Andrew Obin

Andrew Obin sought clarification on the timing of tariff impacts, specifically the $35 million shift from 2025 to 2026, and whether this shift would primarily affect Q1 2026.

Answer

CFO Mike Drazin clarified that the $35 million was a timing shift due to inventory capitalization, moving from 2025 to 2026. He also noted that reduced China and India tariff rates favorably impacted the total annualized burden (from $525 million to $490 million), but the incremental 2026 headwind remains $200 million. CEO Jim Boyle added that the majority of the 2026 tariff burden is expected in the first half of the year.

Andrew Obin sought clarification on the timing of tariff impacts, specifically the $35 million shift from 2025 to 2026, and whether this amount would primarily affect the first quarter of 2026.

Answer

CFO Mike Drazin clarified that the $35 million difference in 2025's tariff impact (ending at $290M vs. $325M projected) was due to inventory timing, shifting that burden to 2026. He added that reduced tariff rates in China and India favorably impacted the total estimated annualized net impact to $490 million. The majority of the 2026 tariff burden, including the shifted amount, is expected in the first half of the year.

Andrew Obin asked about the $20 million revenue pull-forward in the Detection & Measurement (D&M) segment, how to model its impact on 2026, and the expected growth given the 45% organic backlog increase. He also inquired about the OlympusMAX product launch, including customer feedback, booking updates, and its relevance to applications beyond data centers, particularly in light of the NVIDIA announcement.

Answer

Gene Lowe, President and CEO, explained that the $20 million project was pulled from 2026 into 2025, creating a 5% growth headwind for D&M in 2026. He noted that two-thirds of the D&M business is run-rate, showing GDP-plus growth, and the segment has a record year-end backlog of $350 million, up over 40% organically. Mark Carano, CFO, clarified that the $20 million impact should be modeled in the back half of 2026. Gene Lowe expressed strong bullishness on OlympusMAX, highlighting its advantages in tonnage, flexibility (dry to adiabatic upgrade), integrated controls, and robust mechanical equipment. He confirmed material awards from three customers, achieving the $50 million booking target for the previous year, and anticipates strong growth into 2027-2029, with one customer already locking in multi-year demand.

Andrew Obin asked about the $20 million revenue pull-forward in the Detection and Measurement (D&M) segment, specifically how to model its impact on 2026, particularly in Q1. He also questioned the D&M business's growth outlook given its 45% organic backlog increase. Additionally, Mr. Obin sought an update on the OlympusMAX product launch, including customer feedback, bookings, and applications beyond data centers.

Answer

President and CEO Gene Lowe explained that the $20 million project pull-forward from 2026 to 2025 creates a 5% growth headwind for D&M in 2026, making the segment appear flattish despite strong backlog. CFO Mark Carano clarified that the impact on 2026 modeling should be primarily in the back half of the year. Mr. Lowe expressed strong bullishness on OlympusMAX, citing advantages in tonnage, flexibility, integrated controls, and robust equipment. He confirmed achieving the $50 million booking target for 2025 and noted material awards from three customers, with strong visibility into 2027-2029 demand.

Andrew Obin inquired about the performance and outlook for vocational (off-highway) markets, including corporate fleets, construction, and waste, given their past role in supporting the company.

Answer

Rusty Rush (CEO, President and Chairman, Rush Enterprises) stated that vocational segments, which provided stability during the over-the-road downturn, are expected to remain relatively flat. He explained that some segments had been playing catch-up on demand in 2024 and 2025 due to prior supply constraints, and are now returning to more normal replacement cycles rather than experiencing a significant downturn.

Andrew Obin questioned the company's evolving view on ACT orders, specifically if they are warming up to faster improvement in industry orders over the next three to six months, given prior skepticism. He also asked for an update on the performance and outlook for off-highway and vocational markets, including corporate fleets, construction, and waste, in contrast to the over-the-road recovery.

Answer

CEO, President, and Chairman Rusty Rush explained that optimism for improved industry orders stems from clarity on tariffs and EPA 2027 NOx rules, which had previously caused customers to pull back purchases. He noted improving business conditions, such as tender acceptance rates and the spot market, contributing to increasing backlogs and a belief in sustainable, gradual improvement. Mr. Rush expects Q1 to be softer but anticipates stronger deliveries in the latter half of 2026. For vocational markets, he projects fairly flat performance compared to previous solid years, as some segments that were catching up from COVID-related supply issues in 2022-2023 are now returning to normal replacement cycles.

Andrew Obin sought clarification on the expected sequential improvements for Class 8 sales and parts and services in Q2. He also asked about SG&A cost baselines, what factors would provide clarity for OEM production schedules in the second half, and the current state of customer access to credit.

Answer

W. Rush, Chairman, CEO, and President, confirmed that only a 'slight' sequential improvement is anticipated for both Class 8 sales and aftermarket revenues in Q2, stressing extreme market uncertainty. He stated that returning to 2020-era SG&A levels is not feasible due to inflation but that expenses are being tightly managed. Rush explained that market clarity depends on improvements in customers' businesses, certainty on tariffs, and finalized emissions regulations. He concluded that customer access to credit is not currently an issue for qualified buyers.

Andrew Obin from Bank of America inquired about the expected earnings seasonality for 2025, particularly for parts and service, and how the company will manage SG&A expenses during the anticipated ramp-up.

Answer

W. Rush, an executive, projected a ramp-up throughout 2025, with a softer first half followed by a stronger second half for both truck sales and aftermarket services. He emphasized strong G&A expense management in 2024 and expressed confidence in leveraging technology to control costs more effectively in the next growth cycle, aiming to retain a significant portion of new gross profit.

Andrew Obin asked for clarification on the company's constructive order commentary versus ACT Research's forecast for a delayed recovery, and inquired about the broader economic outlook for construction and oil and gas.

Answer

Executive W. Rush clarified that the "bottoming out" commentary referred to the freight market for their carrier customers, not the company's own business. He explained that a return to shorter, 60-90 day order lead times is driving recent order intake for Q4 builds. Rush anticipates a significant uptick in orders in the second half of 2025, driven by an eventual pre-buy ahead of 2027 EPA regulations. Regarding the broader economy, he noted that oil and gas is soft, but the construction sector remains strong due to infrastructure spending, highlighting the benefits of the company's diversified customer base.

Andrew Obin from Bank of America requested a reminder of the company's Class 8 sales mix between vocational and over-the-road segments. He also asked about order trends for July and August, the broader macroeconomic outlook, and the stability of the vocational business.

Answer

Executive W. Rush estimated that the vocational segment comprises about 45-50% of the company's Class 8 business, highlighting its importance for diversification. He anticipates that truck orders will remain down for the next couple of months with no significant uptick expected until late in the year. Regarding the economy, Rush sees significant uncertainty, particularly with the upcoming election, but does not foresee a recession, expecting conditions to 'bobble along'. He confirmed the vocational business is stable but noted that medium-duty demand has largely been met and will likely slow.

Andrew Obin questioned Allegion's capital allocation strategy, specifically why the company chose to accelerate M&A over stock buybacks in 2025, given consistent EPS growth in challenging markets, asking for insights into the board's thought process. He also requested more color on international market growth, particularly the performance of the Interflex business and what's happening with AXA.

Answer

CEO John Stone explained that the top priority for cash use is profitable organic growth, followed by dividends which are expected to grow with earnings. He noted that share repurchases are part of the capital allocation when conditions are right, and attractive, accretive M&A targets are pursued to drive shareholder returns, emphasizing a balanced and disciplined approach. Regarding international, John Stone expressed pride in the Interflex team, highlighting its strong performance, expansion across Europe, integration of AI into software offerings, and growth beyond its core German manufacturing base. No specific details were provided for AXA.

