Jamie Cook

Jamie Cook asked about MasTec's visibility beyond the reported 18-month backlog, seeking insights into which segments offer above-average long-term visibility. She also questioned the timeframe for the pipeline business to achieve or exceed its prior peak revenue of $3.5 billion.

Answer

Jose Mas, Chief Executive Officer, stated that the pipeline business is expected to reach historical highs as early as 2027. He highlighted significant visibility, including $4 billion in renewables LNTPs not yet in backlog, and only a portion of the largest renewables project being in current backlog. Mr. Mas also noted potential for significant backlog expansion in communications due to BEAD and sizable increases in power delivery backlog from transmission demand, expressing overall optimism for 2026 and beyond.

Jamie Cook of Truist Securities asked about MasTec's visibility beyond its reported 18-month backlog, inquiring which segments offer above-average long-term clarity. She also questioned the timeframe for the pipeline business to achieve or surpass its prior peak revenue of $3.5 billion.

Answer

CEO Jose Mas highlighted exceptional visibility, citing $4 billion in renewables notice-to-proceed (LNTPs) not yet in backlog and only partial inclusion of the largest renewables project. He noted significant backlog expansion potential in communications from BEAD and in power delivery from transmission jobs. Jose Mas projected the pipeline business could reach historical revenue highs as early as 2027.

Jamie Cook of Truist Securities questioned whether the current investments in labor and capacity would create a short-term margin headwind into 2026. She also asked for MasTec's current thoughts on M&A and if acquisitions were necessary to enhance competitive positioning or ramp up labor.

Answer

CEO José R. Mas stated that the investment costs are being absorbed in 2025 and should not be a lingering headwind for 2026, where he expects high utilization. On M&A, he said acquisitions are not needed to achieve their growth targets, including exceeding $15 billion in revenue and $8 in EPS in 2026. However, he acknowledged the company is more ready for opportunistic, non-transformational tuck-in acquisitions than it has been in recent years.

Jamie Cook asked for an update on the 2026 revenue outlook for the Pipeline segment, the competitive landscape, and for more details on the margin performance in the Power Delivery segment, which appeared to have a slow start.

Answer

CEO Jose Mas reaffirmed his confidence that 2026 Pipeline segment revenue could meet or exceed 2024 levels, emphasizing that this is the company's highest-margin business. He clarified that Power Delivery margins were impacted by weather on a specific project and would have otherwise beaten expectations, expressing confidence in the segment's margin progression for the rest of the year.

Jamie Cook of Credit Suisse asked for confirmation and rationale behind the forecast that MasTec's pipeline business revenues in 2026 could exceed 2024 levels. She also inquired about the company's M&A strategy given its strong free cash flow and reduced net leverage.

Answer

CEO Jose Mas confirmed the optimistic 2026 pipeline revenue outlook, attributing it to a significant positive shift in customer mindset and a growing number of projects. Regarding capital allocation, Mas stated that while they are always looking, the primary focus is on strong organic growth opportunities, with the potential for smaller, tuck-in acquisitions to accelerate strategic goals.

Jamie Cook of Truist Securities inquired about the focus of future M&A—adjacent markets versus scale—and questioned the Oil and Gas segment's profitability outlook post-MVP project.

Answer

CEO Jose Mas stated that while organic growth is the top priority, the company's restored financial flexibility allows for M&A focused on building scale in existing businesses, with some activity possible in the next year. He clarified that the MVP project was margin-dilutive, and its conclusion does not pose a risk to the Oil and Gas segment's profitability, which he expects to remain strong with a baseline target of mid-teen margins.

Jamie Cook questioned the implied 25 basis points HVAC margin expansion in 2026, which is less than the prior year, despite healthy top-line and organic growth. She also asked for an update on the M&A pipeline, considering SPX Technologies' recent activity and current leverage capacity.

Answer

CFO Mark Carano explained that the lower HVAC margin expansion in 2026 is due to approximately 50 basis points of temporary startup costs related to bringing new plants online. He expects operating leverage to outstrip these initial costs as facilities ramp up. President and CEO Gene Lowe expressed satisfaction with the recent Q1 acquisitions, noting that even with pro forma leverage at about one time net debt to EBITDA, SPX has significant capacity for M&A. He stated that the pipeline remains very full, particularly in engineered air movement and electric heat, as well as detection and measurement platforms, indicating a good probability of further growth investments this year.

