Amit Mehrotra

Amit Mehrotra questioned why Dover's 2026 growth outlook of 4% was lower than the Q4 exit rate, asking if it reflected prudent conservatism. He also inquired if the entire margin expansion for the year was attributable to the $40 million wraparound productivity benefit, potentially offset by mix effects. Additionally, he asked about confidence in recovering the $150 million drawdown in refrigeration from the previous year.

Answer

CEO Richard Tobin confirmed the prudence in the top-line guidance, noting it's early in the year and based on current backlog, with potential for upward revision if bookings momentum continues. He affirmed that the $40 million productivity benefit largely explains the margin expansion, with mix effects playing a role. Regarding refrigeration, he stated confidence in recovery, mentioning Q1 is sold out and bookings extend well into Q2.

Amit Mehrotra questioned Dover's 2026 growth outlook of 4%, which is lower than the Q4 exit rate, asking if it reflects prudent conservatism. He also inquired if the entirety of the 2026 margin expansion is explained by the $40 million wraparound productivity benefit, and if the $150 million drawdown in refrigeration last year is expected to be fully recovered.

Answer

CEO Richard Tobin confirmed that the guidance includes an element of prudence given the early stage of the year and potential input cost fluctuations, but expressed confidence in progressive adjustments based on bookings momentum. He also stated that the refrigeration business is 'sold out for Q1' and booking well into Q2, indicating a strong recovery.

Amit Mehrotra asked why the strong Q2 performance wasn't fully reflected in H2 guidance and about a perceived North American margin decline for the full year. He also questioned Parker's organic growth over the last decade, suggesting an implied volume decline, and sought perspective on this trend.

Answer

Jennifer Parmentier, Chairman and CEO, clarified that North American margins are not declining for the full year; Q2's mix was simply less favorable than Q1, though Q2 was still a record. Todd Leombruno, CFO, added that H2 North America margins are guided at an all-time record of 26.5%. Todd Leombruno addressed the decade-long organic growth by explaining the significant portfolio transformation through acquisitions, emphasizing the company's current focus on achieving its 4-6% organic growth target despite industrial market choppiness.

Amit Mehrotra questioned why the strong Q2 performance did not seem to translate significantly into the second-half guidance and asked for clarification on any implied North American margin decline for the full year. Mehrotra also raised a broader concern about Parker-Hannifin's organic growth over the last decade, noting an average of 2% per year and implied volume declines, asking if this observation was fair and what explained the lack of volume growth, suggesting a need for through-cycle volume expansion.

Answer

Chairman and CEO Jennifer Parmentier clarified that there was no implied North American margin decline, with Q2 being a record and Q3 margins increased, and the second half forecast for North America would be an all-time record. CFO Todd Leombruno addressed the decade-long organic growth, stating that the company's portfolio has transformed significantly through acquisitions, making direct comparisons difficult. He emphasized that Parker is now more focused on organic growth, targeting 4-6%, and is proud to achieve record margins despite industrial market choppiness.

Amit Mehrotra with UBS asked about the broad-based nature of the order improvement, questioning if it reflected widespread green shoots or was primarily driven by longer-cycle pockets. He also inquired about the mixed impact on aerospace margins going forward, given the high incremental margins despite strong OE revenue growth.

Answer

Chairman and CEO Jennifer Parmentier confirmed that while longer-cycle pockets contribute, there's also improvement in other key verticals, citing increased guidance for aerospace and defense, off-highway, and HVAC and refrigeration. Regarding aerospace margins, she noted the Q1 mix was 51% OEM and 49% aftermarket, with strong spares contributing to the record 30% margin. She expressed confidence in maintaining strong margins, with the full-year guide at 29.5% and Q2 forecast at 29.1%.

Amit Mehrotra of UBS requested a breakdown of the exceptional margin performance between pricing power and cost reduction, noting the company's absolute cost base declined in fiscal 2025. He followed up by asking why the fiscal 2026 incremental margin guidance is a seemingly conservative 35% given this strong cost control.

Answer

Chairman & CEO Jennifer Parmentier attributed the margin strength to the 'Power of the Win Strategy,' which drives a continuous improvement culture focused on cost reduction in any economic environment. EVP & CFO Todd Leombruno justified the 35% incremental margin guidance by pointing to the gradual nature of the recovery, with only 1% organic growth forecasted for the industrial businesses, which represent 70% of the company.