Andrew Obin from Bank of America Corporation questioned Allegion's capital allocation strategy, specifically why the company prioritized M&A acceleration over share repurchases in 2025, given consistent EPS growth in challenging markets. He also sought more details on international market growth, particularly the performance of the Interflex business and developments with AXA.

Answer

CEO John Stone explained that Allegion's capital allocation prioritizes profitable organic growth, followed by consistent dividend payments commensurate with earnings. He stated that while share repurchases are authorized and executed when conditions are right, attractive M&A targets that drive synergies and accretive returns are also pursued, reflecting a balanced and disciplined approach. Regarding international, CEO John Stone expressed pride in the Interflex team, highlighting its strong performance in 2025, expansion across Europe, and integration of AI into software offerings, confirming progress beyond its core German manufacturing base.

Andrew Obin asked about current business momentum in the channel and the source of management's confidence in their outlook. He also inquired about the business environment in Europe, particularly in Germany and Italy.

Answer

CEO John Stone stated that the positive non-residential momentum from late 2024 has continued, driven by a healthy aftermarket and resilient institutional demand. Regarding Europe, he noted Germany feels more optimistic than in Q4, and the team in Italy is performing well and gaining share through internal initiatives, though it is premature to change the overall outlook.

Andrew Obin asked for an update on Vertiv's service headcount and the future direction of the service organization, emphasizing its role as a key differentiator for the company.

Answer

CEO Giordano Albertazzi stated that Vertiv is rapidly approaching 5,000 field service personnel, with field capacity trajectories mirroring delivery capacity. He highlighted the importance of commissioning and start-up services, and the evolution of technology, including the PurgeRite acquisition and digitization efforts. CFO Craig Chamberlin expressed excitement about the services portfolio, calling it a 'superpower' for the company.

Andrew Obin asked for an update on Vertiv's service headcount and the evolution of its service organization, highlighting its role as a key differentiator in delivering and servicing products in the field.

Answer

CEO Giordano Albertazzi stated that Vertiv is rapidly approaching 5,000 field service personnel, with field capacity trajectories mirroring delivery capacity. He emphasized the importance of commissioning and start-up services, as well as evolving technology through acquisitions like PurgeRight and digitization efforts. CFO Craig Chamberlin expressed excitement about the services portfolio, calling it a 'superpower' for the company.

Andrew Obin inquired about Vertiv's investments in services, particularly in scaling up support functions and headcount, to keep pace with strong equipment orders and maintain its industry leadership position.

Answer

CEO Giordano Albertazzi confirmed that Vertiv is accelerating investments in its service capacity, which includes over 4,400 field engineers globally. He explained that service capacity expansion is planned geographically based on product demand and backlog, emphasizing productivity in the service environment and rigorous measurement of service levels.

Andrew Obin asked about Vertiv's investment in services, including KPIs on headcount, and how the company is scaling its support functions to keep pace with top-line growth, given the strategic importance of services as a competitive advantage.

Answer

Giordano Albertazzi, CEO of Vertiv, confirmed that large orders necessitate service for installation, project management, and commissioning, calling services a 'superpower.' He stated that Vertiv employs over 4,400 field engineers globally and is accelerating investment in this area. The company uses a SIOP process for services, considering geographic demand and capacity needs, and rigorously measures performance and productivity.

Andrew Obin from Bank of America Merrill Lynch asked about the growth rate of thermal service contracts, particularly for liquid cooling, noting that industry 'teething pains' with new systems could bode well for service opportunities.

Answer

CEO Giordano Albertazzi agreed, stating that the complexity of liquid cooling systems makes Vertiv's service strength a key differentiator for both deployment and lifecycle management. He affirmed his belief that liquid cooling will be a favorable driver for the growth of Vertiv's thermal services business.

Andrew Obin from Bank of America Merrill Lynch highlighted industry-wide 'teething pains' with liquid cooling systems and asked if this was creating a growth opportunity for Vertiv's thermal service contracts.

Answer

CEO Giordano Albertazzi confirmed this view, explaining that the technical complexity of liquid cooling systems and their integration with expensive IT racks makes Vertiv's service expertise a key differentiator. He stated a firm belief that the shift to liquid cooling will be favorable for the growth of Vertiv's thermal services business.

Andrew Obin of Bank of America referenced public reports of hyperscaler project delays and asked how Vertiv manages its production capacity when such situations arise.

Answer

CEO Giordano Albertazzi, without commenting on any specific customer, stated that overall demand remains robust and is increasingly spread across various segments, including hyperscale, colocation, sovereign AI, and enterprise. This diversification provides the flexibility to cover any potential gaps that may arise from a single customer rephasing a project.

Andrew Obin asked for specifics on the 'extraordinarily strong' Americas orders and noted that this strength, combined with flat overall orders, implied significant weakness in EMEA, questioning the potential disconnect.

Answer

CEO Giordano Albertazzi clarified that the strength in the Americas was particularly pronounced in the colocation and cloud segments. He reiterated that the EMEA market is currently slower but that strong pipelines support an expected pickup during 2025. He also noted that the slower growth in distributed IT was expected and previously communicated.

Andrew Obin inquired about the relationship between Johnson Controls' efforts to improve throughput and free up capacity, and its ability to secure more orders in the near term. He also asked whether the impact of recent new product introductions, such as the YK-HT product, was already reflected in this quarter's orders or if it is still anticipated.

Answer

CEO Joakim Weidemanis confirmed a direct relationship, noting that significant past investments in physical capacity have been tripled, and ongoing lean work (business system) further expands capacity without substantial new capital. He emphasized that reliable and quick delivery is a competitive advantage for large data center projects. Regarding new products, he stated their impact on current orders is minor, with the full effect expected to ramp up in the current quarter, driven by direct collaboration with customers to address precise needs.

Andrew Obin asked about the relationship between improving throughput and capacity and Johnson Controls' ability to secure more near-term orders. He also inquired about the immediate impact of recent product introductions, like the YK-HT, on current orders.

Answer

CEO Joakim Weidemanis confirmed a direct relationship, stating that significant prior investments in physical capacity (tripled) combined with Lean/business system work allow for material capacity expansion without substantial new capital. He emphasized that predictable and fast delivery is a competitive advantage for large data center orders. Regarding new products, Joakim Weidemanis noted a very minor impact on orders so far, with the main effect expected 'to come' and ramp up in the current quarter, as these products are a direct result of customer collaboration addressing precise needs.

Andrew Obin asked about the data center market, specifically whether Johnson Controls expects to maintain its market share over the next three years, given competitors' capacity additions and the company's own efforts to improve throughput and on-time delivery.

Answer

CEO Joakim Weidemanis confidently stated that Johnson Controls intends to 'take share,' citing significant prior investments in capacity and recent improvements in on-time delivery (to 95%) and lead times (cut in half) for data center chillers, which will be market-leading. He emphasized building innovation capabilities for end-to-end thermal solutions (including CDUs and Excelsius), maintaining an agile manufacturing position, and leveraging the differentiated global field service organization, which is crucial for mission-critical data center operations.

Andrew Obin of Bank of America Merrill Lynch asked for a breakdown of Americas orders between Fire & Security and Commercial HVAC, with a specific focus on trends in the data center vertical.

Answer

CEO Joakim Weideminis stated that the data center vertical continues to be very healthy, representing about 10% of sales and growing nicely. He noted that the broader applied HVAC business is also performing well, while Fire & Security is growing at a lower, low-single-digit rate. The company is focusing its initial business system improvements on HVAC due to the larger near-term opportunity.

Andrew Obin asked which verticals beyond data centers were driving growth in the Applied HVAC business and if any verticals were creating headwinds.

