin that fourth Before elements of I'd value create the our for results, of review business brief full fundamental our performance and

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

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

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

Turning growth quarter share in growth and us XXXX enterprise. was actions team execution to XXXX. margin successfully and deliver expansion slide also four, consistent other with revenue throughout for our material quartile to Adjusted improved the these us that up of quarter X% and and XX% bookings drive per strategy Despite developed focused and full four. pricing top out leverage year. organic and deliver financial and for top XX% in closed tier revenue the and year growth in earnings tariff business related year headwinds, and XX% persistent organic manage costs enabled delivered bookings each performance effectively quartile, We growth inflation enabled and productivity our and top to the up solid organic

to achieve out the improved delivering record time XXXX record revenues. in team same second of and that end Importantly the significantly against half set at at the organic while of quarter of delivered the objective leverage we bookings two, XX% and

our levels end related order products capital through year customer the performance. our demand while Free core meet XX business is income for which of incremental time to component basis above enterprise to working of the of year achieved our of Additionally, conversion growing and basis largest operating in XXX% lagged financial continuing normal XX% cost flow the target. with for adjusted which we is same year our was healthy net The shortfall and ongoing points at points XX differentiated of the cash pace price per expansion, full positive operational XXXX to funding margin services. the investment

We also income to ROI the conversion fourth past we beyond four years over projects return we average the XXX% additional quarter. XXXX. entered net expected We've and free when we what of greater CapEx high expect in to XXX% for than cash funded delivered an

Lastly, in also optimization to we deployment we expenditures, capital to in share and execute between investing our deployed XXXX, balanced repurchases, plant $XXX dividends, capital largely billion the million and consolidation, $X.X related strategy. business including mergers approximately continue footprint After in acquisitions. and

lines was margin tariff bottom our the with investments in which both against and flow managing business. exception and performance headwinds the delivered the top our related free discussed beat five, slide initial while I earlier. strong expectations expansion, cash on of strong to making and and significantly Turning guidance We inflation healthy

execution focused delivering shareholders our differentiated focus six, the for marketplace results will is maintain strategy in slide to this forward. Turning of we and business going and

year. XXXX, strong another the Looking at we ingredients see for fundamental

First, generally the that markets our end couple detail next slides. remain I'll and in on healthy address more

exceptional have year. record with achieving throughout with at this for XXXX. provides to visibility expect been we'd in business traditionally in improved to multiple XXXX bookings what units entering stage revenues relative into where we're Second, backlog us after XXXX This the

strong to we we in to to as tariff-related deliver inflationary in enable leverage, XXXX. effectively us headwinds in XXXX, improving our manage did and with growth productivity. expected XXXX we and through ability EPS margins volumes, Third, expect solid to higher Combined and pricing demonstrated this continue

cash flow we're XXXX, to free exceed expecting adjusted net income. For

dynamic and We dividends, best it allocation includes the will investments, This strategy deploys organic where repurchases. earns acquisitions, continue to and returns. execute capital mergers share that capital a

On an and to position actionable business with side, have become and in If It M&A we pipeline these when we're strong a fit transactions. any core strong affordable, of active a execute attractive strategy. opportunities. the will our be

trading to well value our in continue intrinsic are below own We which shares see also calculated value.

the growth, Investor XXXX guidance free Day. XXXX, based path revenue that XXXX out our Day Lastly, to laid achieving during our XXXX mid-year flow outpacing guidance and in performance our glide on and our we're Investor EPS, firmly cash for we

two glide path than the we're XXXX, that the of along in differently years, bit we of industry tariffs expected a Given the and the tremendous amount what curve endured ahead moving nonetheless. inflation has well over last

markets growth growth the strong remains our growth quarter appears continue markets all and had show and with few as solid across to well. to and fourth in seven, the end Turning to revenue bookings shaping services. solid remain past geographies be China the over product has there Europe and we economic up both HVAC, portfolio. signals activity mixed throughout as HVAC equipment delivered strong a strength Commercial but in good another in the HVAC quarter virtually shown months, healthy XXXX In year. slide

and in see market at market expectations expecting inroads market with expansion this the in the a China, making global well which outlook infrastructure, and with verticals Our Commercial good point to direct positive growth number be to outside we're market and in we're sales remains strategy The our share of are opportunities has to modest in focus been progress verticals. continues the our situation total HVAC expected. trade be key China continues for uncertainty. growth strongest of fluid still us, of to war But continues Asian mid-single-digit markets one China, the for low-single-digit year, against mixed. In including to a

our come primarily by a was gains, expect of very the Turning Quarter majority and we share demand Residential. growth from replacement with four strong the the for driven to to continued us quarter have market about replacement. This replacement well. XXXX and year. plays business indicators into healthy Economic market still but growth modestly, mix which is XX% supportive for well in softened of the as is

to X. Turning slide

In year, power multiple these with and Transport solid areas. a topic for in we expecting markets gives a refrigeration as growth XXXX, resilient auxiliary uncertainty and built into revenue transport Our we this markets. XXXX, as we for around be result. backlog convert growth and trailers for stronger additional order Transport us businesses units would positive We as impacting bit our business visibility truck we're Brexit a and to opportunities a good North to continues for XXXX. revenue European backlog be business market with position The growth a the to catalyst. single-digit growth a are across bit globally mid-single-digit think time. healthy saw work exceptional weaker low backlog Overall, diversified In trailer is these clarity mixed strong to American over this

good business and globally growth North Technologies Europe in the had America healthy. fourth quarter with Compression Our

primarily by Small of war the fourth total our China – XXXX to impacting single-digit in We equipment mid-single-digit projects continue service a consumer watch quarter wallet China. initiatives attachment expect utility see All being continues and of provided in electric in Technologies share services to in trade things growth to and we to Global Compression to with area see increasing closely. and considered, which powered equipment market growth outpace uncertainty is focused increasing growth is rates be low to vehicle the positive by services services continued main within businesses. multiple growth the of our on accounts. supported well