Amit Mehrotra of UBS Group asked for a breakdown of the strong margin performance between pricing and cost reduction, noting the absolute cost base declined in FY25. He then questioned why FY26 incremental margin guidance was only 35% given this strong cost control.

Answer

Chairman and CEO Jennifer Parmentier attributed the performance to the 'Power of the Win Strategy' and a continuous improvement culture that enables cost reduction even in negative growth environments. EVP & CFO Todd Leombruno credited the decentralized structure and flexible compensation. Regarding the 35% incremental margin guide, Leombruno explained that with industrial organic growth guided at only 1%, the 35% figure is appropriate and is already above the typical 30% model.

Amit Mehrotra followed up on data centers, asking about the potential impact on chiller runtimes and the number of chillers needed if future designs require less operation, and how Trane is positioned for such an environment. He also questioned the perceived conservatism of the 6.5% organic growth target for 2026, given the residential outlook and strong applied/services growth.

Answer

Dave Regnery clarified that while compressor runtimes might vary with free cooling, chillers still need to run, and the number of chillers is tied to thermal load, not expected to change. Service frequency might be impacted, but Trane is modeling this. Chris Kuehn stated the 2026 guidance is set to be met or exceeded, with Americas Commercial HVAC up ~10%, residential flat to down 5%, and transport flat to down low single digits, noting that residential and transport (25-30% of the portfolio) are not baking in much growth.

Amit Mehrotra followed up on data centers, asking if chillers would run less or if fewer would be needed in the future, and how Trane is positioned for such an environment. He also questioned if the 6.5% organic growth target for 2026 was conservative, given residential being flat/down and applied/services accelerating.

Answer

Dave Regnery, Chair and CEO, clarified that while the compressor side of chillers might run less due to free cooling, the thermal load remains, and systems still need to run periodically, impacting service frequency but not necessarily the number of chillers. Chris Kuehn, Executive Vice President and CFO, stated the 2026 guidance is set to be met or exceeded, with Americas Commercial HVAC up ~10%, and residential and transport markets (25-30% of portfolio) troughing in H1 with little growth baked in.

Amit Mehrotra of UBS Group asked if higher CapEx would lead to a reduction in the backlog and questioned the level of visibility into 2026. He also inquired about Trane's positioning in high-growth data center segments, such as liquid cooling, following recent product announcements.

Answer

EVP & CFO Chris Kuehn confirmed the backlog is expected to remain elevated, with $2.5 billion already booked for 2026 and beyond, providing solid visibility. Chair & CEO Dave Regnery added that early investments in capacity are enabling them to meet the current demand surge. Regarding data centers, Regnery highlighted their system-level approach, deep customer partnerships, and recent innovations like a new CDU, citing a project in Australia that achieved an unprecedented COP of over 10.

Amit Mehrotra questioned if the underlying growth in revenue and orders is becoming more concentrated in specific verticals compared to the previously broad-based demand. He also asked if the full-year guidance, which implies a more modest second-half revenue uptick, reflects a normalization of growth or embedded conservatism.

Answer

CEO David Regnery reiterated that demand remains broad-based, with a majority of their 14 tracked verticals showing growth, highlighting strength in data centers, healthcare, and higher education without being overly concentrated in any single one. CFO Christopher Kuehn acknowledged the second-half growth implied by the guidance is more modest but stated it was prudent to maintain the current guidance range given it's early in the year. He expressed confidence in performing at the high end of the range and will provide updates after Q2.

Amit Mehrotra of UBS inquired about the long-term margin opportunity within the growing Service business, given investments in technician efficiency and predictive maintenance. He also asked how the payback calculation for customers might evolve and potentially improve as energy prices rise and technology like the newly acquired BrainBox AI increases equipment efficiency.

Answer

CFO Chris Kuehn stated that the Service business has higher margins and that investments in digital tools and diagnostics support the company's goal of 25% or better organic leverage. CEO Dave Regnery added that the BrainBox AI acquisition will augment their structured data with unstructured data, enabling greater efficiency gains. Regnery agreed that rising energy costs would make paybacks even more compelling in the future, increasing the penalty for not optimizing systems and creating a tremendous long-term opportunity.

Amit Mehrotra asked how Honeywell plans to replicate the success of Building Automation's recurring revenue and upselling services through the Forge platform in the Process and Industrial businesses.

