Chad Dillard

Chad Dillard asked about the impact of the Accelera restructuring on its cost structure and break-even margins, requesting more details on the specific actions taken. He also inquired about the seasonality of gross tariff impacts from the first half versus the second half of the year.

Answer

Jennifer Rumsey, Chair and CEO, explained that the Q4 restructuring focused on the electrolyzer business due to significantly reduced demand for green hydrogen, leading to a decision to stop future commercial activity while honoring existing commitments. These actions are expected to meaningfully lower losses for 2026. Mark Smith, CFO, added that the costs involved people actions, inventory write-downs, and contract exits, permanently reducing electrolyzer participation. Regarding tariffs, Jennifer noted that costs and recoveries grew in the second half of 2025 as commercial agreements were negotiated, with an aim for more stability in 2026 and continued recovery of actual costs. Mark added that the degree of variation in tariff impacts has moderated between quarters.

Chad Dillard inquired about the impact of Accelera's restructuring on its cost structure and break-even margins, detailing the specific actions taken, and revisited the seasonality of gross tariff impacts.

Answer

Chair and CEO Jennifer Rumsey explained that Q4 actions focused on the electrolyzer business due to significantly reduced demand for green hydrogen, leading to a halt in future commercial activity and meaningfully lowered losses, though existing commitments take time to play through. CFO Mark Smith added that costs included people actions, inventory write-downs, and contract exits, permanently reducing electrolyzer participation. Jennifer and Mark also discussed that tariff costs and recoveries grew in H2 2025, aiming for stability in 2026, with the goal of dollar-level recovery.

Chad Dillard inquired whether Cummins needs to expand capacity for standby power beyond what has already been announced, given record orders, and the role of standby power as more prime power moves behind the meter. He also asked to quantify the gross tariff impact in 2025, the split between AIPA and Section 232, and if an AIPA rollback would be a pass-through.

Answer

CEO Jennifer Rumsey confirmed that Cummins is evaluating further capacity investments for standby power due to strong and continuing demand, while also considering prime power opportunities, emphasizing that the fundamental need for data storage will continue to drive growth. CFO Mark Smith stated that Cummins has not provided guidance on gross tariff amounts, only the net negative impact, which has been in the tens of millions quarterly. He declined to speculate on the specifics of AIPA or Section 232 rollbacks due to insufficient detail, reiterating that tariffs are a margin diluter.

Chad Dillard asked if Cummins needs to expand capacity beyond its already announced plans for standby power, given the record level of orders in the past quarter, and the role of standby power as more prime power moves behind the meter. Dillard also requested quantification of the gross tariff impact in 2025, its split between AIPA and Section 232, and whether an AIPA rollback would be considered a pass-through.

Answer

Jennifer Rumsey, Chair and Chief Executive Officer, confirmed that Cummins is evaluating further capacity investments for standby power due to strong and continuing demand, while also assessing prime power opportunities. Rumsey reiterated that the fundamental need for data storage will continue to drive demand. Mark Smith, Chief Financial Officer, stated that Cummins has not provided guidance on gross tariff amounts, only that the net impact has been negative, in the tens of millions of dollars each quarter. Smith declined to speculate on the specifics of AIPA rollback or its financial implications due to ongoing uncertainty.

Chad Dillard from AllianceBernstein asked if the goal of tariff price-cost neutrality by Q4 applies evenly across segments and what the overall price-cost dynamic was in Q2. He also inquired about the growth trajectory and profitability path for the Accelera segment.

Answer

CFO Mark Smith stated that while all segments are impacted by tariffs, the Engine and Components businesses are absorbing more of the cost. He noted that excluding tariffs, overall price-cost was a positive 1.2% in Q2. CEO Jennifer Rumsey acknowledged that Accelera's growth has slowed but said the company is focused on reducing losses and is well-positioned for when the market develops, benefiting from engine sales in the interim.

Chad Dillard from AllianceBernstein asked if the Q4 tariff price-cost neutrality would be consistent across segments and inquired about the growth trajectory for the Accelera business.

Answer

CFO Mark Smith indicated the tariff impact is a challenge across all segments, with Engine and Components absorbing more of the cost. Chair and CEO Jennifer Rumsey acknowledged that Accelera's growth trajectory has slowed but stated Cummins is well-positioned to serve the market as it develops, while continuing to sell more engines in its base business.