We in expect to XXXX. see healthy growth

Our Management, guidance. to our provide Industrial now, quarter And Sue including remain like we growth turn Material more continued Products businesses it on details Handling over expect markets in discuss and see XXXX. Tools these and to healthy I'd Sue? in businesses and XXXX Fluid solid the to to

Sue Carter

number from Please Mike. of X. main to away with points a to a few you, slide I'll call. go Thank begin today's summary take

XX% share we discussed, versus the earnings increase year-ago fourth an quarter financial results of with operating in Mike per and drove As of adjusted period. the solid $X.XX,

growth. in out growth a closed difficult year was revenue XX% Industrial which per segment, our adjusted Organic organic share revenue strong the each excess of and in Industrial fourth of strong In quarter the despite bookings we earnings our delivered earnings and segments. bookings quarter X% bookings growth healthy quarter. both of in in Our QX Organic XXXX. comparison was in organic and growth in XX% growth delivered in Climate we a fourth growth

organic over next up will years. On Commercial bookings four that were provide order including large revenue to the exceptional, three HVAC Climate a XX% side, the

X% X% accelerated growth this XX% These outstanding, exceptional still strong XXXX. growth across and XX%. our of fourth exceptional quarter up organic Climate all revenue quarter rates was businesses the fourth the in of of Excluding despite up was services. growth XXXX broad-based building was Organic across bookings equipment order, comparisons difficult also rate and with growth very up in organic and and

growth Mike bookings funding strong net CapEx flow adjusted primarily XX% revenue of and projects quarter. capital our additional discussed, working for support to higher fourth exceptional in and to free was finding cash income, As the due

cash of drive XXX% for in continued across other quarter. expect in the system income continue the material, manage to excess earnings We operational business operating our Leveraging direct in we headwinds net to XXXX. inflationary adjusted to deliver and high-quality enterprise, free of flow tariff-related and excellence

operating delivered XX points. expanded we QX, and our leverage XX% basis During targeted margins operating adjusted

improvement point higher XX our basis year, the operating initial the guidance. adjusted For end margin was towards

We buybacks deployed year and XXXX. million Importantly, our million we also XX% a dividend in long-term. in the dynamic commitment during capital dividends below deployed $XXX consistent over as our the $XXX the growing on on value. delivered share strong our and shares with We to the continued trade intrinsic maintaining strategy allocation increased dividend calculated to

the on XXXX, to We was in strategic also and majority deployed mergers in of which acquisitions $XXX million XXXX. committed spend

XXX% Looking number go forward, consistently to slide expect time. excess deploy XX. over Please to of we cash

in Commercial XXXX, highlighted HVAC compete. of XX%. difficult quarter of As was a Consistent products, and continued Strong growth the revenues a in orders lumpy. adjusted markets. of system, focused enterprise. quarter orders execution that The by go X%, of across margin to in comparison couple actions new share the pricing points in channel shift Please healthy XX. from XX we the per to go virtually our us the segments in as creating and accompanying system there on disciplined Middle the in operating results adjusted XX. in geography large effectively focus and continued revenue XXXX. number earnings discussed the of revenue organic in year-over-year strategy, controls Last both us decline growth we gains delivered HVAC investments in orders and improvement European These fourth organic every were on per XXXX. minus in growth orders drive continued delivering and was showed of results ongoing strong the be of us One signs Slide sign manage volume productivity tariff-related our revenues chart business East strength earnings we strategy, basis business in and share the our third on previous positive revenue the on We drive underpin of the where strong quarter bookings end quarter. of are These and enabled a chart. capitalizing to highlighted growth the of slide fourth quarter. on indicated fourth quarter operating headwinds number where Please business and slide, by our reflect the for can execution expansion and quarter to solid inflation enabled by

Climate segment strong of another delivered Our income growth. quarter operating

by to results related over more legal growth positive basis line, cost, levering the positive margin our was segment with $X.XX adjusted the expenses results of Technologies and XX% by versus full year, the XX% share we in by share initiatives margins inflation were to strong execution strong despite operating improving for XX. pricing in in price points with income other productivity number enterprise. XXXX. we results impacted the was stronger basis extraordinary legacy quarter. points inflation year-over-year. Corporate XX a in reflecting quarter. in the Strong basis Compression other XX versus Slide up the the negatively efficiency operating delivered solid Industrial inflation earnings in to Our points per All-in, quarter Price and approximately QX particular, earnings Below Please basis against points. business of improvement matters per return across XX go by notably material normal $X.XX. XX drove delivered drove growth Productivity

offset year full productivity other fully the For inflation.