Answer

Vimal Kapur, Chairman and CEO, explained that Building Automation's success stems from ontology-based models that identify assets and enable various applications. He noted that the Process segment is on a similar journey with its Connected Plant offering, about 9-12 months behind, aiming to optimize operations and drive recurring revenue. The Industrial side's strategy is evolving for sensing and measurement. Amit Mehrotra followed up on the Building Automation revenue forecast (mid-single digits+), questioning if it's conservative given the progress in connecting assets and the goal of accelerating, which could lead to sustained high single-digit organic growth. Vimal Kapur acknowledged the low penetration of connected assets provides significant runway and upside. He stated that recurring revenue takes time to scale but expects to ramp up the Annual Recurring Revenue (ARR) at a much higher rate, with more details to be shared at Investor Day.

Amit Mehrotra asked if Building Automation's success in generating recurring revenue by plugging assets into Forge could be replicated in the Process and Industrial businesses, and whether these are different business models. He also questioned if the mid-single-digit+ revenue forecast for Building Automation in 2026 was conservative, given the progress in connecting assets and the goal of accelerating, which could imply sustainable high single-digit organic growth.

Answer

CEO Vimal Kapur explained that Honeywell is actively working to shift to more recurring revenue via its Forge IoT platform. Building Automation is ahead in this journey, using ontology-based models and agentic operations, while Process is about 9-12 months behind with its 'connected plant' offering. Industrial's strategy needs to evolve. He expects similar patterns in Process soon. Regarding Building Automation's forecast, Vimal Kapur acknowledged low penetration of connected assets, offering significant runway. He noted that recurring revenue takes time to scale but expects a higher ramp-up rate as Annual Recurring Revenue (ARR) grows, with more details to be shared at Investor Day.

Amit Mehrotra with UBS questioned Honeywell's pricing strategy, specifically regarding preserving margins while protecting volume, and whether there's an unexploited pricing opportunity in the future, potentially post-spin-offs. He also asked about the Industrial Automation (IA) margin opportunity, including self-help and structural potential to move beyond high teens.

Answer

Chairman and CEO Vimal Kapur affirmed the strategy of preserving margins while maintaining volumes, expecting pricing to be a strong enabler for 2026 margin expansion, with 2025's lag effects not recurring. He expressed confidence in margin expansion for 2026, viewing 2025's flatter margins as transitional. CFO Mike Stepniak confirmed strong 2026 pricing plans across segments and regions, driven by stabilizing tariffs and clearer inflation, expecting Aerospace pricing to become a tailwind. Vimal Kapur explained that IA's margin expansion will come from focusing on product businesses post-realignment, leveraging the Building Automation playbook, and benefiting from pricing, productivity (direct materials, fixed costs), and potential M&A to strengthen the portfolio.

Amit Mehrotra asked about Honeywell's pricing strategy, specifically if there's an unexploited pricing opportunity given increasing revenue expectations but slightly lower margin expectations. He also followed up on the Industrial Automation (IA) margin opportunity and structural improvements.

Answer

Vimal Kapur, Chairman and Chief Executive Officer, stated that the strategy is to preserve margins while maintaining volumes, and pricing will be a strong enabler for 2026 margin expansion, overcoming 2025's lag effect. He expects strong margin expansion in 2026. Regarding IA, Vimal Kapur explained that the new simplified structure, focusing on product businesses, will allow for applying the successful Building Automation playbook, driving margin expansion through pricing and productivity. Mike Stepniak, Senior Vice President and Chief Financial Officer, added that 2026 pricing plans are robust, with tariffs stabilizing and inflation clarity.

Amit Mehrotra asked for an update on the timing of the planned business separations and whether Aerospace margins could improve from Q1 levels. He also questioned if the raised Building Automation guidance now fully reflects its strong performance.

Answer

CEO Vimal Kapur stated the Advanced Materials spin is on track for Q4 2025/Q1 2026, with a specific date pending regulatory approvals, while it's early days for the Aerospace spin. He indicated Q1 Aero margins are representative for the year due to mix and integration costs. CFO Mike Stepniak noted the BA guidance was raised but remains prudent given macro uncertainty.

Amit Mehrotra inquired about the significant year-over-year increase in inventory levels, asking when they are expected to normalize, with a specific focus on the one-step and two-step channels. He also asked for a breakdown of the mid-single-digit price mix guidance for the year, differentiating between carryover effects and prospective price increases.