Answer

CEO Joakim Weidemanis stated that growth is broad-based across most verticals, which are performing well. He noted that after reviewing leading industry indicators against internal data, he does not see any significant slowdowns in key areas, excluding the soon-to-be-divested residential and light commercial business.

Andrew Obin questioned the cause of the negative $20 million productivity drag in North America Building Solutions and its outlook. He also asked about the drivers behind the acceleration in Fire & Security growth and its sustainability.

Answer

CFO Marc Vandiepenbeeck explained the productivity drag was a short-term result of investments in hiring new sales and technical staff to fuel growth. For Fire & Security, he attributed the EMEA/LA growth to a commercial organization pivot, which is sustainable, and noted the Global Products growth benefited from an easy year-over-year comparison due to a prior-year cyber incident.

Andrew Obin requested more detail on applied sales performance in North America across key verticals beyond data centers, asking which areas were showing notable strength or weakness.

Answer

CFO Marc Vandiepenbeeck highlighted several verticals performing well alongside data centers. These include healthcare, particularly hospitals, as well as manufacturing and new energy projects benefiting from government incentives. He also noted that the repurposing of commercial office space is creating new project opportunities.

Andrew Obin asked for clarification on the 3% pricing contribution in Q1 and what to expect for the second half and the full year. In a follow-up, he inquired about the impressive 18% North America order growth, its sustainability, how it progressed through the quarter, and what changes in the North American economy are driving such strong orders.

Answer

Ram Krishnan, Chief Operating Officer, stated that pricing is expected to contribute approximately 2% in the second half and about 2.5% for the full year. Mike Baughman, EVP and CFO, and Ram Krishnan, Chief Operating Officer, attributed the North America strength to industrial policy benefiting electrification/power generation, data centers/AI, grid modernization, nearshoring (Life Sciences, Semiconductor), an open energy policy (shale gas, LNG), and defense policy. They detailed the 18% growth drivers as large project wins in Power and LNG, Ovation business (up 74% in orders), T&M (up 20%, nearly 30% in North America), and strong MRO. While not expecting 18% to continue, they are confident in high single-digit growth for North America for the full year.

Andrew Obin asked about the 3% pricing contribution in Q1 and what to expect for the second half. He also inquired about the impressive 18% North America order growth, its sustainability, and the specific drivers, including industrial policy and high-growth industries.

Answer

Ram Krishnan, EVP and COO, Emerson, guided for approximately 2% pricing in the second half, leading to about 2.5% for the full year. Mike Baughman, EVP and CFO, Emerson, attributed North America's strength to industrial policy benefiting five growth sectors: electrification/power generation, data centers/AI, nearshoring (life sciences, semiconductor), open energy policy (shale gas, LNG export), and defense modernization. Ram Krishnan detailed that project wins in power/LNG, Ovation (up 74%), T&M (up 20-30%), and strong MRO drove the 18% growth, but expects high single-digit growth for the full year, not 18%.

Andrew Obin of Bank of America Merrill Lynch questioned the sustainable growth rate for Emerson's power vertical over the next 24 months and asked how the improving tariff situation has affected customer decisions on large projects.

Answer

President & CEO Lal Karsanbhai and COO Ram Krishnan stated they believe a high-teens growth rate for the power business is sustainable for the next two years, driven by strong investment in generation and transmission. Ram Krishnan added that they have seen no slowdown in customer decision-making for large projects in key markets like LNG, power, and life sciences.

Andrew Obin of BofA Securities inquired about the specific drivers behind the recovery in Discrete Automation, contrasting the strength in Test & Measurement with weakness in factory automation. He also asked for perspective on the large capital spending announcements from major pharmaceutical companies and when that activity might appear in Emerson's orders.

Answer

President and CEO Surendralal Karsanbhai explained that the Test & Measurement recovery is led by its broad-based portfolio business and aerospace and defense, while automotive-exposed businesses in China and Germany remain weak. He affirmed that the pharmaceutical spending is 'very real,' driven by reshoring trends and high demand for new drugs, and noted that Emerson is well-positioned and already seeing early projects enter its funnel.

Andrew Obin asked for more detail on the power generation growth vector for 2025, including business mix and drivers, and specifically inquired about Emerson's exposure to the nuclear sector, including certifications and 2025 outlook.

Answer

President and CEO Lal Karsanbhai explained that power generation, representing about 9% of revenue, is seeing accelerated mid-to-high single-digit order growth driven by data center demand, life extensions of existing facilities, and grid investment. COO Ram Krishnan added that nuclear represents about 20% of their power business, where Emerson has a leading global position in instrumentation, valves, and control systems.

Andrew Obin asked about Eaton's confidence in achieving double-digit growth in data center markets for 2026 and beyond, given strong order numbers, and inquired about recent market developments in liquid cooling and technology trends.

Answer

CEO Paulo Ruiz expressed strong confidence in data center growth, citing market indicators like 200% year-over-year announcements in 2025, an 11-year backlog, and accelerated project starts. He highlighted Eaton's broad portfolio, organic investments in capacity and technology, and inorganic acquisitions like Resilient Power, Fibrebond, and Boyd Thermal. Regarding liquid cooling, Ruiz explained Eaton's focus on the 'inner loop' (cold plates, CDUs) closer to the white space, noting no negative impact from NVIDIA's announcements and confirming Boyd's strong position to meet or exceed 2026 revenues of $1.7 billion.

Andrew Obin inquired about the factors driving confidence in double-digit growth within the data center market for 2026 and beyond, and later asked about Eaton's perspective on recent market developments in liquid cooling, specifically referencing NVIDIA's announcements.

Answer

CEO Paulo Ruiz highlighted strong market indicators such as 200% year-over-year industry announcements and backlog growth in 2025, equating to 11 years of 2025 build rates. He emphasized Eaton's broad portfolio, organic investments in capacity and technology, and inorganic acquisitions like Resilient Power, Fibrebond, and Boyd Thermal, noting that Electrical Americas' data center orders grew 200% and Electrical Global's grew almost 80% year-over-year in Q4. Regarding liquid cooling, Paulo Ruiz explained Eaton's focus on the 'inner loop' (cold plates, CDUs) closer to the white space, which is unaffected or positively impacted by NVIDIA's announcement, and confirmed Boyd's strong position and expected 2026 revenues of $1.7 billion.

Andrew Obin inquired about the outlook for Electrical Americas' LTM orders, specifically for Q4 2025 and early 2026, and sought clarification on the estimated year-over-year growth rate for Electrical Americas' quarterly orders in Q3 2025.

Answer

Paulo Ruiz, Chief Executive Officer, expressed bullishness on Q4 orders, citing strong momentum, a growing negotiations pipeline, and specific project visibility. He indicated that the estimated quarterly orders growth was towards the higher end of the mid-20s to 30% year-over-year range. Ruiz attributed this success to Eaton's broad portfolio, strong channels, deep customer intimacy, leadership in data centers and utilities, and strategic footprint expansion. Olivier Leonetti, Executive Vice President and Chief Financial Officer, highlighted that data center and hyperscale order growth was close to 70% in the Americas and the global electrical sector for the quarter.

Andrew Obin inquired about the Electrical Americas' LTM orders outlook for Q4 2025 and early 2026, noting the acceleration from 2% in Q2 to 7% in Q3. He also asked for confirmation on the estimated quarterly orders for Electrical Americas in Q3 2025, specifically if it was in the mid-20s to close to 30% year-over-year.

