Andy Kaplowitz

Andy Kaplowitz from Citi questioned MasTec's confidence in the pipeline business, asking if there were project timing delays and if the mid-teens margin guidance for 2026 was conservative given recent performance. He also sought a breakdown of communications growth, specifically regarding traditional fiber-to-the-home, BEAD program contributions for 2026, and the expanding opportunity in fiber-to-data-center or middle-mile broadband.

Answer

CFO Paul DiMarco noted that mid-teens margins for pipeline are an appropriate guide, with an objective to exceed. CEO Jose Mas added that pipeline visibility is improving with growing opportunities and negotiations, increasing confidence in sustained elevated levels. For communications, Jose Mas indicated minimal BEAD contribution in 2026, with greater bullishness for 2027, and confirmed that data center connectivity and middle-mile broadband are significant and growing drivers, contributing to broad-based opportunities and strong 2025 growth.

Andy Kaplowitz inquired about MasTec's confidence in the pipeline business, potential project timing delays, and whether the mid-teens margin guidance for 2026 is conservative given strong H2 2025 performance. He also asked for a breakdown of communications growth, including traditional fiber to the home, BEAD for 2026, and the expanding fiber to the data center/middle-mile broadband opportunities.

Answer

Paul DiMarco, Chief Financial Officer, indicated that mid-teens margins for pipeline are an appropriate guide, with an objective to beat. Jose Mas, Chief Executive Officer, expressed improving visibility in the pipeline business, with growing opportunities and confidence for sustained growth into 2027. For communications, Mr. Mas noted minimal BEAD in 2026 but increasing bullishness for 2027, alongside significant growth drivers from data centers and connectivity, leading to broad-based opportunities and potential to outperform 2026 guidance.

Andy Kaplowitz from Citigroup asked about Fluor's backlog conversion rates for 2026, the capital allocation strategy regarding share repurchases versus M&A given NuScale proceeds, and which end markets Fluor has regained competitive advantages in versus those still facing competition.

Answer

CEO Jim Breuer stated that 50%-60% of the backlog is expected to convert to revenue in the next 12 months. CFO John Regan reiterated the capital allocation priority: an early focus on share repurchases (e.g., $1.4 billion in 2026), followed by reinvesting in human capital and 'tuck-in' M&A to add depth in priority markets. He also emphasized Fluor's strategy of targeting markets where it holds a competitive advantage, such as LNG Canada and copper, while acknowledging data centers as a newer, more challenging market.

Andy Kaplowitz asked about the book-to-bill ratio exceeding one in Q4 2025 and January 2026 order trends, seeking color on what's driving the order acceleration, if it's broad-based, and whether aftermarket distributors have stopped destocking. He also inquired about the sequential decline in Q4 Adjusted EBITDA margin on flatter sales, specifically regarding mix, aftermarket destocking, or price-cost dynamics.

Answer

CEO Ivo Jurek noted the most positive order trend in two to three years, driven by a strong recovery in the industrial OEM segment, with off-highway markets stabilizing. He observed choppiness in industrial distribution due to inventory management but anticipates better recovery in the industrial aftermarket. Jurek expressed cautious optimism, awaiting further PMI validation. CFO Brooks Mallard attributed the Q4 Adjusted EBITDA margin dynamics to managing output and working capital to ensure a strong start to 2026.

Andy Kaplowitz asked about the drivers behind the book-to-bill ratio exceeding 1x in Q4 2025 and sustained positive order trends in January, inquiring if the recovery was broad-based and if aftermarket distributors had begun restocking. He also questioned the sequential decline in Q4 Adjusted EBITDA margin, asking about mix, aftermarket destocking, or other factors.

Answer

CEO Ivo Jurek stated that the positive order trend exiting 2025 was the most significant in two or three years, driven by a strong recovery in industrial OEM. He anticipated better recovery in industrial aftermarket in Q1-Q2 2026. CFO Brooks Mallard attributed the Q4 EBITDA margin dynamics to managing output and focusing on working capital, leading to better cash flow and record low net leverage.

Andy Kaplowitz questioned whether Gates Industrial is accelerating or enhancing its restructuring plans (footprint optimization, 80/20) beyond what was outlined at the Investor Day a year and a half ago, given slower growth. He also asked for an update on how 80/20 is impacting Gates into 2026 and beyond, and if the company can achieve core incrementals over 40% with organic growth.

Answer

CEO Ivo Jurek clarified that the company is executing its original restructuring plan, which was paused briefly after "Liberation Day" announcements to reassess the mercantile regime, but ultimately validated. He emphasized the need to be well-positioned for an anticipated upcycle. Jurek highlighted 80/20, material cost reductions, and operational focus as key drivers for outperforming expectations and delivering midterm targets without growth, viewing it as a powerful tool with early innings. He stated that, excluding restructuring benefits, the company expects 30-35% incrementals in a normalized growth environment for 2026 and beyond. Jurek also provided regional growth color, noting North America's challenge from agriculture, South America's normalization after strong growth, Europe's surprising positive core growth driven by auto replacement and industrial first fit, and China's consistent performance. He expressed optimism for India's continued nice growth trajectory.

Andy Kaplowitz asked if Gates Industrial is accelerating or enhancing its restructuring plans compared to the Investor Day update, given slower growth, and sought an update on the impact of 80/20 initiatives. He also questioned if the company could achieve core incrementals over 40% with organic growth, and requested more color on regional growth trends, particularly in North America, EMEA, and China.