Jamie Cook asked for commentary on the HVAC segment's margins, noting that the implied 25 basis point expansion at the midpoint for 2026 is less than what was observed in the past quarter and year, despite healthy top-line and organic growth. She also inquired about the M&A pipeline, given SPX Technologies' recent activity and financial strength.

Answer

Mark Carano, CFO, explained that the lower HVAC margin expansion in 2026 is due to approximately 50 basis points of temporary startup costs related to bringing new plants online. He expects operating leverage to outstrip these initial costs as facilities ramp up. Gene Lowe, President and CEO, expressed satisfaction with the recent Q1 acquisitions and highlighted the company's strong M&A capacity with a pro forma leverage ratio of about one time net debt to EBITDA. He noted a very full pipeline of opportunities in engineered air movement, electric heat, and detection & measurement platforms, indicating a good probability of further growth investments this year.

Jamie Cook asked about Deere's strategy for managing large ag production in 2026 to optimize for 2027, and why Production and Precision Ag (PPA) margins were not projected towards the upper end of the range despite improving conditions and better North American mix.

Answer

Director of Investor Relations Josh Beal explained that combine production for the year is largely defined by the Early Order Program, remaining steady. Tractor production will pick up in the back half based on order books extending into Q4, but overall plans are firming up. He noted that while North America's return is good mix, softening in the profitable South American market creates puts and takes that keep the PPA margin forecast consistent. CFO Josh Jepsen added that PPA is still operating below trough levels, and while positive momentum is seen, the overall magnitude of North America being down 15-20% impacts margins, though strong incrementals are expected as demand returns.

Jamie Cook questioned the strategy for managing large ag production in 2026 to set up for 2027, and why Production and Precision Ag (PPA) margins aren't projected towards the upper end of the range despite improving conditions and better North American mix.

Answer

Josh Beal, Director of Investor Relations, explained that combine production for the year is largely defined by the early order program, with tractor production picking up in the back half based on current orders. He noted that while North American demand is improving, softening in the profitable South American market creates a balanced effect on margins, keeping the forecast consistent. Josh Jepsen, Chief Financial Officer, added that PPA is still operating below trough levels, and while positive momentum is seen, it's not a sharp inflection, thus strong incrementals are expected as demand returns from low levels.

Jamie Cook inquired about the implied decremental margins for the Production & Precision Ag (PPA) segment, which are approaching 60% on a 7% sales decline, asking for clarification on the portion attributable to tariffs and the impact of geographic mix, particularly the profitability differences between North American large ag and other regions like Brazil.

Answer

Josh Beal, Director of Investor Relations, confirmed the implied decremental margin for PPA in 2026 is around 60%. He explained that tariffs account for approximately 1.5 percentage points of margin impact for the full year, reducing the decremental to the low to mid-50s. The remaining elevation is attributed to negative geographic mix, as North American large ag, despite improved global profitability, remains Deere's most profitable market and is experiencing a significant decline.

Jamie Cook questioned the implied decremental margins of approximately 60% for the Production and Precision Ag (PPA) segment on a 7% sales decline, seeking clarification on the tariff allocation and the impact of geographic mix.

Answer

Josh Beal, Director of Investor Relations, confirmed the 60% implied decremental margin for PPA in 2026. He explained that tariffs account for about a 1.5 percentage point margin impact, reducing decrementals to the low to mid-50s. The remaining elevation is attributed to negative geographic mix, as North America large ag, despite improved global profitability, remains Deere's most profitable market.

Jamie Cook asked about the implications of recent tax legislation on Deere's cash flow and any early customer feedback regarding bonus depreciation.

Answer

CFO Joshua Jepsen identified R&D expensing as a long-term positive for Deere and noted bonus depreciation as a potential benefit for the construction segment. Cory Reed, President of the Ag & Turf Division, added that while the large crop is the near-term demand driver, these tax policies will likely influence year-end buying decisions.

Jamie Cook asked about Deere's pricing strategy for the 2026 early order program in light of tariffs and whether the company can still achieve earnings growth on flat sales, or if tariffs will fully offset potential gains.