Chad Dillard asked for a breakdown of Jacobs' double-digit project pipeline growth by core end markets and inquired about the mix of fixed versus reimbursable contracts, as well as the current deployment of the global delivery model. Dillard also followed up on the AI topic, asking how Jacobs communicates the value creation from AI deployment to customers, seeking specific examples of explicit conversations or project benefits.

Answer

CEO Bob Pragada provided a pipeline breakdown: Water and Environmental up 25%+ double digits, Life Sciences and Advanced Manufacturing up 50%+ double digits, and Critical Infrastructure in high single to low double digits, all representing a global 12-18 month pipeline. Regarding AI, Pragada explained that Jacobs articulates value by focusing on using data for greater insights, solving complex issues, and delivering faster, more predictable outcomes, rather than replacing personnel. He noted clients co-create platforms and highlighted AI advisory services, especially with PA Consulting, to help clients understand how AI can enable their business and improve client service.

Chad Dillard asked for a breakdown of the double-digit project pipeline growth by core end markets, information on the mix of fixed versus reimbursable contracts, and the extent of global delivery model deployment. Dillard also inquired about how Jacobs communicates the value creation from AI to customers, including explicit conversations about sharing that value and specific examples.

Answer

Chair and CEO Bob Pragada provided pipeline growth rates for a global 12-18 month pipeline: Water & Environmental (25%+), Life Sciences & Advanced Manufacturing (50%+), and Critical Infrastructure (high single/low double digits). He explained that Jacobs articulates AI's value as using data for greater insights, solving complex issues, and delivering faster, more predictable outcomes, often with clients co-creating platforms. He also highlighted AI advisory services, which have doubled with PA Consulting, helping clients understand how AI can enable their business and improve client service.

An analyst on behalf of Chad Dillard asked about the company's total exposure to the U.S. federal government and the potential risk to contract payments from budget uncertainties.

Answer

Chair and CEO Bob Pragada clarified that Jacobs has limited direct exposure, with less than 10% of its business tied to federal agencies. He specified that approximately 80% of that portion is related to defense infrastructure work, which has continued without disruption from political narratives.

Chad Dillard asked about the expected trend of price-cost dynamics throughout 2026 and the total tariff impact in 2025 versus 2026, differentiating between IEEPA and 232 tariffs. He also inquired about the transmission portion of Hubbell's total addressable market and the overall TAM opportunity for the company.

Answer

Joe Capozzoli, CFO, expects price-cost-productivity to be neutral or better throughout 2026, with inflation settling in and actions ramping. He noted that tariff-related costs were approximately $150 million in mid-2025, managed down slightly by year-end, with no significant recent changes. Gerben Bakker, Chairman, President, and CEO, explained that Hubbell's portfolio for distribution and transmission/substation is similar, providing a large percentage of material where quality and service are paramount. He emphasized the strength and long-term visibility of these markets, confirming Hubbell's strong position in large-scale projects.

Chad Dillard asked about the expected trend of Hubbell's price-cost equation throughout 2026 and the total tariff impact in 2025 versus 2026, including a breakdown between IEEPA and 232 tariffs. He also inquired about the transmission portion of Hubbell's addressable market, given the larger transmission projects in the pipeline, and the overall TAM opportunity.

Answer

Joe Capozzoli, CFO, stated that price and productivity actions are expected to ramp throughout 2026, confidently managing the price-cost equation to neutral or better without significant lumpiness. He noted that tariffs were around $150 million in mid-2025, managed down slightly by year-end, with no recent significant changes. Gerben Bakker, Chairman, President, and CEO, highlighted transmission and substation as an area of strength, with Hubbell's portfolio providing a large percentage of materials at low cost, emphasizing quality and service. He confirmed strong markets with long-term visibility, where Hubbell is well-positioned to participate in large-scale projects.

Asked about the extent of margin pressure in the Telecoms business since its peak and the strategy for rightsizing versus scaling for growth. Also sought confirmation on the Q4 price realization figure and the breadth of positive pricing across the portfolio.

Answer

The company stated that Telecoms margins were at the high end of the portfolio at their peak and are still attractive. The business was rightsized throughout 2024, and they now plan to grow selectively from this lower cost base. They corrected the Q4 price realization figure to be slightly *more* than 1% and confirmed that pricing was favorable across the portfolio with the sole exception of the telecom market.

Chad Dillard of AllianceBernstein asked about the extent of margin pressure in the Telecoms business since its peak and the company's strategy for rightsizing it. He also sought confirmation on the Q4 price realization figure and its breadth across the portfolio.