productivity, Technologies development We continue of drive optimization, operating and to our heavily business approximately work weighted these Ingersoll-Rand reduction product make a and concert investments pretty expense stronger technology Compression business. basis consolidation XX Slide points, new resilient XX. and plant information Commercial to in evenly incremental and more QX All to projects HVAC also investment projects further investments. between to for go reinvest with in Please footprint

were of with X% Our revenue expansion Consistent Climate our across growth go basis to margin points. Please segment strong results the and quarter delivered adjusted XX. strong segment. another operating organic with XX expectations Slide

results and of points with Compression Outside strong settlement delivered discrete by expansion also segment with the X% legal operating growth a adjustment of business organic $X more up revenue was impacted margin million. totaling leverage XX%. Technologies Industrial Our adjusted accrual XX Technologies, leverage basis Compression approximately and Industrial overall negatively than

maintain moving balanced where We executed deploying into expect quarters. it segment high-ROI Industrial leverage during strong allocation returns several Slide our been These plan XXXX projects we highest the go a earns it will We strong growth XXXX Please dynamic customers solve level help healthy of for In as past their in segments the both business be our complex investment to and capital to shareholders. a over has capital XX. most challenges. XXXX. drive investment in help

that We programs in Beyond to Ingersoll-Rand. resilient and on good strong with commitment invested growing long-standing which we that build dividend. a markets optionality and our million CapEx optimization more as a against strong largely stronger our footprint cost-out maintained sheet us We $XXX reliable, balance evolve. provides a executed

the raised XX%. we've XXXX, During dividend,

repurchases share trade intrinsic below the value. million approximately shares deployed $XXX on Additionally as to we continue

committed the a XX. investment best deploys strategy few the be you details through ahead go about investment the slide and to consistently enthusiastic capital forward investments, dynamic deploy strategic a XXXX the raising minutes to opportunities. return or excess value best acquisitions. cash the XXXX, spend our that to future we repurchasing ROI remain on capital to accretive that shares, Please allocation We're look business the excess walking whether As we opportunities guidance. I'll in to making to dividend, the of

contemplates one up in exchange segment foreign and backdrop The Climate than revenues slightly the about earlier, total organic of point with XXXX X% revenue outlined between Industrial. to market reported X% negative faster percentage our growing impact expect to reported year-over-year. difference Given be Mike we the

each delivered slide leverage we number expect XXXX, margin basis enterprise, and and adjusted the the In segment in half With margin solid XX. between in expansion and margin go to further operating Please expansion back of XX enterprise we XXXX. XX points. of expansion

guidance, adjusted XXX for share to continuing expect $X.XX be approximately restructuring. the We $XXX for $X.XX We've of $X.XX XXXX translates into modeled excluding in of about our to diluted XXXX. approximately shares which range into per repurchases in million million earnings share

free highest opportunities to adjusted quarters. the targeting flow greater rate of outlined see coming time. a to on strategy by and XX%. will your approximately primarily ROI We're XXX% footprint than excess allocation cash estimate and Below guidance. we're cash committed The and purposes, expected driven XX% we following million of depend be estimated dynamic income. operating to balanced I expense consolidation, Net over product be excess early to As development cash expenditures earlier, over between are $XXX the XXXX. be effective And in deploys expected actual debt initiatives. the the are tax capital reflecting where consistently to allocation refinancing be for that net million. expenses income, $XXX new did we interest approximately Corporate to factory we optimization, $XXX also modeling approximately we Capital the be million, is offer

expenses advance. line Additionally, We the that million line items and are other plan estimate expense XXXX. be These income that not in expense for not are classified truly did income other $XX or within items pension-related of pension. estimable outside and we other approximately will

The relative and it known the Now guidance, so of go assumptions included laid you. to the to billion a out conclusion XX-day XXX the XXX Relative period. the what's we the in negotiation like on to using. includes, Section we March hard to just tariffs, with what's of XX. keep the the if we're what's slide XXX X, cover that It's full from step-up is useful, be guidance to I'd to we've and the XX% happening XX% XXXX at including X I tariffs. we and interest X, planned track out Please might Lists from Section topics of retaliatory with expected two expect thought impacts X indirect Section $XXX tariffs of and tariffs laid direct the out tariffs, which China

a be as in if As the does not not of to times number anticipate gain. impacts manage these expect XX% however, should to related of in and XXXX and To step-up during a from occur, the clear, windfall inflationary we've you we this able effectively said XXXX. be types costs see we call, we'll tariff- manage XX%

both the thought a content topic in We extra which reduce economic will us to we actual proactively estimated to and inflation fixed implement to XXXX in The we're the call our would at improve and benefits in consolidation be The our doing to it conditions to included base little taking I'll restructuring Of relates next the provide the matter see. our restructuring We efficiencies expected going we on what beyond efforts. operational on Climate pricing and And costs. plant helpful of footprint with optimization steps $X.XX ongoing forward. than back businesses no to encounter is necessary more the cost is Industrial in that, actions presentation. slide resilient optimization main cover is the XX% segments. is XXXX, which project we Each aimed restructuring more the stronger, largely XXXX Mike. same build turn

Mike Lamach

be room to be recognize for by returns a bolstered the believe go no next Please that results XXXX improvement. the year. well-positioned further XXXX to slide several over a Sue. shareholder years our perfect the extremely our XX. to Thanks confidence. There'll is We'll means first was and We deliver strong company financial

delivering business are extend are and successfully to drive and However, throughout for full and appreciation is landscape confidence headwinds problems to to results our to encouraging my improvement world customers shareholders. our overcome results to and for the us people XXXX our teams ability operating prepared high-performing solve gives evolving I excellent want system committed our to escalating navigate complex the that talented ahead. continuous

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

you growth create for bookings enabled Our energy economic which products and less and provides the nexus Unless these execution is and us of and cooler, sustainability will to trends, world for believe in above-average services a populated, to exceptional XXXX. of this getting growth strategy portfolio every the mega growth trends Ingersoll-Rand. conditions tailwind less is efficiency deliver profitable over continue opportunities Successful at resource-constrained, long-term. the mega quarter secular of revenue global

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

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

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

Operator

line Research. from first Instructions] Scott Davis the Your of with [Operator comes question Melius

open. is line Your

Scott Davis

Hi, good morning guys.

Mike Lamach

morning Good Scott.

Sue Carter

Good morning.