Answer

CEO Ivo Jurek clarified that the company is executing on its original restructuring plan, which was paused briefly to assess the mercantile regime, and is now moving forward to position for an anticipated upcycle. He emphasized that 80/20, material cost reductions, and operational focus have been key to outperforming expectations and delivering midterm targets without growth, with early innings still providing significant opportunity. Mr. Jurek stated that excluding restructuring benefits, the company expects 30%-35% incrementals in a normalized growth environment. He provided regional insights, noting North America's challenge from agriculture, South America's normalization after strong growth, EMEA's surprising positive core growth driven by construction and mobility, and China's consistent performance in auto and industrial replacement, with India showing strong growth potential.

Andy Kaplowitz asked for more color on Mobility Tech's Q4 2025 performance, specifically regarding its 8.5% growth versus expectations, potential pull-forwards, visibility for the back-end loaded 2026 guide, and details on the Invenco inventory reserve. He also inquired about the longevity and strength of the retail fueling cycle for EFS, given its strong Q4 growth against tough comparisons.

Answer

CEO Mark Morelli highlighted Mobility Tech's innovation-driven growth, particularly with FlexPay 6 and iNFX, and noted strong overall growth including the DRB turnaround. CFO Anshooman Aga clarified that 2026 linearity is typical, with larger wins in indoor payments and Vehicle Identification System ramping in the second half. He explained the $4 million Invenco inventory reserve was for legacy inventory prior to acquisition, due to strong uptake of new product versions. Mark Morelli expressed confidence in the EFS segment, citing positive feedback from convenience store customers at the NACS Leadership Summit, their long-term build-out plans, and the value of Vontier's new technologies in managing complexity and driving revenue through loyalty and media.

Andy Kaplowitz asked about MobilityTech's Q4 2025 growth exceeding expectations, the timing of project deliveries, visibility for the back-end loaded 2026 guide, and details on the Invenco inventory reserve. He also inquired about the longevity and strength of the retail fueling cycle within the EFS segment and its potential for sustained mid-single-digit growth.

Answer

Mark Morelli (CEO, Vontier) attributed MobilityTech's strong performance to innovation-driven growth from FlexPay 6 and NFX, noting better uptake. Anshooman Aga (CFO, Vontier) clarified that 2026 linearity is typical, with Q1 sales at 23.5% of total, and larger unified payment and vehicle identification system wins ramping in the second half. He explained the $4 million Invenco inventory reserve was for legacy, pre-acquisition inventory, written off due to new product versions. Morelli expressed confidence in EFS, citing C-suite feedback on long-term footprint expansion, new technologies, and M&A, emphasizing lifecycle cost management over first cost.

Andy Kaplowitz from Citigroup sought more color on the smart meter market dynamics, including reasons for orders being below expectations, the reliance on converting delayed projects for 2026 revenue growth, and the impact of memory chip availability. He also questioned Xylem's future margin targets beyond 2026, given that 2026 guidance already surpasses the 2027 adjusted EBITDA margin goal, and plans for an investor day.

Answer

CEO Matthew Pine expressed confidence in MCS's long-term high single-digit growth, attributing near-term outlook to project timing, post-COVID backlog normalization, and walk-away revenue, particularly in analytics and selective meter installations. He noted strong bidding and win rates, but also expected more quarter-to-quarter variability, highlighting Xylem Vue's digital business growth. CFO Bill Grogan confirmed memory chip availability is not a material impact. Matthew Pine also confirmed plans for an investor day in spring 2027 to update strategy and targets, noting that the 2026 guidance of over 23% at the midpoint is ahead of the 2027 target of 23% set in May 2024, indicating likely upside to long-term targets.

Andy Kaplowitz asked for more color on Xylem's smart meters business within MCS, noting solid but below-expected orders and comparing Xylem's performance to peers. He questioned if the 2026 mid-single-digit revenue growth forecast is contingent on converting delayed projects and if memory chip availability impacts the outlook. He also inquired about Xylem's margin targets, given the 2026 guidance already surpasses the 2027 goal, asking about new targets and the business's long-term margin potential.

Answer

CEO Matthew Pine affirmed confidence in MCS's long-term high single-digit growth, attributing near-term variability to project timing, backlog normalization, and 80/20 walk-away revenue, particularly in analytics and mechanical meters. He highlighted strong bidding and win rates, and significant growth in the Xylem Vue digital business. CFO Bill Grogan confirmed no material impact from memory chips. Matthew Pine stated Xylem is tracking ahead of its May 2024 investor day target of 23% adjusted EBITDA margin by end of 2027, guiding over 23% for 2026. New targets and strategy updates will be provided at an investor day in spring 2027.

Andy Kaplowitz with Citigroup inquired about Xylem's accelerated EBITDA margin improvement, the sustainability of 80/20 benefits, and potential upside to the company's 2027 adjusted EBITDA margin target. He also asked about the broad-based strength in Measurement and Control Solutions (MCS) order growth and its implications for 2026 visibility in smart energy and water meters.

Answer

CEO Matthew Pine noted Xylem is ahead of its 2027 EBITDA margin target, with potential upside, and described the ongoing transformation as the 'first phase' focused on operating model, culture, processes, and structure, with future phases targeting growth and core franchises. CFO Bill Grogan confirmed healthy demand and a strong pipeline in MCS, with 11% order growth across water and energy meters, supporting a high single-digit growth outlook for 2026, despite a normalizing backlog.