Answer

CFO Josh Jepsen explained that the early order programs will have a similar structure but with built-in price flexibility to adapt to the dynamic tariff environment. He expressed confidence that Deere is well-positioned for 2026, as proactive inventory reduction efforts allow the company to build in line with retail demand, which is a key factor for manufacturing efficiency and earnings potential.

Jamie Cook asked about Deere's margin performance relative to its 20% mid-cycle target and management's confidence in a 2026 recovery, questioning if further restructuring would be necessary otherwise.

Answer

CFO Josh Jepsen expressed confidence in the company's structural improvements, stating that the current trough-level guided operating margin of ~14.5% is higher than the peak margin achieved in the 2013 cycle. He emphasized this progress demonstrates their ability to reach the 20% mid-cycle goal while continuing to invest in strategic priorities without committing to future restructuring.

Jamie Cook questioned the outlook for decremental margins and asked how pricing could remain positive in North America with large ag demand projected to be down 30%. She also inquired about where large ag sales will be relative to mid-cycle levels by the end of 2025.

Answer

Executive Josh Beal affirmed that Deere expects to maintain positive price-cost in North America. He attributed this to proactive management of new equipment inventory, with levels for key products like 220+ horsepower tractors being extremely low (10% inventory-to-sales ratio), which supports pricing discipline. CFO Josh Jepsen added that Brazil, a price-negative region in 2024, is expected to turn price-positive in 2025, contributing to the overall positive global pricing outlook.

Jamie Cook asked about the path towards undertaking more CCGT projects following the NiSource announcement, whether joint ventures would remain the preferred approach, and if the 10.3% midpoint for electric infrastructure margins should be considered a new target, questioning why there wouldn't be opportunities for margin expansion with 765kV projects and larger initiatives.

Answer

Duke Austin, President and CEO, stated that while there are opportunities for margin improvement, the company took a prudent approach to its guidance midpoint. He noted that organic employee growth (around 6,000 employees) tempers margins. He emphasized a multi-decade compounding growth strategy focused on quality of earnings and risk profile, rather than aggressive short-term margin enhancement, especially in the regulated utility business. He also highlighted the shift to longer-term, collaborative, programmatic negotiations over traditional bidding, which improves return on invested capital (ROIC).

Jamie Cook inquired about the path to securing more CCGT (Combined Cycle Gas Turbine) projects, whether additional customers are approaching Quanta, and if joint ventures will continue to be the preferred approach. She also asked why electric infrastructure margins, at a 10.3% midpoint, aren't showing expansion despite the upcoming 765kV projects and larger project opportunities.

Answer

Duke Austin, President and CEO, confirmed that Quanta is actively looking at the market for gas generation, expects to book more projects (both JV and solo), and will maintain a risk-adjusted approach, avoiding fixed-price generation. He anticipates multiple bookings before year-end, with builds ramping from 2027-2029. Regarding margins, he reiterated a prudent guidance approach, noting that organic employee growth tempers margins and the focus is on compounding returns over multi-decades rather than short-term margin percentage enhancements, while also emphasizing risk-adjusted quality of earnings.

Jamie Cook questioned Quanta Services' decision to joint venture with Zachry for power plants, given it's an unusual approach for the company, asking if it's a preliminary step towards a potential acquisition for full EPC power plant capabilities.

Answer

President and CEO Duke Austin explained that the JV is a response to customer requests to expand services with select, long-standing partners. He praised Zachry as a great, values-aligned company and highlighted the JV as a smart way to mitigate risk for both the client and Quanta. He stressed that Quanta will be extremely selective in pursuing combined cycle projects, focusing on total solutions rather than being pressured into numerous one-off contracts.

Jamie Cook asked if the Total Solutions power generation platform and Zachry JV represent an initial step into power generation, potentially leading to future acquisitions for full EPC capabilities.

Answer

President and CEO Duke Austin explained that the initiative responds to customer requests to expand services with select, long-standing partners. He emphasized that the JV with Zachry helps mitigate risk, and Quanta will be highly selective in pursuing combined cycle projects, focusing on total solutions rather than being pressured into numerous projects.