Answer

Michael Quenzer, CFO, explained that inventory levels are approximately $200 million higher than seasonally normal, with an additional $100 million invested for customer experience. He expects inventory to decrease slightly in Q1 but remain at a level to meet Q2 summer demand. Alok Maskara, CEO, added that one-step channel destocking is largely complete in Q1, while two-step destocking is anticipated to conclude by Q2. Regarding price mix, Michael Quenzer noted a carryover mix benefit of 1-2 points in the first half, with the remainder coming from new price initiatives launched in Q1 and Q2.

Amit Mehrotra from UBS asked about Lennox's inventory levels, which significantly increased year-over-year, seeking insight into when normalization is expected across both one-step and two-step channels. He also questioned the breakdown of the mid-single-digit price mix guidance for the year, distinguishing between carryover effects and new prospective price increases.

Answer

CFO Michael Quenzer explained that inventory was about $200 million above seasonally normal levels, with an additional $100 million for customer experience investments, expecting some reduction in Q1 but maintaining levels for Q2 peak demand. CEO Alok Maskara added that one-step destocking should complete in Q1 and two-step by Q2. Michael Quenzer further detailed that the price mix includes a 1-2 point carryover benefit in the first half, with the remainder from new price initiatives launching in Q1 and Q2.

Amit Mehrotra asked about 2026 growth expectations for maintenance and repair within the services segment, the anticipated trend of service profits relative to revenue growth, and progress on retention and churn. He also inquired about the structural versus cyclical nature of new equipment margins, particularly in China, and price competition.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, outlined expectations for repair rates to ramp up to 10%+ and at least a point gain in maintenance, noting stabilization in retention rates outside of China and a focus on high-value unit retention. Christina Mendez, Executive Vice President and CFO of Otis Worldwide Corporation, detailed an expected acceleration of service profit contribution to $200 million in 2026, consistent margin expansion, and benefits from volume, smart pricing, and productivity. She also addressed new equipment margins, anticipating them to be a headwind in 2026 due to lower China volumes and reduced transformation benefits, expecting rates similar to Q4 2025.

Amit Mehrotra with UBS inquired about Otis's 2026 growth expectations for maintenance and repair within the services segment, the anticipated trend of service profits relative to the mid-to-high single-digit revenue growth outlook, and the company's progress on retention and churn.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, indicated that repair rates are expected to ramp up to over 10% and maintenance to gain at least a point in 2026. Cristina Méndez, Executive Vice President and CFO of Otis Worldwide Corporation, added that service contribution to profit is expected to accelerate to $200 million in 2026, with consistent annual margin expansion of 40-60 basis points. Judy Marks confirmed that the retention rate outside of China stabilized in 2025, with small growth expected in 2026, focusing on retaining high-value units. Regarding new equipment margins, Cristina Méndez explained they would be a headwind in 2026 due to declining China volumes and that 2026 margins are expected to align with Q4 2025 rates.

Amit Mehrotra questioned the structural outlook for service margins beyond Q4, asking if the 50 basis point expansion algorithm remains valid given the impact of higher modernization mix and investments in retention. He also asked for real-time insights into China's pricing trends, specifically if the market is finding a floor as some data suggests.

Answer

Cristina Méndez, EVP and CFO, Otis Worldwide Corporation, highlighted Q3's strong service margin expansion of 70 basis points to 25.5%, the highest since spin, driven by volume growth in repair and modernization, and improving mod margin rates. She stated the full-year margin is expected around 25% (up 40 basis points) and that the focus will be on growing service contribution in dollar terms, acknowledging that mod will be a slight margin rate headwind. Judy Marks, Chair, CEO, and President, Otis Worldwide Corporation, added that Otis has consistently increased service adjusted operating profit dollars for 23 consecutive quarters. Regarding China pricing, Ms. Marks confirmed stabilization in the second half, as predicted, with sequential improvement in the new equipment market. She noted Otis is leading in infrastructure and high-rise segments, focusing on conversions to service, and expects the bond modernization stimulus to continue into 2026.

Amit Mehrotra, MD and Senior Equity Analyst at UBS, asked about the structural outlook for service margins beyond Q4, specifically whether the 50 basis point expansion algorithm remains valid, considering the impact of higher modernization mix and investments in retention. He also sought real-time insights into China's new equipment pricing, questioning if it has found a floor.