Andy Kaplowitz (Citigroup) inquired about Xylem's accelerated EBITDA margin improvement, the sustainability of 80/20 benefits beyond 2025, and potential upside to the 2027 adjusted EBITDA margin target. He also asked about the broad-based strength in Measurement & Control Solutions (MCS) order growth, particularly in smart energy and water meters, and its implications for 2026 visibility.

Answer

CEO Matthew Pine stated that Xylem is ahead of schedule on its 2027 EBITDA margin target (23%), guiding to over 22% for 2025, indicating likely upside. He outlined a multi-phase journey: Phase 1 (operating model transformation), Phase 2 (leveraging simplification for growth), and Phase 3 (doubling down on core franchises and M&A). CFO Bill Grogan confirmed healthy demand and a strong pipeline in MCS, with 11% order growth across water and energy meters. He noted a normalizing backlog of $1.5 billion and projected high single-digit growth for MCS in 2026, with Q4 expected to be book-to-bill positive.

Andy Kaplowitz asked for more color on the 'green shoots' observed in Europe and Asia within the IOS segment, particularly regarding what's driving the inflection in Fluke and the perceived durability of this turn. He also inquired about the gas detection business (Industrial Scientific), asking about the drivers of its market share growth and the expected growth rate for 2026.

Answer

Olumide Soroye, President and CEO, attributed the green shoots in EMEA, APAC, and LatAm to improved execution by Fortive's teams rather than a market inflection, expecting market improvements to be upside. For Industrial Scientific, he highlighted a strong market for mission-critical safety, a leading Hardware as a Service offering, strong team execution, innovation, targeted market investments (e.g., EMEA commercial capacity), and enhanced customer engagement. He confirmed that continued execution and a strong year for the business are factored into the 2026 outlook.

Andy Kaplowitz asked for more detail on the 'green shoots' observed in Europe and Asia within the IOS segment, specifically what is inflecting and the durability of this trend. He also inquired about the drivers of growth and market share gains in the Industrial Scientific gas detection business and its expected growth for 2026.

Answer

Olumide Soroye, President and CEO, attributed the improvements in EMEA, APAC, and LatAm to better execution by Fortive's teams rather than a market inflection, stating that sustained market improvement would be upside. For Industrial Scientific, he highlighted a strong market for mission-critical safety, leadership in Hardware as a Service, effective innovation, targeted investments in EMEA, and enhanced customer engagement, expecting a strong year for the business in 2026.

Andy Kaplowitz inquired about the performance of fire and security markets, which grew low single digits, and whether Johnson Controls is observing an improvement in its short-cycle markets given the global and U.S. economic conditions. He also asked about the ability to scale larger projects and if better margins could be achieved on individual projects moving forward.

Answer

CEO Joakim Weidemanis stated there was no material change in short-cycle markets, with the focus remaining on operational improvements through the business system, clearer priorities, and targeting attractive market segments, irrespective of portfolio outcomes. Regarding larger projects, Joakim Weidemanis confirmed no major bottlenecks for scaling, noting that investments have been made in project engineering and management teams. He added that while pricing is competitive, collaboration with customers on value-added solutions (e.g., energy savings) helps maintain competitive margins, and no particular margin headwind is anticipated.

Andy Kaplowitz asked about any improvement in Johnson Controls' short-cycle markets, specifically fire and security, given the current global and U.S. economic conditions. He also questioned the company's ability to scale larger projects, such as those involving 50-100 chillers, and whether these projects, despite competitive pricing, could yield better margins moving forward.

Answer

CEO Joakim Weidemanis noted no material change in the fire and security markets but highlighted operational improvements through the business system, clearer priorities, and focused effort on attractive market segments. He stated that there are no major bottlenecks for scaling larger projects, as investments include project engineering and management teams. While pricing is competitive, collaboration with customers on value-added, energy-saving solutions helps maintain cost competitiveness, and no particular margin headwind is anticipated from these larger projects.

Andy Kaplowitz asked for more color on Veralto's guidance for 50 basis points of margin expansion excluding In-Situ, inquiring about the puts and takes, including tariff-related headwinds and the front-end loaded nature of In-Situ investments. He also asked if the data center wave could be a meaningful growth driver in 2026 and about Veralto's TAM in this area.

Answer

CFO Sameer Ralhan explained that the 50 basis points of core business margin expansion is driven by pricing and the rolling off of tariff headwinds in the second half of 2026, partially offset by investments in services and sales. He noted that In-Situ's initial integration and synergy realization costs are driving its upfront impact. CEO Jennifer Honeycutt clarified that while data center sales are growing double digits, they are still relatively small and not expected to be a meaningful contributor to core growth in 2026, though the aggregation of ancillary verticals like power generation and semiconductor does add up.

Andy Kaplowitz asked for more color on Veralto's 50 basis points margin expansion guidance (excluding In-Situ), including puts and takes, the timing of tariff-related headwinds rolling off, and the impact of In-Situ investments. He also questioned if the data center wave could be a meaningful growth contributor in 2026 and elaborated on Veralto's TAM.

Answer

Sameer Ralhan, SVP and CFO, stated that pricing is a big driver for the 50 basis points core margin expansion, with tariff headwinds rolling off in the second half of 2026, offset by investments in services and sales. He noted In-Situ's upfront impact is due to integration costs and synergy realization. Jennifer Honeycutt, President and CEO, clarified that data center sales are still relatively small, growing double digits but not expected to be a meaningful contributor to core growth in 2026.