Answer

CEO Paulo Ruiz expressed bullishness for Q4 orders, citing strong Q3 momentum, a robust October, and growth in the negotiations pipeline. He confirmed that the estimated quarterly orders for Electrical Americas in Q3 were towards the higher end of Andrew Obin's estimation, attributing the success to Eaton's broad portfolio, strong channels, deep customer intimacy, and strategic investments. CFO Olivier Leonetti added that data center and hyperscale order growth in the Americas was close to 70% in the quarter.

Andrew Obin of Bank of America Merrill Lynch asked if Eaton is gaining market share in Electrical Americas and followed up on the company's data center strategy for both gray and white space following recent acquisitions.

Answer

CEO Paulo Ruiz affirmed that Eaton is gaining market share, citing 50% growth in its data center business versus a market growing in the low 30s. He detailed a comprehensive data center strategy, highlighting partnerships with Siemens and NVIDIA and acquisitions like Fiberbond and Resilient Power to address power availability, construction speed, and power conversion from the utility grid down to the chip.

Andrew Obin inquired about the order outlook for the Electrical Americas segment for the rest of the year, noting the tough comparison in Q1. He also asked for color on the performance of the utilities business during the first quarter.

Answer

President and COO Paulo Sternadt stated that Electrical Americas orders are expected to remain strong in dollar value, supported by record backlogs. He highlighted that the major project negotiation pipeline was up 18% sequentially from the prior quarter, with significant strength in data centers and industrial projects. On utilities, Sternadt noted very strong mid-teens global growth year-over-year, with high-teens growth in the Americas, driven by a differentiated, non-commoditized portfolio. CFO Olivier Leonetti added that the company expects a book-to-bill ratio over 1 for the segment.

Andrew Obin from Bank of America asked for quantification of the impact from mega projects on the Electrical Americas business in 2024 and questioned how Eaton incentivizes its supply chain to add capacity.

Answer

Craig Arnold, Chairman & CEO, stated that mega project-related business doubled to over $600 million in 2024, with the negotiation pipeline up 60%. He explained that Eaton incentivizes its supply chain by providing long-term visibility and multiyear agreements, rather than direct financial incentives, noting that strong U.S. demand is naturally attracting global capacity.

Andrew Obin from Bank of America inquired about the performance of Eaton's data center business in Q3, specifically asking for details on organic growth, orders, and the negotiations pipeline. He also asked for a more precise quantification of the financial impact from Hurricane Helene in Q3 and any expected lingering effects in Q4.

Answer

Chairman and CEO Craig Arnold reported that the data center market is outperforming expectations, with sales up 35% in the quarter, orders up 55% on a rolling 12-month basis, and negotiations up 90%. Regarding the hurricane, Arnold confirmed it impacted several facilities and about 3,000 employees in the Carolinas. He stated the impact was a matter of timing, pushing revenue into backlog, and that all sites were now operational. He did not provide a specific dollar amount for the Q4 impact but noted it was embedded in the guidance.

Andrew Obin requested an update on the FARO acquisition, including progress and key learnings. He also asked about customer conversations and whether the current order momentum indicates a substantive short-cycle recovery after 2025.

Answer

Chairman and CEO David Zapico reported that FARO is an excellent strategic fit with Creaform, with integration progressing well. The plan is to more than double EBITDA margins from mid-teens to 30% and achieve a 10% return on invested capital by year three, supported by cost synergies and organizational restructuring. Regarding market recovery, Mr. Zapico noted building momentum in orders throughout 2025 and into January 2026, with a strong pipeline and positive macroeconomic conditions suggesting a solid, rather than fleeting, recovery.

Andrew Obin requested an update on the FARO acquisition, including progress, key learnings, and the path to achieving its target EBITDA margins. He also asked for insights into the short-cycle recovery, customer conversations, and whether the current positive trends represent a substantive recovery or a temporary flash in the pan.

Answer

Chairman and CEO David Zapico described FARO as an excellent strategic fit with AMETEK's Creaform business, with significant synergy potential from eliminating public company costs and integrating into AMETEK's infrastructure. He reiterated the plan to more than double FARO's EBITDA margins from mid-teens to 30% and achieve a 10% return on invested capital by year three, expressing increased confidence. Mr. Zapico noted that momentum has been building through 2025 and continued into early 2026, driven by a strong pipeline, positive segments, and a well-positioned power business. He acknowledged macro uncertainties but felt conditions remain constructive, with interest rate policies being positive and the industrial renaissance in the West helping offset tariff drags.

Andrew Obin from Bank of America inquired about the specific verticals and geographies driving AMETEK's strength in Europe and asked for insights into the progression of order patterns throughout Q3 2025 and into October.

Answer

Chairman and CEO David Zapico explained that Europe's low double-digit growth was broad-based, with improvements seen in Dunkermotoren, automation, Paragon elements, Materials Analysis division, and aerospace businesses. Regarding orders, Zapico confirmed September was the strongest month of the quarter and year-to-date for both sales and orders, indicating strong momentum that continued into a very solid October.

Andrew Burris Obin inquired about the drivers of strength in Europe across verticals and geographies, and later asked about the progression of order patterns throughout Q3 and into October.

Answer

David Zapico, Chairman and CEO, attributed European strength to broad-based positive performance across Dunkermotoren, automation, Paragon, Materials Analysis, and aerospace businesses. Regarding orders, Mr. Zapico stated September was the strongest month for both sales and orders in Q3 and year-to-date, with October also showing very solid momentum.

Andrew Obin from Bank of America Merrill Lynch asked if there was a pull-forward of metrology equipment demand in China due to tariff uncertainty and whether management believes the short-cycle industrial market has bottomed.

Answer

Chairman and CEO David Zapico stated he did not see a significant pull-forward in China, attributing project delays to funding uncertainty rather than a lack of demand. He confirmed that the destocking in MedTech and Automation has ended, with strong orders in those areas. While the Process business remains sluggish, he noted improved outlooks for the A&D and Power segments, suggesting a bottoming in key markets.

Andrew Obin asked about the competitive opportunity created by AMETEK's resilient supply chain. He also inquired how new tariffs are influencing long-term manufacturing strategy and if CapEx spending is changing this year.

Answer

CEO David Zapico stated that AMETEK's extensive U.S. manufacturing footprint creates opportunities to win share from competitors more exposed to supply chain disruptions. He confirmed the long-term strategy is to increase localization to mitigate tariff risks. Zapico also said they are not reducing CapEx, citing ongoing strategic investments in digital programs, AI, and e-commerce.

Andrew Obin from Bank of America sought clarification on the organic growth rate embedded in the Q1 guidance and asked how potential tariff noise and foreign exchange fluctuations are factored into the company's full-year outlook.

Answer

Executive David Zapico clarified that Q1 guidance assumes flat organic sales, an acceleration from Q4's decline. He stated the guidance accounts for known tariff discussions, noting the company has a playbook from 2017-2018 to pass on costs and is ready to execute if needed. Executive Dalip Puri added that the company is not overly exposed to FX at the profit level due to natural offsets.

Andrew Obin analyzed the two-year stacked order trend to gauge if a bottom has been reached and asked for an update on the Paragon restructuring timeline, given the complexities of the regulated med-tech industry.

Answer

Chairman and CEO David Zapico responded that while he doesn't focus on two-year stacks, the healthy sequential order growth from Q1 to Q3 is an encouraging sign. Regarding Paragon, he affirmed that AMETEK is highly experienced in regulated markets and the longer timeline required for restructuring is already factored into their integration plans to ensure it is executed properly.

Andrew Obin questioned the sequential slowdown in international growth projected for Q3 and Q4, despite potentially easier comparisons, asking if this was due to large project shipments in Q2 or a conservative outlook. Obin also sought clarification on the implied growth in the 'other segment' of the guidance, particularly if data center activity was a significant contributor.