Scott Davis

more projects really made tariff those of opinion Boy on delay local right Is the some more color pick little bit there's wanted your a it or all. a about not maybe on of quarter really in of at much bit. the But dig to of outcome push that I or behind comments into this guys couple some China. tied just Commercial what's of comments? this little In just a is the to you the in to to a something the the particular,

Mike Lamach

the Yes, to you bit have a Scott. business separate

on really producing whether as momentum less the involving you're go So, transport it's stationary global of particularly attack HVAC hopefully emissions. greenhouse continued gas where most saw I've markets, emissions greenhouse there government XX% to a to or we I thousand susceptible if and infrastructure growth the as take in it's more going that a there's gas going side institutional strong toward gas first XX% problem commercial bias And you're well. services hit greenhouse of HVAC in bookings because think, and times, those again to anywhere, said emissions economies' work

some at let think compliance you said, would of that. Industrial but That have part we will look and would rotary in saw the the largely our I of certainly quality. growth the here certainly all compressor water regulations off in same. general, its that air and China trends three the don't our smaller gas contract-cooled improve foot been and and codes, around Interestingly, in are business line-up I good So, some the compressors, think that rotary of being

from I from China. and are them in outside of What China more outside continues. see, moving they the mostly China however put incremental to waiting our exporting that Asia, of to particular of that are capacity suppliers rapidly are, U.S. to So is, some get in our customers

for a is now. spot right favorite that Vietnam So

think I already of seeing by companies that So you're Chinese sort taken export. actions that

think sort to to forward. going the know positive to see us it's because of you'll matter Scott able they set it I continue And where doesn't that way, by you a for up going them. be shop, support we're

Scott Davis

Yes, other that's is do winner my some to of... those don't loser? natural follow-on guess kind a regions in is be or have I that critical maybe are net you I you? you a China or and net going you mean mass

Mike Lamach

Yes.

We get have you where we don't on part to so can't team of throughout of really the have a ground, Asia, footprint strong a a capacity Asia sufficient supply.

opportunity. So will would we have unlocked so is be as long good somewhere capacity that it

Scott Davis

you pass I going Thank to on. Okay. it am guys.

Mike Lamach

Scott. you Thank

Operator

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

is line Your open.

Steve Tusa

good morning. guys Hey

Mike Lamach

Steve. Hey

Steve Tusa

go more Can we other? tariff number through, of doesn't bridge kind could no you margin price some if on maybe how in year, you little that both just bit? just the What like the of bridge, dig can bps better was in think little a you you And on know a trending? XX but definitely think ex-tariffs investment color the And better in I get then see here, of just kind exactly next the material give windfall into probably said, the own bit would give already color its on than XXXX those ahead in we the maybe trending bridge XQ. of of parts guidance. that, game how see you you're expected I

Mike Lamach

say bridge, quarter sort through thinking the you XXXX so or XXXX Steve are fourth walk the when bridge about you Yes. of bridge?

Steve Tusa

Yes. in what just I I fourth quarter happened context XXXX. the guess in the am of

the what the play there then you'd beyond and in how explain that see in XQ the just XXXX out? XX maybe So bps moving was

Mike Lamach

back would as at had for out, something start get We there. our so year. we and full that we price I basis over it to was got material The worked finish. let expectations X inflation materialized hoped to points, say XX would. roughly That to hoped Yes, the Sue

half into there questions is didn't is tariffs XXXX at remember I there more were why were One you've than what say as of time. and May first the the that so given carryover of price still versus same sees positive going exist some XXX would headwinds got April cost in to implemented from XXX the last tariffs year in the and the implemented October, the and not

items? or pretty of so that is plan our lap We regard. you any of course call laid inflation and from still and II wider looks, X to deflationary, see half that being XXXX. commodity I've steel but you Materials a it's of X begin being also knock-on early --these would quarter XXXX. copper price is in by the spread see next all Tier just as X, in first in model, might that Sue, see QX is largest, metals inflationary But our quarter be in expressed start majority a QX. the the to the get But effect of perhaps but bridge tariffs quarter in out remain to would the

Susan Carter

Yeah.

quarter question think about, going in So Steve if and you your the on into XXXX. investments fourth

capital were the actually as we our do optimization to business So footprint and the planned strategy as product that Operational of and those And carry development investments investments in the XXXX. and part throughout in Excellence the fourth continue quarter they're we of in primarily were we some and invest had allocation over them doing. new in XXXX

So productivity to that projects either operationally manage It's make the XXXX. overall we're you for business. going nothing terribly as unexpected, us where allow us that strategy or in and or the of about think really unusual fourth XXXX, quarter of better, providing increase

Mike Lamach

not up to wanted time that Yeah. the over slowly at was that. productivity you seen us. this we as be in but utilization in of is more we've of view entail a now. to opening really projects XXXX. period footprint a quite That's in a add decision which not one event as XXXX about just higher of that last that. for emerge would restructuring new we've consolidate can something point And front creating XXXX we capacities Sue, think recession, And more large really the the the would and XXXX, we the final But is just a resilient done in I reduce about into a when There larger we've aggressive and recession projects years want point over probably taken of around toward thinking step-up in long high around what and you get can really you've the that the future be happen sort XXXX, clear see much that we're to that. in step-up

the certainly that's So the through another and investments of fourth quarter part what of in XXXX XXXX. involved

Steve Tusa

Historically number more what of kind XXXX Is a that a negative? is that should modest think negative. about we for investment modest

Mike Lamach

bridge always Well, the going the in around XX to basis points we're XX, is what on and itself right total investment modeling exactly that's number be XXXX.