Andy Kaplowitz inquired about the durability of Veralto's industrial water quality business strength into 2026, particularly regarding data center-related growth, its current size, and expected future impact. He also asked about the slight lowering of 2025 margin guidance, whether it was tariff-related or due to incremental investments, and expectations for 2026 incremental margins.

Answer

Jennifer Honeycutt (President and CEO) highlighted data centers as a strategic priority, seeing strong double-digit growth from existing and new builds, and emphasized Veralto's role in maximizing energy efficiency and water conservation across the AI value chain. Sameer Ralhan (SVP and CFO) attributed the margin guide adjustment to Q4 expectations, including price/cost impacts and investments, primarily affecting PQI, while Water Quality maintained strong performance. He expects a return to 30-35% incremental margins in 2026.

Andy Kaplowitz from Citi asked about the long-term durability of Veralto's industrial water quality business strength, particularly concerning data center-related growth, and requested insights into the size and expected future impact of this specific business. Kaplowitz also questioned the slight reduction in the full-year 2025 margin guidance, asking if it was primarily due to PQI tariff pass-throughs or incremental investments, and if normal incremental margins (30%+) are expected to resume in 2026.

Answer

Jennifer Honeycutt, President and CEO, emphasized data centers as a strategic priority, noting strong double-digit growth from existing and new customers, driven by the "big five" tech companies. She highlighted Veralto's critical role in water treatment for chip manufacturing, power generation, and raw materials for AI infrastructure, confirming it's a smaller but rapidly growing part of the business. Sameer Ralhan, SVP and CFO, explained that the full-year margin guide reflects Q4 investments and tariff impacts, mainly in PQI, but expressed confidence in raising EPS guidance due to higher sales volume, lower interest expense, and tax rate benefits.

Andy Kaplowitz asked for an update on semiconductor investment, specifically if Jacobs is seeing an acceleration, particularly on the memory side, given its historical strength in the sector. Kaplowitz also inquired about the longevity of the water infrastructure cycle, addressing concerns about municipal spending and the eventual rundown of IIJA funding, and how Jacobs views its strong water bookings in this context.

Answer

CEO Bob Pragada confirmed that Jacobs is in acceleration mode for semiconductor investment, driven by rapid advances in high bandwidth memory by American providers, which are significantly shortening node advancement cycles. He mentioned Jacobs' involvement in projects in Idaho and New York. For the water vertical, Pragada noted high single-digit growth, with strong international tailwinds from the UK's AMP8 cycle, the Middle East, and Australia. He clarified that municipal spending is not strongly linked to IIJA (which focused on transportation) and that water scarcity, aged assets, and climate effects are driving long-term demand. CFO Venk Nathamuni added that strong water bookings and a growing pipeline provide multi-year visibility.

Andy Kaplowitz asked for an update on the semiconductor sector, specifically if Jacobs is observing an acceleration in investment, particularly on the memory side, and what details are driving this trend. Kaplowitz also inquired about the longevity of the water infrastructure cycle, addressing concerns about municipal spending and the eventual winding down of IIJA funding.

Answer

Chair and CEO Bob Pragada confirmed an acceleration in the semiconductor sector, driven by advances in high bandwidth memory from an American provider, which is shortening node advancement cycles from 20 years to 2-3 years, requiring rapid plant readiness in locations like Idaho and New York. For water, Mr. Pragada noted high single-digit growth, highlighting strong international tailwinds (UK's AMP8 driving double-digit growth, Middle East, Australia). He clarified that IIJA was primarily focused on transportation, and water scarcity, aged assets, and climate effects are driving a long-term demand tail. CFO Venk Nathamuni added that strong water bookings and a growing pipeline provide multi-year visibility.

Andy Kaplowitz from Citigroup Inc. asked about the funding visibility and progression under the Infrastructure Investment and Jobs Act (IIJA) for Jacobs' transportation sector, specifically if there were any observed delays or accelerations in new money flowing to states. He also sought insights into regional performance across end markets, identifying which regions outperformed expectations and which might be softer in FY26.

Answer

Chair and CEO Bob Pragada stated that IIJA continues to be a catalyst without delays, noting strong global transportation growth beyond the US, including Europe, Middle East, Australia, and New Zealand. He added that business outside the US is in growth mode, with double-digit growth in the Middle East, recovery in Europe, and strong transportation and water growth in Southeast Asia and Australia/New Zealand, indicating uniform global performance. CFO Venk Nathamuni added that PA Consulting also sees solid momentum in the UK and continental Europe.

Andrew Kaplowitz asked about the sustainability of double-digit growth in the Water and Environmental segment, particularly regarding potential impacts from U.S. deregulation, and questioned the drivers for the expected second-half recovery in Advanced Manufacturing.

Answer

Chair and CEO Bob Pragada affirmed confidence in Water and Environmental growth, citing fundamental needs like urbanization and climate effects, and noted some deregulation can even accelerate projects. For Advanced Manufacturing, he explained that while the semi business is flat, data centers are growing double-digits, and a recovery is expected in Industrial Manufacturing, driven by a growing pipeline and reshoring efforts.

On behalf of Andy Kaplowitz, Natalia from Citi asked about the margin and revenue growth outlook for the PA Consulting segment in fiscal 2025. She also inquired about capital deployment priorities and whether M&A could be used to fill any portfolio gaps.