Answer

CFO Bill Sperry stated that Telecoms margins, while still attractive, have moved from the high end of the portfolio and that the business was rightsized throughout 2024. CEO Gerben Bakker added that the business was deliberately scaled down to match volume, enabling profitable growth from the new, lower cost base. Sperry then re-confirmed Q4 price was over 1 point and favorable across the portfolio, with the exception of the telecom market.

Chad Dillard inquired about the telecom business, asking about the extent of margin pressure since its peak and the strategy for rightsizing the operation. He also sought clarification on Q4 price realization and its breadth across the portfolio.

Answer

CFO William Sperry stated that telecom margins, while down from their peak, remain attractive and that the business was rightsized in 2024. CEO Gerben Bakker added that the business was deliberately scaled down to protect profitability. Sperry clarified that Q4 price was 'a little bit more than 1 point overall' and was favorable across the portfolio, with the notable exception of the telecom market.

Chad Dillard requested a quantification of incremental tariffs in 2026, split by segment, and asked about the strategy if IEEPA were overturned regarding maintaining margins or revisiting pricing. He also sought to bridge the vocational business's incremental margins, splitting between price realization and volume, and questioned why the 2028 target isn't being raised given the 17% margin in 2026.

Answer

President and CEO John Pfeifer stated that the full-year tariff impact is about $200 million, roughly $160 million higher than last year, with about three-quarters in the Access segment. He assumes present tariff rates will sustain, or an equivalent will replace them if overturned. EVP and CFO Matt Field noted that volume is a larger driver of vocational incremental margins in 2026 than in 2025 due to increased capacity, with price-cost remaining favorable. He expressed satisfaction with the 17% margin, which is within the 2028 target range, indicating strong progress.

Chad Dillard requested quantification of the incremental tariffs expected in 2026, broken out by segment, and asked about Oshkosh's strategy regarding pricing discussions with customers if the IEEPA (International Emergency Economic Powers Act) tariffs were overturned. Dillard also sought a bridge for the vocational business's incremental margins, splitting the contribution from price realization versus volume, and questioned why the 2028 target for vocational margins isn't being raised given current performance.

Answer

CFO Matt Field quantified the full-year 2026 tariff impact at approximately $200 million, about $160 million higher than 2025, with roughly three-quarters impacting the Access segment. Field stated that Oshkosh's guidance assumes current tariff rates sustain, and if overturned, an equivalent measure is expected. For vocational margins, Field indicated that volume is a larger driver in 2026 than 2025 due to increased capacity, with price-cost remaining favorable, and expressed satisfaction with the 17% margin, which is within the 2028 target range of 16-18%.

Chad Dillard of Bernstein asked for expectations on second-half orders, specifically the mix between national and independent accounts, and for details on the current backlog composition. He also questioned if typical seasonality is the right way to model Access segment revenue and margins for Q3 and Q4.

Answer

CEO John Pfeifer declined to provide specific backlog mix details but suggested the mix is likely weighted toward national accounts due to their role in large projects. CFO Matthew Field confirmed that the Access segment is expected to follow normal, pre-COVID seasonality, with a relatively strong Q3 followed by a seasonal dip in Q4.

Chad Dillard questioned the future role of backup diesel generators versus Battery Energy Storage Systems (BESS) in prime power applications and how customers view this evolution. He also asked if Caterpillar expects to maintain its 2025 power generation revenue momentum (30% growth) in 2026, or if the 20% CAGR target is a more realistic anchor.

Answer

CEO Joe Creed clarified that the power generation revenue guide reflects high confidence in current capacity, with potential upside if supply can be brought online faster. For prime power, he noted that most applications still utilize gen sets for backup (often fast-start gas gen sets) rather than 100% battery backup, indicating a continued role for generators.

Chad Dillard inquired about the evolving role of backup diesel generators versus Battery Energy Storage Systems (BESS) in prime power applications, asking how customers perceive this shift over the next few years. He also questioned whether Caterpillar's Power Generation revenue momentum could sustain growth above the 20% CAGR target in 2026, given the 30% growth in 2025, or if it is primarily constrained by capacity.

Answer

CEO Joe Creed stated that Power Generation growth is primarily supply-constrained, with current revenue guidance reflecting high confidence in existing capacity, but potential upside if supply can be brought online faster. He noted that most prime power applications still involve backup power, often using fast-start gas gensets rather than 100% battery backup, and that Caterpillar's diverse portfolio allows for flexible solutions based on customer needs and fuel availability.