Steve Tusa

Got about and XQ And one we how seasonality last year? Normal seasonality – think half half second and should it. next the then first year, next for to one. rest

Mike Lamach

because the I one. love expecting Steve one was about you're I question, adapting quarter your

is view you confusion XX.X%. because one first, three-year I average part actually most a taking if the the But one been that think on answer that me I usually Quarter appreciate investors. we've longer the let so you're creates that at And around historically, around look that.

to around go been it's a you long-term average, If XX.X%.

in seasonality for us, models for comes a you when the it you're largely and about first XX% that between are safe range. think that think kind of XX.X% And into quarter. I the So

If north that out about. you're something probably figuring we don't of you're that, know

some rest the confusion I would back sort the been that itself half out. thoughts don't quarter there's I or situations year kind The works how many that's quarter even So around around one. been of think the two. there's you where give of of year of

Steve Tusa

gave Well, you me was to guys. I more going I Thanks I appreciate that. than get. thought

Mike Lamach

you. Thank

Operator

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

Your line is open.

Julian Mitchell

of Maybe within step-up in around first morning. free cash Hi. Good flow conversion question that the a XXXX.

see mostly coming grow from through year just drop for XX%, for double seasonal? do to XX%. is pretty for tends improvement, out, guiding think still CapEx you're think growth your how quickly guide. I Maybe you're the to cash you we operating cash receivables, And that given guiding be example? the flow flow spell that almost to EBIT about But so

Sue Carter

free it for greater XXX% should of good expect income a have and story really Julian, XXXX. in flow. net We cash Yeah. than us to be do

second And couple XXXX. apart approximately was pieces, talk take so That to a there's lower million a for as is those CapEx million of and than components $XXX about let's you doing guide for That with XXXX. a $XXX lease consolidation on made that. absolutely decisions we project. a warehouse projects decision had versus a XXXX. had some facility couple a buy. carryover in made we warehouse were We We the to We good of a where

So long...

Mike Lamach

way versus owned around, leased. Other

Sue Carter

leased. All right. Owned versus

Sorry, Mike.

our of in range it CapEx, So you the revenues into to about XXXX. back think normalizes of sort as X% X% more

helpful. So that's

terms. about to and going think capital, an capital to you to balance going always looking your supplier which working As isn't viewpoint, working you're your change terms strategy be is customer overall from out that

those out. of What looking quite And on-time the in in through our is, is make been balance normalize capital your of DPO that course, expect to revenue which strong. guide. and going into cash at the back more would sure delivery. meet products DSO of have, always the long-term working as we X% is XXXX that a that, guide the free we to range X% meet to also XXXX I to have the as to move you And inventory, looking on to same So demand that time, enough you're customer percentage flow see

back us moving the for cash gives statistics next more in into we're bump So that's free metrics XXXX the year. the flow what in longer-term and additional of

Julian Mitchell

color overall. Great. question, more you're in bit what seeing And my Europe on second Thank then a maybe you.

are you'd terms that you have in think of items King specific so forth, watch on anything spending appetite split which the some changing Western But mentioned Trane Thermo Middle and interesting or side and in maybe understandable. on the Industrial I versus anything customer Europe East. in

Mike Lamach

so greenhouse and And making the changes bifurcation that that year is this energy Well, again, gas here quarter in continues. HVAC between very strong we've and had very a in happen. focused emissions on economies, this efficiencies, – to Europe regulatory make four

that Europe mode little in it's build a a certainly of Brexit and not not large in you're of it's great that them or for can slower sloppier So in in think – Generally, been about is whether quarter-to-quarter. not East the or Middle are bad looking slower of and sort outstanding. difference us in just then, bit been in than think Industrial not orders district talking And of But course, really extremely come all, Europe you're and at Industrial in them HVAC. growth there. you're is we the a are there side the I the cooling all as The rates choppier with it's I or modify plants way make there. factoring sort economy

lumpiness So, good the of there a just for matter is the I in think It's environment orders. us.

we're relatively as Middle well. Europe on and optimistic certainly East So, the

it's In little terms of a refrigeration in transport mixed. Europe, bit

in You've Europe. Western got a slowdown

Europe. got Eastern continued You've in growth

think and And just concerns, little You see be good you general a market. there. really a of a would European stronger again, see European some sort truck economic on slower Brexit. is of a largely of outcome clarity this outcome. little market I the sort baseline trailer Clarity Brexit, And, through frankly, working

think market for and the a our positive it's for I businesses.

Julian Mitchell

Understood. Thank you.

Operator

comes line next Research. with Wolfe the Your Nigel of from Coe question

open. is Your line

Nigel Coe

morning guys. Good Thanks.

Mike Lamach

Hi Nigel.

Sue Carter

Good morning.

Nigel Coe

like sounds had QX prepared. answer it that Mike you

Mike Lamach

that I so to I it. didn't want on Steve disappoint one, got

Nigel Coe

specific. pretty was that XX.X%

order So, and the think long-cycle. I I've seen size ever large in commercials call order, that of out don't you especially an

order? for of that terms in in. maybe the I color out are of What's that scale and more that just like mean a of seeing market bit you opportunities how there? kind So, progresses of size

Mike Lamach

wished it XXXX bit called in and we XXXX when out one that had have because in it in lapped. actually created I we of a would little Yes, confusion XXXX

range, in closer $XXX think I was $XXX it this million. the one's to million

these we're moving buildings, I where the seeing of even to facilities, alternative approach maybe reducing intensity, use So, toward that energy some more more see campuses, of grid energy getting We're think going it's that. flexibility a power. toward reducing holistic in

involves that. that us, with that's controls, along equipments, of a we're seeing design, for it lots so that And service and will moderating go subcontract time, over

they're this So, been talking about four probably three quarters. or for lumpy. I've

like I pretty forward. the pretty We shouldn't we So, get margins it for like really think This and the will leverage it -- having nice be linear will project four good we the about and expect that. what we a one particular years XX are build in these the over business thought projects and on. earn last good spotted resiliency again, close things larger of will fashion. will going to time. months base affect The we that and revenue business a over in to And so that's