Answer

Chairman and CEO Jennifer Parmentier clarified that Q2 international growth benefited from the timing of large project shipments, primarily in power generation and commercial HVAC filtration in AMEA, which are not expected to repeat in Q3, leading to a forecast of 2% growth based on gradual industrial recovery. Parmentier also noted that electronics, including strong data center growth (though less than 1% of sales), contributed to the 'other segment.' CFO Todd Leombruno added that the international guide was doubled from initial expectations, and positive orders indicate a positive outlook for the future.

Andrew Obin inquired about the projected sequential slowdown in international growth to 2% in Q3 and Q4, despite strong Q2 performance, asking if it's due to specific dynamics or a conservative outlook. He also asked for clarification on the implied growth jump in the 'other' segment, particularly regarding electronics and data centers.

Answer

Jennifer Parmentier, Chairman and CEO, explained that Q2's strong international performance benefited from the timing of large project shipments in AMEA that are not expected to repeat in Q3. Todd Leombruno, CFO, added that the international guide was doubled, and longer-cycle businesses ship later. Jennifer Parmentier clarified that the 'other' segment includes electronics and strong data center growth, which, while less than 1% of sales, has been robust.

Andrew Obin of Bank of America Merrill Lynch highlighted the reacceleration in aerospace orders over the past two quarters and asked management to explain the dynamic between this strong order growth and the more moderate 8% organic sales growth forecast for fiscal 2026.

Answer

Chairman & CEO Jennifer Parmentier attributed the strong orders to rising commercial build rates and robust aftermarket and defense demand. She explained that the lag between orders and revenue is due to the long-cycle nature of aerospace, a record backlog, and production capacity. EVP & CFO Todd Leombruno added that the 8% growth is expected to be consistent throughout the year, with each quarter setting a new record.

Andrew Obin of Bank of America Merrill Lynch asked about the drivers behind the reacceleration in aerospace orders over the past two quarters. He also sought to reconcile the relationship between strong prior-year order growth and the current year's sales growth forecast.

Answer

Chairman and CEO Jennifer Parmentier attributed the order strength to increasing commercial transport and wide-body build rates, continued aftermarket growth from air traffic, and sustained demand from defense legacy programs. She explained that the conversion of long-cycle orders to sales is gated by customer build rates and capacity, making the 8% sales growth forecast consistent with visibility into customer plans, despite a large backlog.

Andrew Obin of Bank of America asked if Parker's shift toward longer-cycle businesses would extend the time from positive orders to sales growth. He also requested a timeline for the end of the off-highway OEM destock and a breakdown of aerospace aftermarket growth between military and commercial.

Answer

CFO Todd Leombruno confirmed that the company's longer-cycle mix implies a slightly longer translation from orders to revenue. CEO Jenny Parmentier estimated the off-highway challenges would persist through the calendar year. She then provided a detailed breakdown of Q2 aerospace growth: Commercial Aftermarket at +21% and Defense Aftermarket at +25%, driven by strong depot partnerships.

Andrew Obin questioned whether uncertainty around the U.S. election is impacting customer behavior, based on feedback from Parker's distributors. He also asked about the sustainability of the strong outperformance in the defense aftermarket (MRO) business.

Answer

CEO Jenny Parmentier stated that distributors are not citing the election as a factor; instead, they point to project delays, possibly related to interest rates. On defense MRO, she noted the exceptional 47% Q1 growth will face tougher comps, but the company has raised its segment guidance to low-double-digits, driven by success in public-private partnerships and leveraging the Meggitt portfolio.

Andrew Obin asked about current business conditions in Europe and the company's exposure to European defense budgets. He also questioned if Parker is reconsidering its manufacturing footprint or adjusting CapEx in response to the latest tariffs.

Answer

Executive Jennifer Parmentier noted that while broad-based softness in Europe is expected to continue, there is positive sentiment around future stimulus and defense spending. She highlighted Parker's global defense position, noting many U.S.-built aircraft are exported to allies. Regarding tariffs, she stated Parker is not adjusting CapEx and sees no need for major supply chain realignment due to its 'local-for-local' model, which provides global capacity and is supported by dual sourcing strategies.

Andrew Obin asked about residential under-absorption in Q4 2025 and expectations for Q1 2026, given the market was perceived as 'better' in Q4. He also inquired about the reality of biopharma reshoring, excitement for 2026, and customer visibility into 2026-2027.

Answer

Dave Regnery, Chair and CEO, clarified that Trane's residential performance was stronger in Q4, not necessarily the market, and the deleverage was intentional. Chris Kuehn, Executive Vice President and CFO, expected Q1 2026 residential deleverage to be better than Q4 2025, with level-loaded production. Dave Regnery noted that while Life Sciences was not positive in Q4 2025, there's an optimistic pipeline for large pharma reshoring projects, with over $1 billion in backlog for 2027 and beyond across multiple verticals.

Andrew Obin asked about the expected under-absorption in the residential business for Q1 2026, comparing it to Q4 2025, given the tough Q1 2025 comps. He also inquired about Trane's observations regarding Biopharma reshoring, its reality, and visibility into 2026-2027.

Answer

Chris Kuehn stated that Q1 2026 residential is expected to be down ~20% due to tough comps, but deleverage should be better than Q4 2025, with level-loaded production and right-sized inventory. Dave Regnery noted that Life Science was not positive in Q4 2025 but sees large pharma reshoring projects in the pipeline, expressing optimism. Chris Kuehn added that over $1 billion of backlog for 2027 and beyond (up 30% YoY) reflects multiple verticals, including these projects.

Andrew Obin from Bank of America Merrill Lynch asked for management's view on when the Transport Refrigeration market might bottom out. He also questioned if the company had an appetite for larger, more transformative M&A to gain scale in critical areas like data centers.

Answer

Chair & CEO Dave Regnery acknowledged the market's volatility but pointed to ACT forecasts for a strong rebound in 2026, stating Trane is investing through the downturn to be prepared. On M&A, EVP & CFO Chris Kuehn reiterated a disciplined approach, confirming that while they have the financial capacity for larger deals, their strategy remains focused on value-accretive bolt-on acquisitions of $1 billion or less.

Andrew Obin from Bank of America sought clarification on Trane's end-market exposure in China, questioning if it was primarily industrial rather than commercial real estate. He also asked about the expected pricing impact from the A2L refrigerant transition in 2025.

Answer

CEO Dave Regnery clarified that Trane's China business is not in commercial real estate but is focused on applied systems for industrial applications like semiconductors. He confirmed the weakness was from the industrial side, compounded by the company's tightened credit policies. CFO Chris Kuehn addressed pricing, stating the new A2L refrigerant products would be priced in the high single-digit range higher to cover increased costs, with a goal of being margin-neutral. He noted this would be a tailwind for 2025 revenue.

Andrew Obin asked about the growth contribution from Access Solutions cross-sell within Building Automation and the segment's exposure to data centers. He also inquired about anticipated further portfolio actions on the industrial automation side or beyond, after the planned sale of Productivity Solutions and Warehouse and Workflow Solutions.

Answer

CEO Vimal Kapur confirmed that the Access Solutions acquisition is performing well, growing high single digits, with sales synergies significantly contributing to overall Building Automation growth. He noted that Honeywell's data center exposure is slowly becoming material, approaching greater than 5% of revenue (from 0 a couple years prior), across safety, environmental controls, and security. Regarding future portfolio actions, Vimal Kapur stated that Honeywell is 'very pleased with the end state,' having built Industrial Automation focused on sensing and measurement, and will scale from this point, implying no further immediate divestitures.

Andrew Obin asked about the growth contribution from Access Solutions cross-sell within Building Automation and the segment's exposure to data centers.