Chad Dillard of Bernstein questioned the decision to build dealer inventory in the second half of 2025 and the source of visibility supporting this move.

Answer

CFO Andrew Bonfield clarified that this is a planning assumption based on strong dealer order rates, not a directive. CEO Joe Creed added that the key takeaway is a different seasonal pattern, with stronger-than-usual second-half sales expected due to resilient sales to users, which prevents the typical inventory drawdown.

Chad Dillard inquired about PACCAR Parts' gross margin in Q4 and its expected scaling in 2026 as the business reaccelerates. He also asked for an update on PACCAR's inventory levels versus the market and the expected evolution of truck pricing through 2026.

Answer

President Kevin Baney stated that PACCAR Parts' Q4 gross margin was 29.5%, a good result in a soft market focused on required maintenance. He expects a rebalancing of the mix and higher proprietary parts take as the market improves. CEO Preston Feight reported that industry Class 8 inventory is 3.2 months, while PACCAR's is 2.2 months, indicating an optimal position. He expects build registrations to align and sees dealers placing stock orders.

Chad Dillard inquired about PACCAR Parts' gross margin for Q4 and its expected scaling in 2026 as the business reaccelerates. He also asked for an update on PACCAR's inventory levels compared to the market and the anticipated evolution of truck pricing through 2026.

Answer

President Kevin Baney reported Q4 parts gross margin at 29.5%, noting strong results in a soft market due to focus on required maintenance. He expects a rebalancing of mix and higher proprietary parts take as the market improves in 2026. CEO Preston Feight stated that PACCAR's Class 8 inventory is at 2.2 months, compared to the industry average of 3.2 months, indicating an optimal position. He expects build registrations to align this year, with dealers placing stock orders.

Chad Dillard asked about the industry's supply-demand balance for trucks, the extent of excess capacity, and the time needed to clear it, and if this is factored into the 2026 industry outlook. He also asked for early thoughts on the parts business growth profile for 2026.

Answer

CEO R. Preston Feight acknowledged sufficient industry capacity at current build rates but noted uncertainty in market adjustment timing and the impact of the 35 mg NOx standard. He expects a gradual recovery in the truckload sector, accelerating as the year progresses. Executive Vice President Kevin Baney reiterated that the elevated truck park creates growth opportunities for the parts business, with continued investments and tailored programs. CFO Brice Poplawski added that growing in a negative retail market is a testament to the parts team and provides significant opportunity for next year.

Chad Dillard asked about the industry's supply-demand balance for trucks, the extent of excess capacity, how long it might take to clear, and if this is factored into the 2026 industry outlook. He also sought early thoughts on the parts business growth profile for 2026, considering customers are keeping trucks longer.

Answer

Preston Feight, CEO, noted sufficient capacity at current build rates but found it difficult to handicap the timing of market adjustment. He expects a gradual recovery in the truckload sector, accelerating as the year progresses, leading to a 'pretty good-looking 2026.' Kevin Baney, EVP, highlighted the elevated truck park as a growth opportunity for parts, citing continued investments, tailored programs, and AI leverage. Brice Poplawski, CFO, added that growing in a negative retail market is a positive sign, indicating significant opportunity for the parts business next year.

Chad Dillard from Bernstein asked how the possibility of a 2026 pre-buy is influencing PACCAR's down-cycle strategy regarding labor and fixed costs, and whether recent price increases are sticking with customers.

Answer

CEO & Director R. Preston Feight emphasized PACCAR's continuous focus on lean production and cost control. He noted that as the market's likelihood of improving increases, it will be beneficial for both employees and the company, suggesting a balanced approach. He also linked pricing dynamics to improving carrier profitability and the eventual need to meet replacement demand.

Chad Dillard asked how the possibility of a pre-buy ahead of 2027 regulations is changing PACCAR's down-cycle playbook, specifically regarding labor retention and fixed cost absorption, and also inquired about pricing trends in the second half of the year.

Answer

CEO & Director R. Preston Feight emphasized PACCAR's continuous focus on lean production and cost control. He stated that given the likelihood of market improvement, the company aims to retain its employees to meet potential upside demand. Regarding pricing, he noted that as the truckload market rebalances and profitability improves for carriers, it will be positive for market dynamics and demand.