Nigel Coe

really that's call. And or mentioned times think, four during helpful. shares Okay, value you intrinsic the then below I think three your I for,

You also mentioned M&A opportunity.

the to too I'm accretively actually do towards wondering you helpful. for is more price buybacks? deploy Or right share opportunities dollars incremental share given you consider buybacks? cheap your be than Any that would So, still M&A out see needle there now, comment there

Mike Lamach

there intrinsic Yes, mean could we you really of would the it's we it us. then ROICs based affordability the that's value. at on and both And out I what for expect that do for the Nigel. can that that be it's toward think both looking comparing M&A

good company. core of fit compounding time, the if course, base over of they're the on cash is a particularly the the strategically benefit Of businesses building acquisition

going is cash deploy we're not So quarter, certainly in we're and the sheet going plenty that's fourth with the that's long quarter. capacity forward. let and as up there But to sheet stepped somewhere. great happened actually to the buyback what the in around And fourth of where going focus. to shape, it balance sit saw for the flexibility so in you work Balance

Nigel Coe

Okay. Mike. Thanks,

Operator

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

Your open. line is

Joe Ritchie

morning, everyone. Good Thanks.

Mike Lamach

Joe. morning, Good

Susan Carter

Good morning, Joe.

Joe Ritchie

clarify points couple the a on So just cash of Sue. to flow

in nice obviously So step-up expected XXXX.

like Get seems EBIT half it capital improvement XX% – working from coming expecting growth are half EBIT it roughly is of the the growth, delta of be from core growth. seems guys to growth. earnings You CapEx coming or point, it

And turn so piece? you side, Or are be better? working thinking about a the assuming the that on working get capital how capital we turns should

Susan Carter

about think to of the If a at X.X%, right of happen. to making end series so you're going do back of that a that of that not. a is middle it on actually there little inventory in working revenue, year And coming X.X%, have of as where range. your just a bit a have up you Yeah. called at I to not levers been go a percentage with our it point Joe decision again, full of I where process have And somewhere ended we probably X% capital the X.X% would it get I or X% would out there. there's is about point whether mean, and

what's demand those actually you're to the to going you plan see customer factories you plan meet efficiently and through the how in factories As happen as time, going manage going forecast, order to that delivery. in you on-time

and the gives range the to inventory everything X% is go probably point you your revenue uplift. that of it what one, the will down does So right which else come But time balanced. into remains to over X% back

Mike Lamach

really Joe, course of a flow outsized And delivered cash in slowdown. we

particularly historically. in we we're what of to of terms as is would not components increased kind want We've a to parts. have on-time a be and to and hard-to-get think to plenty increase handle that. biasing cash we've turns. particularly half throttle volatile about but it XXXX is order a card it usually to it's We in plan terms make always stock able plan when here. we reason got ability always upwards, good XXXX. at funding problem to The not The rates sure or in of sizes Kanban So delivery The worry we have turn, got of deliver in We'll of growth safety be worry Trump on-time back. And everyday. and always shipment, was a done good we it our there it do about sort it's you've

sun sure to shining. make going just while we're is the so And we're making that hay

but So, growth on time. Sue's right, it exactly fulfill the and to do we make want point's sure to

Joe Ritchie

All right.

have quarter said to the to maybe looks book year problem another and next as way, you inventory progresses and the just year So good if a that's build may good have. again

Mike Lamach

it probably Well, what half was our last growth rates the year. forecast of

there anyway come you're down where a bit. to see capital Sue's going little So the I think to point,

above this I it's But got based it's we how scenario over that's a a fulfill we're evolve think year. blue need think there, China-U.S. And or going so sky stuff the on if negotiations, go that. is there, going just to you on to fight, outcome whether get to that. comfortably XX-round it's XXX% good or some out adjust a discussions, as we've debt if the ceiling necessary of the to Brexit, about tariff

Joe Ritchie

like talking makes lumpiness, about Mike, earlier the it'd sense. if to pipeline that less see come question, be saw projects about through today No, being as but months large whether to you these these little Yeah. you maybe and robust over you your quarters. see starting can some the follow just you around of I are comment helpful projects than And a ago? your or talk pipeline, on several XX recognize pretty the maybe what full for maybe

Mike Lamach

two, horizon. time Yeah. often sort years to development that out They as the can on Look, often in of you project, are go imagine. five I think that kind of these $XX-or-more of projects the the million a develop. to at two put three take into there We'll

couple get we've we there's can a in out of thinking that really one something, the there. we closer magnitude knew the that or out had large million be to as two got of closer do we $XX that smaller year. $XXX million turned are to this certainly and toward one, We but And one so,

Joe Ritchie

Okay, great. guys. Thanks

Mike Lamach

you. Thank

Operator

Kaplowitz question comes the Andrew with line Citigroup. from of next Your

Your line is open.

Andrew Kaplowitz

Good morning, guys.

Mike Lamach

Hi, Andy.

Susan Carter

morning, Good Andy.

Andrew Kaplowitz

with there for new bit growth resi But some to natural year continues market XXXX? growth resi growth do obviously, Ingersoll? another the in climate be concern for Or given should that in single in a weakened replacement Mike, could little will for share housing. at line Ingersoll the the single gains projecting you think QX down digits? And growth resi based we XXXX on of XXXX think high know market your be Was more we you're digit -- in you HVAC some demand. slow in point, real

Mike Lamach

about talking you Are resi, Andy?