Answer

Vimal Kapur, Chairman and CEO, confirmed that the Access Solutions acquisition is performing well, growing high single digits in line with Building Automation, with sales synergies being a significant additive to overall growth, particularly in projects. He noted that Honeywell's data center position in Building Automation is slowly becoming material, now exceeding 5% of revenue (up from 0% a couple of years ago), across safety, environmental controls, and security. Andrew Obin then asked if further portfolio actions are anticipated on the industrial automation side or beyond, following the sale of Productivity Solutions and Warehouse and Workflow Solutions. Vimal Kapur stated satisfaction with the end state, emphasizing that Industrial Automation is now heavily focused on sensing and measurement, providing a platform for future scaling, with strategy details to be shared at Investor Day.

Andrew Obin from Bank of America Merrill Lynch asked for clarification on the UOP business, questioning why growth was strong in Q2 but the outlook was cautious for the second half, and which verticals were driving these trends. He also followed up on Industrial Automation's margin outlook.

Answer

Chairman & CEO Vimal Kapur attributed the strong Q2 in UOP to a significant licensing agreement and pulled-forward catalyst sales. He noted the cautious second-half outlook stems from delayed energy project spending due to economic and regulatory uncertainty, which also affects the HPS business in Industrial Automation. SVP & CFO Mike Stepniak added that the company remains prudent regarding short-cycle orders in the second half.

Andrew Obin of Bank of America Merrill Lynch asked for details on the UOP business, seeking to understand the specific verticals driving Q2's strong growth versus the weaker outlook for the second half. He also inquired if similar dynamics in HPS were driving the lower margin outlook for Industrial Automation.

Answer

Chairman & CEO Vimal Kapur attributed the Q2 UOP strength to a large licensing agreement and pulled-forward catalyst sales. He noted that the H2 weakness stems from delayed energy project spending due to economic and regulatory uncertainty. He confirmed that the projects side of HPS is seeing similar pressure, while the services side remains strong. CFO Mike Stepniak added that the outlook remains prudent, especially regarding short-cycle orders.

Andrew Obin inquired about the drivers behind the divergence in Aerospace performance, with OE weaker and aftermarket stronger than expected. He also asked about the potential impact of a U.S.-China trade disruption, questioning if it's a parts shortage or demand destruction risk.

Answer

CEO Vimal Kapur attributed the Aero OE results to product mix and revenue recognition timing, noting manufacturing volumes are growing. Regarding trade tensions, Kapur clarified the primary risk is demand destruction, which is factored into the guidance, and that the company does not foresee any shortage of parts due to its localized footprint.

Andrew Obin inquired about competitors' reactions to 232 tariffs and the strategic benefits of Alliance Laundry's distributor acquisitions.

Answer

CEO Mike Schoeb noted that only one small Asian competitor has significantly raised prices due to 232 tariffs, with broader industry responses anticipated in 2026. He also explained that distributor acquisitions, like the recent New York deal, are part of a vertical integration strategy to get closer to customers in dense urban markets, with 16 such deals completed to date.

Andrew Obin inquired about competitors' responses to incremental Section 232 tariffs and the broader industry environment. He also asked about the strategic and financial benefits of Alliance Laundry's distributor acquisition strategy.

Answer

CEO Mike Shabe noted that only one small Asian competitor had increased prices (around 16.5% for the full year) in response to tariffs, with no other significant activity expected until 2026. Regarding acquisitions, Mr. Shabe explained that the company's 16th acquisition, Metropolitan Laundry Machinery Sales, aligns with their vertical integration strategy, focusing on dense urban markets to get closer to customers and drive outsized growth.

Andrew Obin asked for an update on Logix unit volumes, specifically how they compare to pre-COVID levels. He also questioned whether the rollout of new Logix products in fiscal 2026 would impact margin patterns or seasonality.

Answer

Blake Moret, Chairman and CEO of Rockwell Automation, confirmed that Logix unit volumes reached pre-COVID levels in the second half of the fiscal year, though the full year remained below. He expects Logix unit volumes to return to pre-COVID levels in fiscal 2026 and continue growing. Moret also noted that new product releases, like the Logix L9 processor and Process I/O, typically contribute to steady sequential growth rather than causing a large swell of orders or significant margin pattern changes.

Andrew Obin inquired about Logix unit volumes relative to pre-COVID levels and whether the rollout of new Logix products in fiscal 2026 would impact margin patterns or seasonality.

Answer

Blake Moret, Chairman and CEO, stated that Logix unit volumes touched pre-COVID levels in the back half of fiscal 2025, though the full year was still below. He expects Logix unit volumes to return to pre-COVID levels in fiscal 2026 and continue growing. Moret also confirmed that new Logix products, like the L9 processor and Process IO, have already been released and are seeing impressive orders, but typically contribute to steady sequential growth rather than causing a big swell of orders or significant margin/seasonality impact.

Andrew Obin of Bank of America Merrill Lynch asked about the growth outlook for the next fiscal year considering investment and tax headwinds, and also requested a retrospective on the cost-saving program's progress and key areas of success.

Answer

CEO Blake Moret affirmed a commitment to margin expansion regardless of top-line growth, noting they have factored in headwinds. He highlighted manufacturing efficiencies as a key future opportunity. CFO Christian Rothe added that the cost program progressed from faster SG&A cuts to longer-term initiatives like product redesigns and operational excellence, and that vigilance against cost creep is now critical.

Andrew Obin from Bank of America Merrill Lynch asked about the growth outlook for the next fiscal year considering investment and tax headwinds, and for a deeper analysis of the restructuring program's successes and future opportunities.

Answer

CEO Blake Moret affirmed Rockwell's commitment to margin expansion regardless of top-line performance, noting plans to mitigate tax headwinds. CFO Christian Roethe added that they expect margin expansion next year from price and ongoing cost programs. Regarding restructuring, Moret highlighted the program's breadth as key, with future opportunities in manufacturing efficiencies. Roethe detailed the program's progression from headcount reductions to operational excellence in factories.

Andrew Obin of BofA Securities inquired about the drivers behind the robust growth in e-commerce and warehouse automation, its visibility, and the reasons for the unexpected growth slowdown in the Lifecycle Services segment.

Answer

CEO Blake Moret explained that growth in e-commerce and warehouse automation is driven by multiple factors, including logistics improvements in consumer industries, new e-commerce fulfillment centers, and power distribution equipment for data centers. Regarding Lifecycle Services, Moret attributed the slowdown to customer delays in large CapEx projects, particularly in process industries, due to commodity price pressure and policy uncertainty. He noted competitiveness remains strong and some delayed projects were secured in April.

Andrew Obin sought clarity on the conversion timeline from sales funnel to shipment and asked for an update on the business environment with European machine builders.

Answer

Blake Moret, Chairman and CEO, explained that the order-to-shipment timeline varies from weeks for products to an average of 5-6 months for Lifecycle Services projects. He added that engagement with European machine builders is encouraging, and he expects Europe to be the second-best performing region in fiscal 2025 as destocking abates.

Andrew Obin noted strong nuclear bookings but weak underlying power bookings (excluding nuclear), asking for the reasons behind this trend and if core power is expected to rebound. He also questioned the relationship between last year's 9% bookings growth and this year's flattish bookings, and how current bookings translate into hitting the 5% revenue target next year.

Answer

Scott Rowe, Flowserve's President and CEO, attributed traditional power weakness to timing impacts, noting investments across all power forms but a more competitive environment requiring selective bidding. He explained that this year's flattish bookings are due to a decline in OE Middle East energy projects, while other business grew 9%. Mr. Rowe believes renewed commercial excellence and 80/20 focus on growth will help achieve a 5% growth rate over time. Amy Schwetz, Flowserve's CFO, added that improving conversion rates from operational excellence and aftermarket strength, combined with healthy end markets, will offset headwinds for 2026.