Answer

Cristina Méndez, EVP and CFO, expressed satisfaction with Q3's 70 basis point service margin expansion (25.5%), the highest since spin, driven by strong volumes in repair and modernization, and improving modernization margin rates. She noted the full-year service margin is expected to be around 25% (up 40 basis points), with future focus on growing service contribution in dollar terms, acknowledging modernization as a slight margin rate headwind. Judy Marks, Chair, CEO, and President, added that profit dollars have consistently increased every quarter since spin. For China pricing, Judy Marks confirmed stabilization in the new equipment market during the second half, aligning with predictions. She highlighted Otis's leadership in infrastructure and high-rise segments, and the growing service business in China, which now accounts for 40% of China's revenue.

Amit Mehrotra of UBS followed up on tariffs, asking if pricing actions were surcharges or permanent repricing. He also inquired about any signs of local retaliation against U.S. companies in China, the outlook for China order stabilization, and the drivers behind maintenance and repair pricing.

Answer

Chair, CEO and President Judy Marks stated that Otis is not seeing any targeted retaliation in China and confirmed that pricing actions are structural price increases, not temporary surcharges. She reiterated the expectation for the China new equipment market to stabilize in the second half of the year. CFO Cristina Mendez explained that maintenance pricing is around 2% due to softer inflation and that the muted 3% maintenance and repair growth was due to the timing of repair backlog conversion, which is expected to accelerate.

Amit Mehrotra questioned the structural impact on New Equipment margins from the pivot to Service and asked for the rationale behind the confidence in the China market stabilizing. He also asked about the disconnect between strong modernization orders and the more conservative 2025 revenue growth guidance.

Answer

Executive Judith Marks noted that while China's New Equipment market is more challenging, the focus is on improving profitability through service density and modernization, where margins now exceed New Equipment. Executive Cristina Mendez explained the modernization revenue guide is conservative due to the need to ramp up resources and clarified that while mod has lower margins than maintenance, it is a positive dollar contributor and its margins are improving.

Amit Mehrotra asked for clarification on how far GE Vernova is 'sold out' for heavy-duty and aero-derivative units, and a clarification on Electrification's organic growth expectations for 2026.

Answer

CFO Kenneth Parks clarified that Electrification's organic growth expectations remain unchanged at 20%, with Prolec GE revenue added on top. CEO Scott Strazik stated that the 83 GW on contract heavily plays into 2029, with slots still available, but 100 GW by year-end 2026 would largely sell out 2029 and 2030.

Amit Mehrotra asked for an update on the sold-out timeline for heavy-duty and aero-derivative gas capacity, given the significant backlog numbers, and sought clarification on Electrification's organic growth expectations for 2026.

Answer

CFO Kenneth Parks clarified that Electrification's organic growth expectations for 2026 have not come down, with the $3 billion Prolec GE revenue added on top of the 20% organic growth. CEO Scott Strazik stated that the 83 GW capacity is heavily playing into 2029, with slots in 2030 and beyond. He projected that by the end of 2026, with 100 GW, 2029 and 2030 would be largely sold out.

Amit Mehrotra asked about the structural opportunity for GE Vernova's power margins, questioning if there is any reason they cannot exceed previous cycle peaks (around 25%) given the current pricing environment and long-term service stream beyond 2028.

Answer

CEO Scott Strazik affirmed there is no reason GE Vernova cannot meet or exceed previous peak margin levels in the power business. He emphasized the significantly larger install base and more profitable services business today, alongside equipment revenue becoming an attractive economic driver from the second half of 2026. Scott Strazik indicated that the December 9th investor update would provide further insights into the business's trajectory beyond 2028.

Amit Mehrotra asked about the structural opportunity for power margins, specifically if GE Vernova can exceed the peak margins of the last cycle given the current pricing and service stream, extending beyond the 2028 outlook.

Answer

CEO Scott Strazik stated there's no reason GE Vernova cannot meet or exceed previous peak margin levels in the power business. He highlighted the significantly larger installed base today, leading to a much larger and more profitable services business, alongside growing equipment revenue with new price paradigm orders expected to impact revenue in late 2026 and beyond. He emphasized confidence in the business's trajectory beyond 2028.

Amit Mehrotra inquired about the implications of the recent tax bill on the Power business, including potential impacts on permitting, and whether data centers are becoming a larger driver of growth.

Answer

CEO Scott Strazik stated that while it is still early, the tax bill has spurred an acceleration of customer activity in Wind, solar inverters, and grid equipment. He explained that this near-term renewables activity is also strengthening the long-term case for gas power for grid firming, leading to a growing pipeline for gas demand for deliveries in the 2029-2031 timeframe.