Andrew Kaplowitz

yes. Yes,

Mike Lamach

Yeah.

product really sure, the the really quarters in strategy resi, XXXX digital. share consecutive gain. say had in row model, I in to XX, present, we've would We a XXXX for distribution, changed and So from the investments

the a this strong. for XX there. quarter without so fourth share markets It year. was And in had straight of remain quarters hiccup same And the there gain the we've

the of realize have in market. we going market, construction new is to that, replacement not the do You be what XX% to

of than the you about of our think less context about So HVAC Residential XX% being Ingersoll-Rand, revenue. think as

X% So going if to We're to a you think it think market a negligible small about new really really could off obviously, – and us. be to construction would number, and about being I continue X% the you're for XX%, be strong. that's dip fell talking even built replacement that towards

Andrew Kaplowitz

Obviously, the Okay. XX% And maybe, market. growth a you large HVAC was on Mike, projects, organic Commercial about if I U.S. ask but the of the even strong. lot can very quarter questions in bookings the

than you prepared had. get Looking mentioned the in to I here think visibility to remarks better XXXX, you've

at you institutional start strength still And is seen, late cycle. question, really that you that point? between markets? to does this have XXXX But institutional lead the look this And we're if markets, it in way same XXXX? backlog the to going picking at people how supply in Some is broad-based still the you've

Mike Lamach

applied business certainly strength One of the Well you remains strong, but really a strong have was market well. to the unitary couple is unitary I of Andy. the commercial tell things, as –

about got and in It's long, think we have a us we outliers that still continues there growth that long so gives we're fourth unitary. U.S. on to that about XX% commercial think continues this positive. particularly The along in healthcare education education this We applied strong. to of are the the to quarter underlying to the move be continues that institutional seeing that and mix, of that be front. healthcare strong. No work nicely, general sense results just And kind economic had the for in conditions had pretty legs

four-year the thing Nigel we think for a XXXX. contract that regarding solid And booked So span. mentioned that asked we've on as backlog I larger we that has earlier built the got question a

legs got sure. XXXX So thing I has for think through this

XX% context. for you service. business, keep you equipment, -- to When Now me XX% recognize Commercial about in to HVAC get let it too, just our Andy, think people think about

pretty what there get of buildings Commercial. we it component thing, You large But do quickly the to Institutional between of replacement is this still breakdown in really equipment the and U.S. piece the

And there’s efficient, energy I as so going to there's more have us and so here ideas our environmentally well. customers, an opportunity opportunity creation into friendly think demand for more always

Andrew Kaplowitz

it, Mike. Appreciate

Operator

Your next Walsh Suisse. question comes with from the line Credit John of

line is Your open.

John Walsh

morning. good Hi,

Mike Lamach

Hi, John.

John Walsh

anything there just just bridge margin Maybe is to to XXXX to Climate. out wondering back Was terms call of in for into mix. circle the if

sub-businesses, rates impact? gave equipment you the then growth different the it the the service market there anything us rates to growth And You, is and between as of margin think some but as relates Ingersoll-specific there? about anything obviously, for

Mike Lamach

the So nothing at jumps on all It's pretty to year. stick. out remarkable me straight

price product weaker bit TK maybe mix opening line. could XX% or of that more I more continue the improve in side year. With profitable throughout of mean The than trailer bit of right North will with and the bit leverage a in be continually ballpark bit perhaps mix more point think side being that Europe. little the some little there to a a if Europe for versus anything, the America, truck the TK Res too on toward there I the a because we expand

TK ever units trailer is most the particularly obviously, backlog we visibility but on visibility and it's edges, things in little The I had around, a business. the that units pretty for year. North So think the straightforward power around American

year well feel the HVAC about way entering backlog we too. think I as that in the

think. here plan So a relatively I straightforward

John Walsh

starting a as Got $XX think and the out I think $X.XX million about about you, mean, here then XXXX how them call in payback. through we you. obviously, from four-year these rolling restructuring And benefits we should carrying the over having going some and about it could to think actions 'XX? or be that? than these kind XXXX is even have to later what restructuring what's of actually actions of tailwind And then into from earlier

Sue Carter

and of way is than over that in X factories to is John, optimization paybacks would X pieces what year we've think in footprint into the X time. been know the you projecting those the about bigger and restructuring of it XXXX about XXXX, So less sort we're I the arena talking the range XXXX between

will so increasing XXXX -- the provide building great out it in to going there, will We into and build. XXXX build you're footprint, better you be again, savings be each as XXXX, process started go it payback. savings to to going in good a that there but in capacity years but continue you're savings there the these So obviously going through a is building optimizing from a that's catching it return the And in have locations XXXX, really and and does projects. about does of Ingersoll-Rand

Mike Lamach

think we make that year and margins announcements planning and help costs think all I long-term know say next course do, the the into of John, can we I'd happened. fixed sometime guidance costs, in about the lower you we is extending that this will company XXXX going something that once into later round improved factor to in of probably benefit forward. these recast understand And for investors what's we of as the

have announced that once we do to note intentions. a make we'll our So

Sue Carter

opportunities Mike the we're ahead a the I We're regardless think really actually And you get to environment. environment. not made an looking of economic part these at in earlier these that, is at the to looking of point as well economic opportunities operate discussions actually way of

a And you of in to so company the get stronger is fact that can the making terrific. addition return great off that,

John Walsh

Thank it. Appreciate Great. you.