Andrew Obin noted that underlying power bookings, excluding nuclear, appeared weak (down high teens) and asked for an explanation, questioning if core power would pick up given the broader power generation trend. He also inquired about the relationship between bookings and revenue, specifically how this year's flattish bookings would translate into hitting the 5% revenue target next year, considering last year's 9% bookings growth hadn't fully flowed through.

Answer

Scott Rowe, President and CEO, attributed the weakness in traditional power bookings to a timing impact in the quarter, noting ongoing investments in various forms of power globally. He stated that Flowserve is selective in this more competitive environment, focusing on customers who value their aftermarket. Regarding bookings and revenue, Mr. Rowe explained that this year's lower bookings growth was due to a decline in OE Middle East energy projects, but other business segments grew 9%. He emphasized that commercial excellence and 80/20 initiatives are driving growth, with target selling accounts for industrial pumps up 21%, and he believes a 5% growth rate is achievable over time. Amy Schwetz, CFO, added that improving conversion rates from operational excellence and strong aftermarket performance, combined with healthy end markets and Middle East opportunities, are expected to offset any headwinds and contribute to 2026 growth.

Speaking on behalf of Andrew Obin, David [indiscernible] asked if Flowserve observed any pre-buy activity from distributors ahead of the March price increase. He also inquired whether the company sees a need to add manufacturing capacity to support the elevated level of nuclear and other specialized project orders.

Answer

President and CEO Robert Rowe responded that there was no material pre-buying activity from distributors, who remain focused on disciplined inventory management. Regarding capacity, Rowe stated that Flowserve does not need to add new facilities, as they have a large existing footprint. He explained that capacity can be expanded within current sites through process improvements, staffing, and operational excellence initiatives with minimal capital investment.

Andrew Obin of Bank of America asked for more detail on the FCD segment's margin performance and the decline in its original equipment bookings. He also inquired about the outlook for coal power plant life extensions.

Answer

CFO Amy Schwetz acknowledged FCD's margin expansion was modest due to mix but expects improvement from cost-out efforts, noting the segment's focus is on margin over growth. CEO Scott Rowe added that Flowserve benefits from coal plant life extensions in Europe and the U.S., as all forms of power are needed to meet rising demand.

Andrew Obin asked about the industry and Carrier's capacity for magnetic bearing chillers, Carrier's ability to gain market share, and whether additional capacity investments are needed. He also inquired about the expected pace of residential recovery in 2026, specifically if Q1 would be down before a positive trend.

Answer

CEO David Gitlin stated Carrier is in great shape with magnetic bearing chillers, having built a new facility and expanded an existing one in North America, increasing water-cooled chiller capacity by 4x since 2023. This has contributed to significant share gains, and no further CapEx is needed for North America. CFO Patrick Goris expects the first half of 2026, particularly Q1, to be down year-over-year for CSA residential volume due to tough comparisons from the strong first half of the current year.

Andrew Obin of Bank of America inquired about the industry capacity for magnetic bearing chillers and Carrier's position to take market share, asking if additional capacity investments were needed. He also sought clarification on the expected pace of residential recovery in 2026, specifically whether Q1 would be down and if it's a first-half versus second-half story.

Answer

CEO David Gitlin stated that Carrier is in great shape with magnetic bearing chiller capacity, having built a new facility and expanded an existing one, increasing water-cooled chiller capacity by 4x and total chillers by 3x since 2023. He noted no need for further CapEx in North America. CFO Patrick Goris confirmed that the first half of 2026, especially Q1, is expected to be down year-over-year for CSA residential volume due to tough comps from a very strong first half in 2025.

Andrew Obin of Bank of America Merrill Lynch asked for more detail on the transportation segment's return to growth in North America, given weak truck volumes. He also questioned why the outlook for North American residential HVAC weakened since May, probing whether inventory or end-market demand was the primary cause.

Answer

Chairman & CEO David Gitlin noted that while North America Truck & Trailer (NATT) saw modest growth, the segment benefits from easy comps in the second half and strength in its container business. On the residential side, Gitlin explained that softer-than-expected sales movement in May and June led to higher channel inventory, prompting a more cautious volume forecast for the second half to allow inventories to rebalance.

Andrew Obin questioned the drivers of the 1% overall price forecast, asking which regions or verticals might see weaker pricing. He also requested a progress update on the aftermarket business, including key performance indicators (KPIs).

Answer

CFO Patrick Goris identified the Refrigeration segment and the Asia region, particularly China, as areas where pricing might be flatter than the company average. CEO David Gitlin reiterated that aftermarket remains a key focus with a mandate for perpetual double-digit growth. He cited positive momentum in KPIs like attachment rates approaching 50% and a long-term goal to grow aftermarket revenue from ~7% of sales to closer to 30%.

Andrew Obin of Bank of America asked if other funding sources like the IRA were helping to smooth out the decline in ESSER funds for the K-12 market. He also inquired about any potential one-time items that could affect free cash flow in 2025, particularly related to the Viessmann acquisition.

Answer

David Gitlin, Chairman and CEO, agreed that more funding has been available for the K-12 segment than ever, contributing to its strength. He believes the strength will continue as pent-up local school budgets will be deployed as federal funding wanes. Patrick Goris, CFO, stated that at this point, he would not call out any significant one-time items for 2025 free cash flow and that the company would target 100% conversion of adjusted net income.

Andrew Obin sought more detail on the comment that tariff uncertainty is dissipating, asking if this is translating into actual changes in customer behavior and budget releases.

Answer

President and CEO Neil Barua clarified that while it's not an 'all clear' signal, the level of uncertainty has been mitigated since the last call, giving customers more clarity on their operating guardrails. He noted that while challenges like higher input costs remain, the complex environment has elevated the importance of mission-critical digital transformation, positioning PTC as a more strategic partner for customers navigating these dynamics.

Andrew Obin from Bank of America asked about the level of budget uncertainty for calendar year 2025 post-election and whether the go-to-market realignment is a larger source of uncertainty than the macro environment.

Answer

CEO Neil Barua asserted that the fundamental customer need for PTC's technology to manage complexity and accelerate product development persists regardless of the political or macro climate. He described the current environment as a 'tectonic shift' that benefits PTC. He concluded that uncertainty is multifaceted and that the company is focused on execution and prepared for any scenario.

Andrew Obin of Bank of America inquired about the impact of tariff uncertainty on orders, asking if it led to pull-forwards or pushouts, and requested an update on booking trends for data center-exposed businesses.

Answer

President and CEO Richard Tobin confirmed the primary impact was project pushouts, particularly in the non-CO2 refrigeration and LNG cryogenic components businesses. In contrast, he highlighted strong momentum in data center-exposed markets, noting that thermal connector bookings grew 50% year-to-date and that the company is actively increasing capacity for both connectors and heat exchangers to meet demand.

Andrew Obin asked about the sustainability of bookings growth given tougher upcoming comparisons and potential tariff impacts, and questioned the high decremental margin implied by the EPS guidance reduction.

Answer

Executive Richard Tobin expressed confidence that the book-to-bill ratio would remain above 1.0 in Q2 based on current momentum. He clarified the guidance change was a "mechanical" adjustment, equivalent to removing $100 million in revenue at a 38% margin, rather than a detailed re-forecast based on specific decremental assumptions.

Andrew Obin asked if Dover's better-than-peer outlook in vehicle wash and above-ground fueling is due to market share gains or a genuine market turn. He also questioned if the liquid cooling (Colder) business for data centers could potentially double in the upcoming year.