Jamie Cook of Truist Securities inquired about Quanta's internal strategies to manage a potential short-term slowdown in renewables, and asked about the potential for revenue synergies and margin improvement from the Dynamic Systems acquisition.

Answer

President & CEO Duke Austin explained that Quanta's workforce is fungible and can be moved across segments like transmission and substations, mitigating risk from any single market. He noted the company intentionally operates below 100% capacity to maintain flexibility. Regarding Dynamic Systems, he highlighted significant revenue opportunities from offering integrated solutions with existing businesses like Cupertino, though he reiterated that synergies are not included in initial deal models.

Jamie Cook questioned why margins in the electric infrastructure business wouldn't trend higher with a mix shift towards larger projects and asked for an update on the performance and revenue synergies of the Cupertino acquisition.

Answer

President and CEO Duke Austin explained that margins are being held in the guided range by significant training costs associated with scaling the workforce. He noted that the Cupertino acquisition is performing 'ahead of schedule' and is a top-tier deal, with significant synergy opportunities in the large and growing technology infrastructure market.

Jamie Cook asked for expectations on backlog growth for 2025, specifically focusing on potential revenue synergies and larger contract awards from the Cupertino acquisition. She also requested clarity on the expected cadence of free cash flow throughout the year.

Answer

President & CEO Earl Austin expects record backlog levels driven by larger projects, noting that synergies from acquisitions like Cupertino materialize as tech and utility markets converge, expanding Quanta's addressable market. He explicitly confirmed the potential for larger awards related to Cupertino. CFO Jayshree Desai stated that the free cash flow profile for 2025 will follow a typical pattern, being weighted towards the second half of the year.

Jamie Cook of Truist inquired about the strong renewable segment margins and the likelihood of achieving sustainable double-digit margins in 2025. She also asked for an update on the performance of the recently acquired Cupertino Electric.

Answer

President and CEO Earl "Duke" Austin stated that double-digit margins in renewables are achievable over time but reminded of seasonality. He noted Cupertino is already providing synergies that will become more visible in 2025 and beyond. CFO Jayshree Desai reiterated the 9-10% margin target range for renewables from their Investor Day and confirmed Cupertino is performing at the high end of its $1.0-$1.1 billion 2024 revenue guidance.

Jamie Cook inquired about the improved opportunities in the power market, seeking clarity on the potential percentage of Fluor's business that power could represent in the next three years on a backlog basis, and whether terms and conditions with utilities have improved, particularly given the hybrid contract structure of cost-plus converting to fixed price.

Answer

CEO Jim Breuer explained that the U.S. power market has significantly evolved due to high demand, leading to utilities recognizing the need for reliable EPC services and offering more balanced 'smart lump sum' contracts. He anticipates executing multiple large gas-fired power projects simultaneously by 2027, managing relationships as programs across different sites. CFO John Regan noted a comparatively lesser focus on nuclear backlog growth in the immediate two years.

Jamie Cook from Truist Securities asked about the improved opportunity in the power market, its potential percentage of Fluor's business in the next three years, and whether terms and conditions with utilities have improved, considering the historical challenges.

Answer

CEO Jim Breuer highlighted the significant evolution of the U.S. power market due to demand, leading to more favorable terms with utilities, including reimbursable starts converting to 'smart lump sum' with balanced risk. He anticipates executing multiple large gas-fired power projects simultaneously by 2027, making it a key growth engine. CFO John Regan noted less focus on nuclear backlog growth in the near term.

Jamie Cook of Truist Securities followed up on the NuScale monetization, asking if the initial 15 million share conversion is the primary path forward and whether a strategic sale is now off the table. She also requested more color on the cash flow implications of the LNG Canada COVID claim settlement and an explanation for the $1.7 billion positive backlog adjustment.

Answer

CFO John Regan explained that the 15 million NuScale share conversion helps utilize tax credits, demonstrates the conversion path, and is expected to recoup Fluor's initial investment. He noted it is 'increasingly difficult' for a strategic buyer to acquire the entire stake at the current price. CEO Jim Breuer clarified that the LNG Canada settlement does not significantly change management's expectations and that the $1.7 billion backlog adjustment was for scope changes on existing reimbursable work, primarily customer-furnished materials (CFM), leading to a temporary $13 million deferral of profit.