Operator

with Pokrzywinski line Your Josh Stanley. next of the Morgan question from comes

open. line is Your

Josh Pokrzywinski

Hi, good guys. morning

Mike Lamach

good morning. Pok, Josh

Josh Pokrzywinski

Yes, am enough, used right. to I close it.

were the business. Not levels, back seems XXXX like from thinking of fine and there that hard about you context Industrial I'm other caught distance that abrupt. here. Products Industrial It in the but and think the not the some anyone on scenario, are surprise of landing and XXXX, some with of XXXX? and tone thinking necessarily operate shorter-cycle a prior kind Tools to being trough and decrementals you elements inventory customer I Just by of bit should alarmist and a everything's of How overly

trying sensitivity Just gauge what to looks like? the maybe

Mike Lamach

has of question, about it all restructuring compressor business, point at Industrial I business. particularly this you where first of bulk mean sort the Well, when this the back the spend into gone into has think gone, John's to

more what And resilient so been a is higher-margin they've I certainly doing. building think business

its bit continue outpace that of here what for service we're The growth, view around other matter a mean We there piece outcome too again a what that certainty toward China-U.S. is of is wallet and seeing in our both to what that believe of is we probably think growth has happen. share balanced could going if and could clearly there of equipment lock service certainly is CTS that orders penetration the certainly that, business. QX there. I strategies to tariffs, from little some certainty no be,

share happens, too. think the restructuring is a business. a we're think Industrial prolific at business always it's we downturn balanced base, I in I can in mix. around think investing. basis going if higher a through that a take XX business a fixed-cost In and into share full to sign of this has but say gives make view So, And point we downturn, want for lower sure been I that healthy a time, planned want the investing that points you and into I back taking back that service to

Josh Pokrzywinski

is projects in equipment? larger cycle that operating does or performance projects there about these when as in those like kind in incremental not terms lower or that your see about revenue I'd of in it, feel Is pass-through equipment. that some would of that then the some helpful. large Got margin thinking of that's you up. I And imagine a more we all with show just think imagine a comes contracting especially and it ship? Climate, hit normal more some should leverage How of on, just wears

Mike Lamach

don't not going this particularly out incrementals. be materially case, or something spikes can It Josh one's think right? with in anything to be Yes. this I that leverage

not are bad. on So, the margins projects those

in contract as talked those margin to from perspective look past, business. there look to the an well contribution contribution to at between projects SG&A you've income the got we've operating left little As the everything into loaded at. and have Usually very the entire are margin

we've hard into everything what to start Again, probability to to that. when I a put we don't And them think a So, out, certainly the to magnitude on comp got hard plans. positive talk it. of closing, feel do booked, get something got they're we those straight when about high that's base we'll spike of perspective. might forecast. we there's We we from And so have

So, question. that I your hope answers

Josh Pokrzywinski

Sure does. Thanks Mike.

Operator

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

is open. line Your

Andrew Obin

me? Can Yes, guys you good morning. hear

Mike Lamach

how morning, are you? Good

Andrew Obin

good. I'm Hey,

you just HVAC answered, lot thanks state give guys? on have you foundations? a been and for guys the questions key can look you a visibility much local including I America do question the on visibility funding institutional of as in for in a because have is institutional because it funding us me. at How Just know you market side But North side for

Mike Lamach

look of at to lot metrics ADI, GDP I growth, mean certainly look good. got at the there, those a Andrew. non-resi, all look fixed looking construction, We've There's you can all at-- benefit of

Andrew Obin

be Those longer useful, local government. government in -- and from bond term of state to sorry. you interested guys tend metrics sort more yes, and was issuance track I

Mike Lamach

and as into thing well the track we can investment do we use of the systems at front that. The Yes, important Commercial process. certainly put is though end in you look we the can a guys we most of lot

Or of put confidence you back because Climate, of all the have you the do this the kind to heart very in feel visibility a backlog. and degree out? we XXXX at got ability the the doing to globally what back XX healthy. that that. understand of America, very And say is around in into in would haven't institutional least around this probably -- what look And size really over institutional we about the in the the growth the maybe of guidance I us number are could from even you do institutional goes the very So, perspective I around high of tell And got for confidence out But I of now strong put and the what emissions what's have North larger that pipelines projects to forward. going business. better strong gas TK supports strongly that and Those Ingersoll-Rand you compliance, happening growth I years and confidence are today I just on certainly HVAC, of question had I've around in I've visibility, visibility the all indicators have? question, greenhouse

Andrew Obin

That's North How follow-up is on a offsetting great are answer. you. for which And much in good just it are the Thank And this America you. compressors. automotive orders is to Thank as you? the because industrial of headwind a a headwind quite well? industries if

Mike Lamach

Investor look Day when and of it at pie on colors markets out we that charts of ran business Yes chart. at sure. shows the back the Andrew produces one you slivers you that serve, and go the end sort and did pie we the

X% but and is not what of so electronics it's So, forth. we piece, on we Automotive or beverage, food or so probably is do, X% do, a not what X% it's a and and of more than and X% piece, pharma and

So, se the at a indicative critical spending the economy. times. of broader in indicative slowdown automotive is but of it is It's per not

it can sure. automotive when leading see watch a slow for down, indicator we automotive for and So, us be we

Andrew Obin

guys as out in But what's end to on markets you Are Industrial North that America? strong side? the there turned strong any

Mike Lamach

markets some to markets to -- strong capacity certainly be remain compressors be us. still would what's and trade. waiting weak-to-moderate customers are oil-free then the would understand be would with might anything pharma And strong where be that be beverage, of Industrial happening larger food going at for

Operator

turn I will conference Zac Nagle now comments. the back over for closing to

Zac Nagle

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

Shane I days the take weeks will be may any and available always to and have. over you coming questions As

we'll chat. March all So, road we to look February on Thank seeing certainly you'd to the the out and upcoming us in you. like as well. at you in And be if forward to conferences reach

Operator

This concludes today's conference call.

You may now disconnect.

Trane Technologies (TT) 30 Jan 192018 Q4 Earnings call transcript