Answer

CEO Bob Pragada stated that PA Consulting's margin profile is expected to continue its strength. CFO Venk Nathamuni added that they anticipate a growth inflection point for PA in FY25, which is factored into the overall company guidance. Regarding capital, Venk prioritized organic investment and shareholder returns (buybacks, dividends), noting M&A is a long-term accelerant and that the company has significant optionality due to its strong balance sheet.

Andy Kaplowitz asked for a breakdown of Emerson's 9% order growth in Q1 between process and hybrid markets, the impressive 74% Ovation growth, and whether the mid-teens growth expected in Power could lead to an extended runway for opportunities like behind-the-meter power. He also inquired if process and hybrid markets are settling into a mid-single-digit order growth rate. In a follow-up, he asked about the 9% ACV growth, the expected 10%+ growth for the year, and how AI, specifically Nigel AI, could be complementary to growth and margins in Emerson's software businesses despite market angst.

Answer

Lal Karsanbhai, President and CEO, explained that Power growth was driven by modernization, upgrades, and behind-the-meter capacity at data centers, with new generating capacity expected to develop longer-term. He highlighted strong, broad-based Test and Measurement orders (up 20%) across Portfolio, Semiconductor, and ADG, offset by challenges in Transportation. Ram Krishnan, Chief Operating Officer, added geographic color, noting strong North America (up 18%), Middle East (up 6%), Latin America (up 9%), and India (up 22%), while Europe and China were down. Lal Karsanbhai further clarified that project wins were significant across Power, LNG, Semiconductor, Life Science, and ADG. Regarding AI, Lal Karsanbhai stated that Emerson's software is built on sticky, first-principle models with deep domain knowledge, making the threat of AI disruption minimal. He believes AI capabilities, like Nigel AI, will accelerate software growth and ACV.

Andy Kaplowitz asked for a breakdown of Emerson's 9% Q1 order growth between process and hybrid markets, specifically inquiring about the impressive 74% Ovation growth and the potential for an extended runway in power opportunities. He also asked if process and hybrid markets are settling into a mid-single-digit order growth rate. Additionally, he inquired about the 9% ACV growth and the expected 10%+ for the year, asking Emerson to elaborate on why AI could be complementary to growth in ACV and margin for their software businesses, given market concerns.

Answer

Lal Karsanbhai, President and CEO, Emerson, and Ram Krishnan, EVP and COO, Emerson, explained that power growth was driven by modernization, upgrades, and behind-the-meter data center capacity, with new generating capacity expected later. Test and measurement orders were up 20% across portfolio, semiconductor, and ADG, offsetting softness in transportation. Geographically, North America was up 18%, India 22%, Middle East 6%, and Latin America 9%, while Europe and China were soft. Project wins totaled $432 million, with a third in power and significant participation from LNG, semiconductor, life science, and ADG. Regarding AI, Lal Karsanbhai stated that Emerson's software, built on first-principle models and domain knowledge, is resilient to AI disruption, and AI capabilities like Nigel AI, Ovation, and DeltaV are expected to accelerate software growth and ACV.

Andy Kaplowitz asked for more color on the commercial Water Solutions business, specifically regarding the Q1 flat core guidance, the low single-digit expectation for the year, visibility into improvement, and any differences between Manitowoc and Everpure. He also inquired about the incremental productivity opportunities and timeline for improvements from combining residential flow and residential water, noting they represent 25% of Pentair's factories.

Answer

CFO Nick Brazis and CEO John Stauch explained that Commercial Water Solutions (CWS) is expected to return to growth in 2026, with North American markets remaining strong despite international volatility. They highlighted the high-margin nature of these businesses. Regarding the combination, CEO John Stauch stated it forms a roughly $1 billion water quality management business, aligning channels for growth synergies and expecting substantial margin improvement over several years by merging technologies and channel opportunities.

Andy Kaplowitz inquired about the performance of Pentair's commercial Water Solutions business, seeking clarity on the modeled improvement for 2026 and any distinctions between Manitowoc and Everpure. He also asked about the incremental productivity opportunities and timeline for improvements following the combination of residential flow and residential water businesses, noting their significant factory footprint.

Answer

CFO Nick Brazis stated that both Commercial Water Solutions businesses are expected to return to growth in 2026, with North American membrane filtration remaining strong despite international volatility. CEO John Stauch explained that combining residential flow and water creates a $1 billion "water quality management business," aligning channels for growth synergies in the North American plumbing segment and anticipating substantial margin improvement over several years from operational efficiencies.

Andy Kaplowitz asked about the lowered 2025 core Water Solutions growth guidance, specifically if commercial growth continued to lag, and sought preliminary thoughts on the segment's outlook for 2026. He also inquired about the 26% ROS target for 2026, questioning if the transformation and 80/20 funnel could extend well past 2026 to drive further margin expansion.

Answer

CFO Bob Fishman confirmed the core Water Solutions guidance tweak was due to commercial Water Solutions coming in at low single digits, reflecting a slower food service industry, but noted continued bottom-line optimization. CEO John Stauch added that North America Water Solutions performs well, offsetting some softness in international sales, with encouraging mid-single-digit growth in the ice business and 18 consecutive quarters of growth in North America filtration. Regarding margins, John Stauch expressed strong confidence in the 26% ROS target for 2026 and anticipated demonstrating a significantly improved transformation funnel at the upcoming Investor Day, driven by supply chain studies and expected labor and overhead productivity as volume returns.