Jamie Cook questioned the potential conservatism in the full-year EBITDA guidance given that Q1 results annualized would meet the high end, and also asked about the confidence in the cash flow forecast despite a Q1 outflow, especially with an increased share buyback plan.

Answer

CFO John Regan clarified that Q1 adjusted EPS was favorably impacted by about $0.08 to $0.09 due to stock price-sensitive compensation, which distorts a simple annualization and places them more squarely at the midpoint of the guidance. CEO James Breuer added that the company's confidence in its cash flow outlook, supported by some working capital normalization in April, underpins the increased share repurchase authorization.

Jamie Cook asked for more color on the LNG Canada project, referencing a partner's announced cost increases, and questioned if the lower end of the 2025 Energy Solutions margin guidance reflects issues there. She also asked for guidance on the expected cadence of earnings in 2025, specifically first half versus second half.

Answer

COO James Breuer stated that while additional resources were needed for insulation work, the LNG Canada project continues to track to management's expectations and is on schedule for the first cargo by mid-2025. CFO Joe Brennan explained the Energy Solutions margin guidance reflects a 'pivot' as large projects wind down and the business reloads with front-end work, causing some initial drag. Incoming CFO John Regan added that earnings would be back-end loaded, with a 'really high exit velocity' from an EBITDA perspective in the second half of the year as the Urban Solutions segment ramps up.

Jamie Cook inquired about the significant implied revenue ramp in Q4 guidance, the lower implied margins for Energy Solutions, the drivers behind the improved free cash flow guidance, and the potential timing for share repurchases.

Answer

Chief Financial Officer Joe Brennan explained that the margin reduction is due to revenue recognition timing on a large project slipping into 2025, combined with some project cancellations and delays. He noted that improved cash flow stems from disciplined management of legacy project funding, reducing it from a forecasted $260 million to $80 million for the year. Brennan stated that a comprehensive shareholder return plan, including buybacks funded by operating cash flow, will be detailed soon and will begin as soon as practical.

Jamie Cook of Truist Securities sought clarification on the organic top-line assumptions for 2026, specifically if the mid to high single-digit growth factors in market outgrowth from successful customer acquisition. She also inquired about the stage of the portfolio optimization process, asking if it was nearing completion or if more divestments were anticipated.

Answer

CFO Dennis Fehr stated that the mid-single to high single-digit range for 2026 is an initial view based on current data, acknowledging encouraging year-end demand and PMI upticks but emphasizing short-cycle business visibility. CEO Matt Moschner confirmed that the portfolio optimization analysis is largely complete, with the announced actions representing the culmination of a thoughtful and rigorous process, though ongoing efforts to streamline SKUs and reduce complexity will continue.

Jamie Cook sought clarification on Cognex's organic top-line assumptions for 2026, specifically if the mid-to-high single-digit growth factors in market outgrowth due to successful salesforce transformation and customer acquisition. She also inquired about the current stage of the portfolio optimization process, asking if it's largely complete or if more non-core divestments are anticipated.

Answer

Dennis Fehr, CFO, stated that the mid-to-high single-digit growth is a current view, not a full-year guide, influenced by recent demand and PMI upticks. Matt Moschner, CEO, confirmed that the portfolio optimization analysis is largely complete, though ongoing efforts to streamline SKUs and reduce complexity will continue.

Jamie Cook asked if Cognex might pivot its end-market focus away from cyclical areas like Automotive and Consumer Electronics to reduce volatility, and also inquired about the company's M&A appetite for 2025.

Answer

CEO Robert Willett explained that the emerging customer initiative is designed to reduce volatility by broadening the customer base into more mid-tier accounts across various industries, rather than pivoting away from core markets. CFO Dennis Fehr stated that M&A remains a high priority after organic investments. He highlighted the successful Moritex acquisition and confirmed Cognex is actively looking for quality deals, with more details to be shared at the upcoming Investor Day.

Jamie Cook inquired about the emerging customer initiative, specifically how the new target of 3,000 customers compares to the previous $50 million incremental revenue goal and if the unified sales force presents a cost-saving opportunity. She also asked for details on Q4 gross margin headwinds from mix and pricing.