Amit Mehrotra asked about the implications of the recent tax bill on the Power business, including any potential easing of permitting bottlenecks and whether data centers are becoming a larger part of the growth story.

Answer

CEO Scott Strazik stated that while it is still early, the company has seen an acceleration of customer activity in its Wind, solar inverter, and grid equipment businesses since the bill passed. He believes the legislation reinforces a 'more gas longer' theme, noting that the pipeline for gas power demand is growing for deliveries in the 2029-2031 timeframe as utilities plan for the long term.

Amit Mehrotra (UBS) inquired about Crane's total power generation exposure, particularly how the addition of nuclear capabilities with PSI (Reuter-Stokes) changes the outlook for nuclear power generation. He also asked for clarification on the implied Q2 year-over-year growth given the 45% first-half earnings weighting and Q1 guidance, and whether PFT's EBIT growth in 2026 could disproportionately exceed revenue growth due to PSI synergies.

Answer

Alex Alcala (EVP and COO, Crane Company) detailed that traditional combined cycle power plants drive growth in the valve segment, while Reuter-Stokes doubles nuclear exposure, creating Crane Nuclear. He outlined four growth drivers for nuclear: plant restarts, new construction (AP1000 Westinghouse), small modular reactors (SMRs), and license extensions. Rich Maue (EVP and CFO, Crane Company) attributed Q1 and Q2 headwinds to the non-repeating hurricane insurance recovery. He clarified that the 30%-35% leverage applies to legacy PFT, with incremental PSI synergies expected to impact the second half of 2026 more significantly.

Amit Mehrotra asked about Teledyne's 2026 revenue outlook, seeking a breakdown between organic and inorganic growth, and insights into long-cycle versus short-cycle business assumptions. He also inquired about the Digital Imaging segment's strong Q4 margins, the impact of a contingent liability reversal, and the outlook for achieving the 24% margin target in 2026.

Answer

Robert Mehrabian (Executive Chairman) detailed that most 2026 growth would be organic (around 3.6%), with non-organic contributing about 4.2%. He noted minimal difference between short and long-cycle growth, expecting healthy increases in marine instruments (5%) and FLIR (4.6%), with no anticipated shrinkage in short-cycle businesses for the full year. Regarding Digital Imaging margins, Mr. Mehrabian explained the contingent liability reversal added about 50 basis points in Q4 2025, with full-year 2025 margins at 22.6%, and an expectation to reach 23.4% in 2026, aiming for 24%.

Amit Mehrotra inquired about Teledyne's order numbers and book-to-bill ratios across its main segments for Q4 2025 and the full year, and also asked about the full-year sales and growth expectations for the total unmanned business in 2026.

Answer

Executive Chairman Robert Mehrabian provided Q4 2025 book-to-bill ratios: instrumentation at 1, digital imaging at 1.06, aerospace and defense at 1.25, and engineered systems under 1, with a total Q4 book-to-bill of 1.07 and a full-year 2025 book-to-bill of 1.08. He stated that combined unmanned businesses generated about $500 million in 2025 and are expected to grow to approximately $550 million in 2026.

Amit Mehrotra asked about the 50% operating leverage target for fiscal year 2026, its translation to segment EBITDA margins, and the prioritization of opportunities including cost reduction, portfolio management, and G&A.

Answer

CFO Marc Vandiepenbeeck clarified that EMEA and APAC would be the primary drivers of margin improvement. CEO Joakim Weidemanis explained that the operating leverage guidance reflects productivity from the business system in field operations, service, and SG&A, alongside ongoing G&A cost reductions. He also discussed disciplined capital allocation for M&A and a multi-quarter portfolio strategy guided by shareholder value.

Amit Mehrotra of UBS Group AG asked CEO Joakim Weideminis about his initial observations after nearly five months, the key performance indicators (KPIs) he is focused on, and the anticipated timeline for tangible progress on the company's return profile.

Answer

CEO Joakim Weideminis explained his focus on customer-centricity, innovation, and leveraging the company's 40,000-person field organization. He introduced a new business system focused on 'simplify, accelerate, scale' using 80/20 principles and lean methodologies. He highlighted two initial projects: one to double customer-facing time for sellers in the HVAC business and another to cut chiller lead times in half for the data center market, emphasizing these efforts will build capabilities to be scaled across the company.