Andy Kaplowitz inquired about the lowered 2025 core Water Solutions growth guidance, specifically if commercial growth continued to lag, and sought preliminary thoughts on the segment for 2026. He also asked for an update on the 26% ROS target for 2026 and the potential for the transformation/80/20 funnel to drive margins higher beyond 2026.

Answer

CFO Bob Fishman confirmed the slight downgrade for core Water Solutions, noting commercial water sales were at the lower end of expectations due to the food service industry. CEO John Stauch added that North America performed well, but international sales, particularly in China, showed softness. John Stauch expressed confidence in the 26% ROS target for 2026 and indicated a significant funnel of opportunities for margin expansion beyond that, driven by tariff mitigation studies and expected volume-based productivity.

Andy Kaplowitz inquired about the performance of core markets, specifically the acceleration in PVC and metal conduit volumes in Q1 fiscal 2026 compared to fiscal 2025. He also asked about the expected ramp-up of construction services and mega projects, particularly in data centers, and why the company did not raise its EBITDA and EPS guidance despite strong Q1 results and productivity. Additionally, Kaplowitz sought an update on the competitive environment, including PVC conduit pricing declines versus steel conduit increases, and the impact of foreign competition in both markets.

Answer

President and CEO Bill Waltz and COO and President of Electrical John Pregenzer confirmed strong growth in PVC and steel conduit, noting robust backlogs for data centers and a bullish outlook for fiscal year 2027, supported by a strong Dodge Momentum Index across data centers, warehousing, education, and healthcare, with PVC demand also benefiting from border wall projects. Regarding guidance, John Pregenzer and Bill Waltz stated it was early in the year, and while pleased with Q1, they preferred to wait another quarter before adjusting full-year expectations, given the anticipated pickup in Q3 and Q4. Bill Waltz addressed competition, indicating continued PVC imports (though still less than 10% of the market) and a slight retreat in steel imports, allowing Atkore's steel business to grow with sequential price and margin improvements.

Andy Kaplowitz inquired about the performance of core markets, specifically the acceleration of PVC and metal conduit volumes in Q1 compared to FY25, and the expected ramp-up of construction services, particularly for mega projects and data centers. He also asked why the company did not raise its EBITDA and EPS guidance despite strong Q1 results and productivity gains, and sought an update on the competitive environment, including foreign competition in PVC and steel conduit.

Answer

President and CEO Bill Waltz confirmed strong growth in PVC and steel conduit, attributing it to good overall markets and strong backlogs for data centers, with further growth expected in FY27. COO and President of Electrical John Pregenzer added that the Dodge Momentum Index, driven by data centers, warehousing, education, and healthcare, supported this growth, with PVC also benefiting from border wall projects. Regarding guidance, Bill Waltz and John Pregenzer stated it was early in the fiscal year, and while pleased with Q1 productivity, they preferred to wait another quarter before adjusting full-year expectations, especially given the anticipated pickup in Q3 and Q4. On competition, Bill Waltz noted that PVC imports continue to come in (less than 10% of the market but growing), while steel imports were down low to mid-single digits year-over-year, allowing for continued growth and sequential price and margin improvements in metal conduit.

On behalf of Andy Kaplowitz, an analyst asked about Atkore's volume growth visibility for fiscal 2026, demand trends in the water end market, and the competitive landscape for HDPE products amid BEADs funding.

Answer

President and CEO Bill Waltz expressed optimism for future volume growth, citing exploding demand from data centers and a positive outlook for solar. He noted that while mega-projects can be lumpy, the overall trend is favorable. For the water market, he stated that the municipal sector is picking up. Regarding HDPE, Waltz mentioned that while the competitive dynamic with satellites hasn't changed, overall business volume is increasing. CFO John Deitzer added that a low single-digit volume growth environment seems reasonable for the future.

An analyst on behalf of Andy Kaplowitz at Citigroup asked for more detail on productivity opportunities and the factors contributing to the soft Q1 guidance and the expected ramp-up in the second half of the year.

Answer

CEO Bill Waltz explained that Atkore expects tens of millions in net productivity in FY25, driven by investments in lean teams focused on scrap reduction and equipment uptime, which are not solely volume-dependent. Regarding the Q1 outlook, Waltz cited normal construction seasonality, while CFO John Deitzer added that Q1 faces a difficult year-over-year comparison and that new growth initiatives are expected to gain traction and contribute more significantly as the year progresses.

Andy Kaplowitz asked for more details on Parker's regional performance, specifically if Europe's recent positive turn is sustainable and the outlook for Asia-Pacific in FY26 and beyond. He also questioned Todd Leombruno about the sustainability of Parker's over 40% incremental margins and the key drivers behind this performance.

Answer

Jennifer Parmentier, Chairman and CEO, provided a detailed regional outlook, increasing North America's full-year organic growth forecast to 2.5%, International to 2%, and Asia-Pacific to positive mid-single digit. Todd Leombruno, CFO, stated that they are guiding H2 at 35% incrementals, resulting in 40% for the full year, attributing it to strong operational execution and a continuous focus on cost and price.

Andy Kaplowitz asked for more details on Parker-Hannifin's regional performance, specifically inquiring about the durability of Europe's positive turn and the outlook for the APAC region in fiscal year 2026 and beyond. Kaplowitz also questioned the sustainability of Parker's incremental margin exceeding 40% and the key drivers behind this strong performance, such as pricing power, cost management, or operational execution.