Answer

CEO Robert Willett positioned the 3,000 new customers as a significant first step in a long-term strategy to broaden Cognex's customer base, noting the new sales profile is less expensive and offers higher productivity potential. CFO Dennis Fehr explained the sequential gross margin decline was driven by the dilutive effect of an extra month of Moritex financials, a product mix shift towards Logistics, and competitive pricing pressures, particularly in China.

Jamie Cook asked about the Specialty Vehicles (REV Group) business, specifically if there was conservatism in the 2026 forecast given the two-year backlog and where potential upside might come from. She also inquired if the improved market backdrop for Aerials made the asset more interesting to potential buyers during the strategic review.

Answer

Simon Meester (President and CEO) expressed comfort with the high single-digit growth guide for Specialty Vehicles, emphasizing execution and maintaining operational momentum. Regarding Aerials, he noted strong inbound interest and the asset's well-known nature, stating the company is deliberately evaluating interest to maximize shareholder value. Jennifer Kong (SVP and CFO) added that the incremental margin on higher volume for SV is expected to be around 30%.

Jamie Cook asked about the conservatism in the specialty vehicle (REV Group) forecast for 2026, given the two-year backlog, and potential sources of upside. She also inquired about the Aerials business sale, asking if the improved market backdrop (bottomed market, cyclical tailwinds) makes the asset more attractive to potential buyers.

Answer

Simon Meester, President and Chief Executive Officer, expressed comfort with the specialty vehicle guide, emphasizing execution to bring down the backlog. Jennifer Kong, Senior Vice President and Chief Financial Officer, added that the incremental margin on higher volume for SV is expected to be around 30%. Regarding Aerials, Simon Meester stated that it's a well-known asset with documented performance through cycles, and they were pleased with the inbound interest, evaluating options deliberately. Jennifer Kong noted that the immediate priority post-merger is to strengthen the balance sheet, with proceeds from an Aerials sale offering optionality for shareholder returns, debt paydown, or reinvestment.

Jamie Cook asked for a breakdown of the full-year guidance, questioning how the Q1 earnings beat is reconciled with a new $0.40 tariff headwind while the EPS forecast is maintained. She also inquired if Terex's U.S. manufacturing footprint creates a competitive advantage.

Answer

CFO Jennifer Kong-Picarello explained that the Q1 beat, largely from the ES segment, partially offsets the tariff impact, with the remainder covered by operational efficiencies and a lower share count. CEO Simon Meester stated that while the U.S.-centric footprint is an advantage, particularly in ES and Aerials, it's difficult to pinpoint a specific product line for market share gains, though it helps against Asian competitors.

Jamie Cook asked for confirmation on the accretion outlook for the ESG acquisition in 2025 compared to initial expectations. She also questioned how Terex is managing pricing and flexibility in its Aerials business given the potential for future tariffs.

Answer

Executive Julie Beck reaffirmed that the company's confidence in ESG's accretion has only increased following its strong Q4 performance. Executive Simon Meester stated that regarding potential tariffs, the company's first priority would be to mitigate the impact internally through its operational flexibility. He added that Terex remains focused on maintaining pricing discipline to be price-cost neutral against other inflationary pressures.

Jamie Cook asked if customers are approaching AECOM to renegotiate projects due to AI, or if discussions are more focused on upcoming opportunities, and if this could be a long-term positive. Cook also inquired about the weaker cash flow in the quarter, asking for reasons and management's confidence in the full-year cash flow outlook.

Answer

CEO Troy Rudd clarified that client discussions around AI are not renegotiations but rather clients seeking ways to deploy AECOM for more valuable work, recognizing the increased customer value. Clients are also discussing moving to fixed-fee contracts to better reflect this value. CFOO Gaurav Kapoor stated that Q1 cash flow was consistent with expectations, representing about 10% of the full-year outlook, which aligns with historical patterns. He explained that the first half typically includes significant disbursements for compensation (401k, bonuses) and large vendor software payments, with a consistent ramp expected in the second half.

Jamie Cook asked if AECOM's communications with customers regarding AI have led to renegotiations of existing projects or if the focus is on upcoming work, and if AI could be an incremental positive for long-term numbers. She also questioned the weaker cash flow in the quarter and sought reassurance on the full-year cash flow outlook.