Chad Dillard focused on the Field Systems business and its OEM strategy, asking about CAM expansion post-Caterpillar JV, the OEM versus distribution split, growth differential, and necessary changes in product development and sales to win. He also asked a modeling question regarding the implied Q4 guidance for Field Systems, noting a step down in growth and seeking an exit rate perspective for 2026.

Answer

President and CEO Rob Painter clarified that working with OEMs was not new post-JV, but Trimble was now dedicating more resources, favoring open interfaces for machine control. He emphasized winning through solution quality, portfolio breadth, and ecosystem linkage, with a focus on the aftermarket via "Trimble Ready" options. Mr. Painter highlighted product development successes like machine guidance for tilt buckets and Roadworks 3D for pavers, expanding market reach, and strong sales execution by partners. CFO Phil Sawarynski explained the implied Q4 growth step-down in Field Systems was largely due to a strong Q4 2024 with large government orders that are not expected to recur in Q4 2025.

Requested a breakdown of AECO trends by customer size, asked about the AI revenue model and buy-vs-build strategy, and inquired about the lowest-hanging fruit for AI development and adoption.

Answer

The CEO explained that TC1 gets the most dollar traction with mid-to-large customers (centered on ERP/project management), while SMB shows higher percentage growth. The AI revenue model is primarily through tiered pricing, with some standalone products. For development, they focus on using AI as a tool to solve customer efficiency problems rather than selling AI itself. The lowest-hanging fruit is applying AI to enhance existing workflows and drive productivity.

Chad Dillard asked about the medium- and long-term evolution of the power industry to serve large load customers like data centers, specifically the mix of GenCo, behind-the-meter, and traditional grid connections. He also inquired about the contract structure for the recently announced JV.

Answer

President and CEO Duke Austin stated that the industry evolution would involve 'all of the above' approaches. For contract structures, he indicated that Quanta is comfortable with lump sum for well-scoped projects but will de-risk itself for others. He reiterated Quanta's public stance against taking certain risks on large projects, emphasizing the importance of early pre-planning.

Chad Dillard posed a big-picture question on how the power industry will evolve to serve large load customers like data centers (Genco model, behind the meter, traditional grid), and asked about the contract structure and bidding process for the recently announced JV.

Answer

President and CEO Duke Austin indicated that the power industry's evolution will involve 'all of the above' models. For contracts, he stated Quanta is comfortable with lump sum for well-scoped projects but will de-risk on unknowns, emphasizing pre-planning and collaboration.

Chad Dillard from Bernstein inquired about cross-selling opportunities with Dynamic Systems, including customer overlap with Cupertino and the potential for programmatic contracts. He also asked how renewables customers are navigating the safe harbor executive order.

Answer

President & CEO Duke Austin highlighted significant customer and service synergies between Dynamic and Cupertino, noting they are often on the same projects for the same clients. He sees an opportunity to provide a more complete, expedited solution for clients. Regarding renewables, Austin stated Quanta actively helps clients with safe harbor and project certainty, leveraging its supply chain investments (transformers, poles) and craft labor to navigate the noisy regulatory environment, leading to continued backlog growth.

Chad Dillard asked about the implications of using incremental pool funds to discount used equipment while raising new equipment prices, and what this means for farmers and the trade cycle.

Answer

Cory Reed, President of the Ag & Turf Division, explained that pool funds provide dealers flexibility to manage trade-ins and offset higher interest costs for customers, which is critical for moving used inventory. He noted the goal is to position dealers for year-end tax-based buying. CFO Joshua Jepsen added that renewable fuels represent a positive long-term demand fundamental.

Chad Dillard requested more specific details on the company's 'strong order book,' including its duration, end-market mix, and year-over-year growth, and asked for a quantification of the easier comps from last year's hurricanes.

Answer

CFO Larry Wilt described the order book as comprising purchase orders for multifamily, commercial, and infrastructure projects with strong year-over-year bidding activity. He confirmed three hurricanes impacted operations in late 2024, creating easier comps, but did not have the exact number of lost workdays immediately available.

Chad Dillard asked about the magnitude of the weather impact on Q4 volumes, the expected volume and pricing cadence through 2025, and the outlook for cash conversion and CapEx for the year.

Answer

CEO Vassilios Zarkalis explained that severe weather in Q4 and Q1 2025 created significant pent-up demand and backlogs, leading to an expectation that 2025 results will be weighted towards the second half. CFO Lawrence Wilt stated that the company will manage its growth investments prudently to ensure cash conversion remains at a solid level consistent with past performance.