Answer

Chairman and CEO Jennifer Parmentier provided a detailed regional outlook, noting increased North America organic growth driven by industrial, aerospace, and defense strength, and a gradual in-plant industrial recovery. She explained that international growth was boosted by large project shipments in Q2, with AMEA and Asia-Pacific seeing increased full-year organic growth forecasts. CFO Todd Leombruno stated that while the second half incremental margin is guided at 35%, the full-year forecast is 40%, emphasizing the team's hard work, best-in-class performance, and strong operational execution across all businesses.

Andy Kaplowitz asked about the expected segment incrementals for 2026 across Americas, EMEA, and Asia, the outlook for European margins, and the overall price-cost dynamics given recent commodity cost increases. He also questioned Trane's positioning in the data center market, including the impact of the Stellar acquisition and adaptation to liquid cooling.

Answer

Chris Kuehn expects 25% or better organic incrementals across all segments in 2026, with reported incrementals lower due to M&A. He anticipates pricing to contribute around 1.5% for the year, aiming for 20-30 basis points of margin growth from price versus inflation. Dave Regnery emphasized Trane's long-standing strength in data centers, close collaboration with hyperscalers and chip manufacturers on future designs, and the continued role of chillers, highlighting innovation around thermal management systems.

Andy Kaplowitz asked about the expected segment incrementals for Americas and Europe in 2026, considering Q4 margin pressure, and the overall price-cost dynamics given recently higher commodity costs. He also questioned Trane's positioning in the data center market, adaptation to liquid cooling, and the future role of chillers.

Answer

Chris Kuehn, Executive Vice President and CFO, stated expectations for 25%+ organic incrementals across all segments in 2026, with reported incrementals lower due to M&A. He noted pricing around 1.5% for the year, aiming to stay ahead of inflation. Dave Regnery, Chair and CEO, reaffirmed Trane's strong data center position, emphasizing that future reference designs still include chillers and highlighting innovation around thermal management systems, including collaboration with hyperscalers and chip manufacturers.

Andy Kaplowitz inquired about the execution risks associated with Quanta Services' new Total Solutions platform, particularly for large power generation jobs, and how the company secures favorable terms and conditions to protect its interests.

Answer

President and CEO Duke Austin emphasized Quanta's extensive experience in generation (8 GW) and Zachry's expertise (100 CCGTs). He highlighted a collaborative partnership approach with clients to de-risk both sides from cost escalations, reiterating Quanta's public stance against taking undue risk on these projects by focusing on total cost solutions.

Andy Kaplowitz asked about execution risks for the new Total Solutions power generation platform, particularly for larger jobs, and how Quanta plans to secure favorable terms and conditions to protect itself.

Answer

President and CEO Duke Austin emphasized de-risking both Quanta and the client on cost escalations, stating Quanta is not taking undue risk on these projects. He highlighted collaborative planning for total cost solutions and the strength of their partnership with Zachry.

Andy Kaplowitz from Citigroup inquired about the drivers behind the accelerating organic growth in Safety Services, specifically asking if it was boosted by data center tailwinds or more broad-based, and sought an update on APi Group's M&A progress, including the expansion of its elevator platform.

Answer

President and CEO Russ Becker explained that while data centers contribute (moving from 7-8% to 9-10% of revenue), growth is broad-based across semiconductors, advanced manufacturing, aviation, healthcare, and critical infrastructure, benefiting from APi's ability to handle complex projects. Regarding M&A, Mr. Becker stated they are 'right on track' for their $250M target, highlighting the 'forever home' value proposition for sellers, continued focus on North America (fire, security, elevators), and growing international activity based on country readiness.

Andy Kaplowitz asked about the acceleration of organic growth in Safety Services, seeking a breakdown of drivers such as data center tailwinds versus broader growth, and inquired about APi Group's M&A progress, including the number of bolt-on acquisitions and expansion into new platforms like elevators.

Answer

Russ Becker, President and CEO, explained that robust activity in data centers (pushing 9-10% of revenue), semiconductors, advanced manufacturing, aviation, healthcare, and critical infrastructure are driving growth. He noted the size and complexity of projects limit competition. Regarding M&A, Mr. Becker stated they are on track for $250 million in bolt-ons, with a strong pipeline focused primarily on North American fire and security, and ongoing work in elevator/escalator and international markets. David Jackola, EVP and CFO, added that the underlying organic growth algorithm is sustainable.

Andy Kaplowitz asked for more color on the margin inflection seen in FTD during the quarter, specifically the contribution from MOGAS versus core FTD, and whether the segment's long-term operating margin target of 16%-18% by FY2027 might be conservative given current performance. He also inquired about Flowserve's potential market share within the $10 billion nuclear flow control opportunity over the next decade and if nuclear bookings could continue to average high single digits of total bookings.

Answer

Scott Rowe, President and CEO, detailed the successful integration of MOGAS, noting its full adoption of the Flowserve business system, operational excellence, 80/20 principles, and commercial excellence. He confirmed MOGAS margins were accretive to FTD and that modules that previously caused concern have shipped. Amy Schwetz, CFO, added that FTD's 410 basis point sequential improvement was broad-based, driven by operational excellence, 80/20, and MOGAS, and that new long-term targets would be considered in 2026. Regarding nuclear, Mr. Rowe emphasized rising bookings and a higher trajectory for nuclear growth. He highlighted Flowserve's substantial market share (content in 75% of reactors), high barriers to entry, and strong position in North America, Europe, and Korea. He projected Flowserve to be a market leader in nuclear pumps and valves, potentially increasing market share, with the $10 billion opportunity excluding China.