Amit Mehrotra sought to understand if margin improvement would come from quick, absolute cost-out measures or longer-term service leverage. He also asked how JCI manages pricing in long-cycle contracts amid inflation and tariff risks.

Answer

CEO Joakim Weidemanis clarified that it will be both: cost leverage in the field service business and a combination of leverage and direct cost-out in other areas. CFO Marc Vandiepenbeeck explained that JCI has implemented strong contractual terms and overhauled processes to reprice and manage change orders effectively, protecting margins.

Amit Mehrotra asked what specific qualities the board found attractive in incoming CEO Joakim Weidemanis for the company's next phase. He also inquired about the expected cadence of margins through fiscal 2025 and the largest long-term margin opportunities.

Answer

CEO George Oliver highlighted Joakim's operational and strategic experience as key to capitalizing on growth opportunities. CFO Marc Vandiepenbeeck indicated that EMEA/LA, Global Products, and APAC present the biggest margin opportunities in the near term. Long-term, he pointed to continued simplification and leveraging the cost base through growth.

Amit Mehrotra inquired about the progression of the power generation funnel, Emerson's visibility, and its entry point in the power generation lifecycle. He also asked about the trending of software Annual Contract Value (ACV) versus the installed base, future performance expectations, and attach rate trends.

Answer

President and CEO Lal Karsanbhai described robust power generation, distribution, and transmission markets, with $1 billion added to the project funnel. He noted Emerson's early visibility due to its upstream position in turbine and boiler controls, with Ovation controlling significant global power capacity. EVP and COO Ram Krishnan stated that software ACV finished at $1.56 billion, up 10%, with expectations for continued double-digit growth and cash flow trends aligning with ACV, operating at a 'rule of 45'.

Amit Mehrotra inquired about the progression of the power generation funnel, the visibility Emerson has, and its entry point in the power generation lifecycle. He also asked about the trending of software Annual Contract Value (ACV) versus the installed base, future performance expectations, and attach rate trends.

Answer

Lal Karsanbhai (President and CEO) highlighted a $1 billion addition to the power project funnel, robust global activity, and Emerson's early engagement upstream in the construction cycle due to Ovation's significant market share. Ram Krishnan (EVP and COO) stated that ACV finished at $1.56 billion, up 10%, with expectations for continued double-digit growth and cash flow trending with ACV, operating at a 'rule of 45'.

Amit Mehrotra of UBS inquired about any movement on pricing related to tariffs over the course of the year, specifically regarding rebates or other adjustments, given the evolution of tariffs. He also asked about the main drivers of residential HVAC weakness this year and the leading indicators Carrier is watching to inform the 2026 market evolution.

Answer

CFO Patrick Goris clarified that the pricing requirement to offset tariffs for the year remains around $200 million, with the carryover impact of tariffs and pricing expected to be net neutral in 2026. CEO David Gitlin explained that residential weakness was a "double hit" from depressed new home construction and existing home sales, which typically drive HVAC system changes 20-25% of the time. He noted easier comps in H2 2026, right-sized field inventories, and potential tailwinds from declining interest rates and pent-up demand, while monitoring consumer strength and Q1/Q2 comps.

Amit Mehrotra asked about any movement on pricing related to tariffs over the course of the year, specifically regarding rebates or how tariffs have evolved. He also sought clarification on the drivers of residential HVAC weakness this year, Carrier's demand models, and the main leading indicators for 2026 volume.

Answer

CFO Patrick Goris confirmed that incremental pricing implemented earlier this year related to new tariffs, initially estimated at $300 million and later updated to $200 million, remains unchanged. He expects the carryover impact of tariffs, pricing, and cost to be net neutral in 2026 based on current tariffs. CEO David Gitlin clarified that 20-25% of new home sales typically result in HVAC system changes. He noted easier comps in the second half of 2026 and that field inventory destocking should not be a headwind. Optimistic factors for 2026 include potential interest rate declines and pent-up demand, while watch items include tough comps in Q1/Q2 and consumer strength.

Amit Mehrotra of UBS Group asked about any potential volume impact from expiring tax incentives, whether the outlook assumes any pricing rollbacks, and for more detail on the productivity gains driving the expected Q3 to Q4 margin improvement in Europe.

Answer

Chairman & CEO David Gitlin said the expiring incentives are not expected to have a material impact. He and SVP & CFO Patrick Goris confirmed no material price rollbacks are assumed in the forecast. Goris explained the European margin step-up is driven by a combination of typical second-half sales seasonality (up 10-20% vs first half) and an acceleration of cost synergy realization, which is more second-half weighted.