Answer

Executive Richard Tobin attributed the positive inflection in the fueling businesses to the mix impact of a recovering below-ground market and significant restructuring benefits, rather than a major market turn. Regarding the liquid cooling business, he acknowledged that it could double, but emphasized that its short-cycle nature (45-day visibility) makes forecasting difficult.

Andrew Obin asked for clarification on why gross margins, particularly service gross margins, were declining and also questioned the reason for the decline in nuclear revenue.

Answer

CFO Ken Parks explained that the gross margin movement was a result of revenue mix between equipment and services and was not a concern, as new equipment sales set up future service revenue. He attributed the nuclear revenue decline to the timing of fuel servicing contracts, which is the primary activity until new Small Modular Reactor (SMR) projects begin to contribute.

Andrew Obin asked for an explanation for the decline in gross margin, particularly in services, and also questioned why nuclear revenue was declining despite a bright long-term outlook.

Answer

CFO Ken Parks addressed both points. He attributed the gross margin shift to the revenue mix between equipment and services, stating it was not a concern and actually sets up future services growth. Regarding nuclear, he explained the revenue decline was simply due to the timing of fuel servicing contracts, which is the primary activity until the new Small Modular Reactor (SMR) business begins to ramp up.

Andrew Obin asked if recent EPA directives are altering utility spending plans and if there have been any tangible changes on the ground related to project permitting.

Answer

CEO Scott Strazik stated that the directives are not currently changing customer behavior or spending plans. He commented that while there is industry collaboration on permitting reform, it is not a primary focus in the current political environment and is more likely to be a topic for 2026 than 2025.

Andrew Obin of Bank of America inquired how rising natural gas prices might affect the scope of GE Vernova's service activities for its gas turbine fleet.

Answer

CEO Scott Strazik explained that higher utilization is driving demand for technology upgrades to increase megawatt output, even more so than efficiency at present. He stated this will lead to an increased scope per outage, as customers invest more in technology. This underpins the company's forecast for a 50% growth in its gas upgrades business by the end of the decade.

Andrew Obin followed up on the nuclear topic, asking how GE Vernova will secure its market share with new customer profiles like hyperscalers, who may lack traditional utility relationships.

Answer

CEO Scott Strazik explained that new customers will likely partner with traditional nuclear operators, who are GE Vernova's core clientele. He stressed that for both gas and nuclear, the commercial arrangements are still evolving. For SMRs, he highlighted the company's competitive advantage in its established BWRX technology and a clear time-to-market with the first unit targeted for 2029.

Andrew Obin of Bank of America Merrill Lynch asked to quantify the top-line benefit from improving on-time-in-full (OTIF) service levels and sought clarification on headwinds affecting second-half margin seasonality.

Answer

CEO William Brown explained that while 3M doesn't specifically quantify the revenue impact of OTIF, improving it is critical for reducing customer churn and implicitly drives growth. CFO Anurag Maheshwari clarified that the second-half margin profile is primarily impacted by the timing of tariff headwinds and a step-up in stranded costs, which are guided to be $70 million in H2 versus $30 million in H1.

Andrew Obin from Bank of America questioned if 3M is modeling any potential demand destruction resulting from tariff-related price increases. He also asked why the company isn't being more aggressive with its share buyback program given the stock's weakness and the new authorization.

Answer

CEO William Brown and CFO Anurag Maheshwari explained that while the weaker macro outlook is factored into guidance, they are not modeling specific demand destruction from their own actions, as pricing changes are being implemented surgically and in consultation with customers. Regarding buybacks, Maheshwari noted that recent option exercises were driven by timing. Brown added that the company increased its plan from $1.5B to $2B and retains the flexibility to be more opportunistic with its $7.5B authorization later in the year.

Andrew Obin questioned the 100% free cash flow conversion guidance for 2025, asking about working capital benefits and potential offsets. He also asked for an outlook on the abrasives and industrial specialties businesses and when they might return to growth.

Answer

CFO Anurag Maheshwari explained that while inventory reduction will provide a cash benefit, it will be offset by higher receivables from revenue growth, leading to the ~100% conversion guidance. CEO William Brown stated he expects the abrasives business to improve in 2025, aided by the new Cubitron 3 product platform, and believes both abrasives and industrial specialties will 'turn the corner' to growth during the year. He also noted that inventory in the industrial channel is normalized.

Andrew Obin from Bank of America asked for CEO Bill Brown's views on centralization versus decentralization at 3M, referencing past leadership philosophies, and requested an update on insurance recovery efforts related to PFAS and combat arms liabilities.

Answer

CEO William Brown endorsed the previous decision to centralize factories and supply chains under a common leader, calling it "global coordination" and the right step to unlock value. On insurance, he reported that 3M recovered $54 million in Q3 and over $175 million year-to-date. He stated that recovery efforts are ramping up and that 3M expects its insurers to honor their obligations, while noting 3M's total liability is higher than its total insurance value.

Andrew Obin sought to clarify if Tektronix orders were positive and if the outlook assumes fewer deal conversions. He also asked about the key end-market differentiators for Tektronix versus competitors and the outlook for 2025 CapEx.

Answer

President and CEO James Lico clarified that overall Precision Technologies (PT) orders were positive, driven by Sensors and Systems, while Test and Measurement (which includes Tektronix) was down. He differentiated Tektronix by its focus on the R&D lab and less exposure to telco comms. Lico stated that 2025 CapEx is expected to remain flat, as the company utilizes a low-CapEx model.

Andrew Obin of Bank of America inquired about the growth performance and 2025 outlook for Fortive's software assets, including Gordian, Accruent, and ServiceChannel. He also asked for an update on the utilities and power vertical, including customer conversations and capacity needs.

Answer

President and CEO James Lico reported that software revenue grew high-single-digits for the quarter and year and is expected to continue at that rate in Q1. He noted moderating growth at Gordian but improvements at Accruent and ServiceChannel, along with dramatically improved profitability. For the power vertical, Lico described strong, multi-year double-digit growth at Qualitrol, driven by grid monitoring and transformer demand, necessitating capacity expansion to meet long-term investment trends.

Andrew Obin of Bank of America questioned the sustainability of Fortive's strong price realization and asked for more detail on the drivers of the high single-digit order growth at Tektronix.

Answer

President and CEO James Lico stated that Fortive's pricing power is sustainable and rooted in its high-value innovation. He explained that the Tektronix order growth was driven by a combination of easier comps and real demand from customers investing in data centers, batteries, and next-generation electrification, with particular strength seen in regions like Korea.

Andrew Obin asked for confirmation that guidance for Test & Measurement and Welding does not model a cyclical recovery and questioned why Food Equipment growth is guided to decelerate from Q4 levels.

Answer

CFO Michael Larsen confirmed the guidance is based on current demand and does not model a recovery, though he noted historical recoveries can see mid-to-high single-digit growth. CEO Christopher O'Herlihy explained the Food Equipment guidance is based on normalized sequential run rates, not just the strong Q4, and expressed overall optimism for the segment due to its recovering service business and innovation pipeline.

Andrew Obin inquired about the structural improvements made to pricing, the outlook for pricing in 2025, the drivers of the short-cycle business, and the status of distributor destocking.

Answer

CEO Luca Savi detailed pricing strategies, including commodity indexing in MT and strategic renegotiations in CCT, and noted a more analytical approach for 2025. CFO Emmanuel Caprais attributed short-cycle strength to share gains in valves and services, driven by reduced lead times. He stated there are no signs of destocking in IP, while in connectors, high inventory levels may be offset by rising point-of-sale data, suggesting a potential inventory rerating.