Andy Kaplowitz asked for more color on the margin inflection seen in the FTD segment, specifically differentiating between MOGAS's contribution and core FTD improvements. He also questioned if the FTD segment's operating margin, already exceeding the 2027 target range, could be conservative. Additionally, he inquired about Flowserve's potential market share in the $10 billion nuclear flow control opportunity over the next decade and the sustainability of rising nuclear bookings.

Answer

Scott Rowe, Flowserve's President and CEO, detailed MOGAS's successful integration, embedding of the Flowserve business system, and its accretive margins to FTD. Amy Schwetz, Flowserve's CFO, added that FTD's 410 basis point sequential improvement was broad-based, driven by operational excellence, 80/20, and MOGAS, confirming FTD is exceeding long-term targets and will reset them in 2026. Mr. Rowe then elaborated on the nuclear opportunity, citing Flowserve's substantial share, high barriers to entry, and presence in 75% of global reactors. He outlined the $10 billion prize, excluding China, from new reactors, SMRs, aftermarket growth, and life extensions, expressing confidence in Flowserve's advantaged position and market leadership.

Andy Kaplowitz asked if GE Vernova would consider ramping gas power capacity beyond the 20 GW annual run rate before reaching the 80-100 GW backlog threshold, given the expectation of 70 GW in slot reservations and backlog by year-end.

Answer

CEO Scott Strazik stated that GE Vernova does not currently plan to ramp gas power capacity beyond the 20 GW annual run rate before reaching the 80-100 GW backlog threshold. He clarified that 80-100 GW is an evaluation point, not an automatic trigger for expansion, as current orders are for later fulfillment at attractive economics without significant market share loss. Scott Strazik expects CapEx for gas build-out to peak in 2026, with potential for modest capacity lifts from productivity gains due to new machinery installations.

Andy Kaplowitz asked if GE Vernova would consider ramping gas power capacity beyond 20 gigawatts annually before reaching 80-100 gigawatts in backlog and slot reservations, given the current strong demand.

Answer

CEO Scott Strazik stated that GE Vernova is not currently planning to ramp capacity beyond the 20 GW annual run rate before reaching 80-100 GW in backlog/slot reservations. He clarified that 80-100 GW is an evaluation point, not a trigger, as orders are being booked further out with attractive economics. He noted that GE Vernova is not the only long-lead item and customers also need to secure EPC, gas pipelines, and permits. He expects CapEx for gas and grid to peak in 2026, with potential modest capacity lifts from productivity gains.

Andy Kaplowitz of Citigroup requested more color on the accelerating growth in Defense and Space, particularly the balance between U.S. and international demand. He also asked for an update on direct material productivity initiatives and the stickiness of recent price increases.

Answer

Chairman & CEO Vimal Kapur attributed the Defense and Space growth to both supply chain healing and strong order demand from domestic and international markets, which he expects to continue. On productivity, he stated that pricing has been sticky and successfully executed without destroying demand. He highlighted that value engineering, enhanced by AI, is becoming a meaningful lever that provides optionality in balancing price and productivity to drive margins.

Andy Kaplowitz from Citigroup asked for more color on the accelerating Defense & Space business and for an update on how direct material productivity and AI initiatives are helping to offset cost inflation, as well as the stickiness of recent price increases.

Answer

Chairman & CEO Vimal Kapur stated that Defense & Space growth is driven by both supply chain healing and strong international and domestic demand. He confirmed that pricing has been sticky and is balanced with significant productivity gains from value engineering, which is being accelerated by AI. SVP & CFO Mike Stepniak added that the overall focus is on consistent long-term growth, allowing business units flexibility on the price-volume mix.

Representing Andy Kaplowitz of Citigroup, an analyst asked about the company's path to achieving its long-term 14-16% EBITDA margin target given the 2025 guidance is around 11%, and requested an update on the Hazel Park facility ramp-up.

Answer

Executive Jagadeesh Reddy acknowledged that achieving the 2023 Investor Day targets might take longer due to current market conditions but reaffirmed they are achievable, citing future volume leverage from a Commercial Vehicle market recovery in 2026. Executive Todd Butz added that 2025 is a story of two halves, with margins expected to improve from 8-10% in H1 to 11-13% in H2, creating a clear path toward the long-term goal. Regarding Hazel Park, Reddy stated that while the top-line has been impacted by market demand, the company remains on track with new product launches.

An analyst on behalf of Andy Kaplowitz asked about the fiscal 2025 organic NSR growth outlook, questioning if both segments would grow in the 5-8% range and seeking an update on the Middle East. He also asked why guided margin expansion of 30 bps is below recent historical averages.

Answer

Management stated that the Americas segment is expected to lead organic growth, with International ramping up in the second half. President Lara Poloni confirmed the Middle East business grew in Q4 and for the full year, with no slowdown. CEO Troy Rudd explained that the 30 bps margin expansion reflects record organic investments in talent, technology, and new platforms like the Water & Environment Advisory business. These investments, while expensed now, are expected to drive margins well beyond the 17% long-term target.