Amit Mehrotra from UBS asked for a breakdown of the revised Americas residential guidance into volume and price/mix. He also questioned the European outlook and sought commentary on the confidence in achieving the $3.60 EPS proxy target.

Answer

CEO David Gitlin confirmed the revised residential guidance includes contributions from both better-than-expected price and some volume. CFO Patrick Goris outlined the path to the $3.60 EPS target, citing the company's framework of 6-8% organic growth, 50+ bps of annual margin expansion, strong free cash flow for buybacks or M&A, and the potential monetization of a significant tax benefit to lower the effective tax rate.

Amit Mehrotra asked about the opportunity presented by announced U.S. pharmaceutical production expansions and whether this was reflected in the strong first-half book-to-bill ratio.

Answer

CEO Vicente Reynal acknowledged this as a significant long-cycle opportunity that the company is tracking closely, but stated it is too early for it to appear in the order book. He clarified that the full-year book-to-bill is still expected to be around 1.0x, implying a sub-1.0x ratio in the second half as the company maintains a precautionary outlook.

Amit Mehrotra of UBS Group AG asked for more color on the improving regulatory environment for AI infrastructure and whether trailing-twelve-month orders could reaccelerate past tough comps.

Answer

CEO Giordano Albertazzi focused on the regulatory environment, noting increased U.S. administration focus on the power grid and growing strategic awareness of AI in EMEA. He believes this is creating a more conducive environment for data center investment. He declined to comment on the future direction of orders.

Amit Mehrotra of UBS Group AG asked for more color on the improving regulatory environment for AI infrastructure and whether trailing-twelve-month orders could reaccelerate as the company moves past tougher comparisons.

Answer

CEO Giordano Albertazzi commented on the regulatory environment, citing a supportive U.S. administration focus on power and growing strategic awareness of AI in EMEA. He described EMEA as a 'coiled spring' but declined to provide forward-looking commentary on order trends.

Amit Mehrotra of UBS Group AG requested an update on the PFAS litigation outlook following the New Jersey settlement and asked for an explanation for the implied second-half margin decline despite sequentially higher revenues.

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CEO William Brown described the New Jersey settlement as a strategic move to reduce risk and noted that over 30 other state AG cases are being managed individually. CFO Anurag Maheshwari explained the second-half margin step-down is not due to weaker operations but is driven by the timing of tariff impacts (over 120 basis points), higher stranded costs, and a pickup in investments, which more than offset volume and productivity gains.

Amit Mehrotra from UBS asked for guidance on the EPS cadence from Q1 to Q2, considering various factors like stock compensation timing and tariffs. He also questioned whether the current tariff environment presents an opportunity to accelerate the company's existing efficiency initiatives.

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CFO Anurag Maheshwari provided a detailed EPS bridge, forecasting year-over-year EPS growth of $0.05 to $0.10 for Q2. CEO William Brown added that while the tariff situation forces a deeper, SKU-level analysis of the business that can uncover new opportunities, the company is primarily focused on executing its existing operational excellence game plan, which is already yielding results like the margin improvement seen in Q1.

Amit Mehrotra asked about the sustainability of high incremental margins beyond 2025 and the rationale for a lower share buyback plan. He also inquired about the timeline for improving the low 80% OTIF rate in the Safety & Industrial (SIBG) business.

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CFO Anurag Maheshwari deferred long-term margin framework questions to the upcoming Investor Day. CEO William Brown expressed urgency on improving SIBG's OTIF, stating he expects progress immediately with a goal to get closer to 90% this year. He noted SIBG's complexity but emphasized the team is laser-focused on making improvements, prioritizing operational execution within factories first.

Amit Mehrotra asked if data center orders could reaccelerate due to the technology transition to higher-density racks like Blackwell. He also questioned if there is a content difference between retrofit and greenfield AI data centers and whether the Electrical Americas backlog is expected to grow this year.

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President and COO Paulo Sternadt confirmed that higher rack power density directly benefits Eaton's business and will increase its dollar-per-megawatt content. While difficult to forecast quarterly orders, he pointed to the data center negotiation pipeline being up 18% sequentially as a strong positive indicator. Regarding the backlog, he stated the goal is for the book-to-bill ratio to remain above 1. CFO Olivier Leonetti added that the company's 15% CAGR forecast for the data center market is still intact.