Answer

CEO Troy Rudd clarified that discussions with clients are not about renegotiation but about deploying AI to provide more value, leading clients to explore contracting methods like fixed fees that recognize this value. CFOO Gaurav Kapoor stated that the quarter's cash flow was consistent with expectations, representing about 10% of the full-year outlook, with a normal historical ramp in the second half due to significant first-half disbursements for compensation and vendor payments.

Jamie Cook asked for the full-year margin expectation for the International segment and questioned if the company would consider adjusting its long-term targets to be more aggressive on margins and less so on top-line growth, given recent performance trends.

Answer

CFO Gaurav Kapoor stated that International margins are expected to continue improving through the year. CEO Troy Rudd addressed the long-term targets by emphasizing that 'not all growth is of equal value,' explaining that the company prioritizes winning valuable work that supports margins over chasing top-line growth at any cost, which could be easily achieved by bidding at lower rates.

Jamie Cook inquired about the scale of investments being made in the current year to drive organic growth, particularly in the Water and Environment advisory business, and asked for an outlook on the International segment's design backlog growth.

Answer

President Lara Poloni reported strong momentum in the Water & Environment Advisory business, noting it was ahead of milestones for backlog, pipeline, and talent acquisition. She highlighted a 100% re-compete win rate on the U.K.'s AMP8 water program and strong growth in the Middle East, which contributed to an overall increase in the International backlog and a 1.2 book-to-burn ratio for the segment in the quarter.

Jamie Cook asked about the expected operating margins for North America and South America in 2026 relative to 2025, considering the top-line outlook and discounting concerns. She also inquired about the strong operating cash flow in Q4 2025 and opportunities for free cash flow conversion improvement.

Answer

Damon Audia, SVP and CFO, projected North America to remain in a loss position for 2026, with Q1 and Q2 worse year-over-year due to underproduction and large ag market decline, but improving in the second half. South America margins are expected to be modestly better for the full year, starting weaker and strengthening later. Mr. Audia attributed record free cash flow in 2025 to incremental volume in North America and Europe, and efficient receivable management, maintaining a 75%-100% conversion target for 2026 with hopes for modest working capital improvement.

Jamie Cook asked about the expected operating margins or losses for North America in 2026 compared to 2025, given the top-line outlook, and the anticipated performance of South America's margins amidst discounting concerns. She also inquired if there were any unusual factors contributing to the strong operating cash flow in Q4 and for the full year 2025, and if there are opportunities for free cash flow conversion to improve further.

Answer

Damon Audia, SVP and CFO, projected North American margins to be negative for 2026, likely in the high single-digit to low double-digit loss range. He expects Q1 and Q2 to be worse year-over-year due to underproduction and the large ag market decline, with Q3 potentially improving but still negative for the full year. South American margins are forecast to be modestly better for the full year 2026, starting weaker in H1 due to underproduction and mix, then strengthening in H2. Mr. Audia attributed the record $740 million free cash flow in 2025 to incremental volume in North America, significant volume growth in Europe, and the sale of receivables to AGCO Finance. He confirmed comfort with a 75%-100% free cash flow conversion ratio for 2026 and anticipates modest working capital improvement from refined inventory and better forecasting.

Jamie Cook of Truist Securities inquired about the controllable factors that could drive earnings growth in 2026 assuming a flat market, and asked when the North American segment's losses from underproduction might cease.

Answer

SVP & CFO Damon Audia identified two primary drivers for 2026 earnings growth: lapping the significant margin headwind from underproduction (over 1%) and realizing the full run-rate savings from ongoing restructuring actions. The question on North American losses was addressed later in the call.

Jamie Cook of Truist Securities inquired about the drivers behind AGCO's Q1 earnings beat and the company's specific strategies for mitigating tariff impacts, including any potential risks to the order book.

Answer

CFO Damon Audia attributed the Q1 outperformance to stronger pricing and mix in Europe and accelerated cost control benefits, which accounted for about $0.25 of the beat, with another $0.20 from below-the-line items. Regarding tariffs, he stated that the current outlook embeds a net negative impact of approximately $0.30 per share, reflecting planned price increases and a potential slowdown in North American volume. Mitigation strategies include using bonded warehouses and actively working with suppliers.

Jamie Cook from Truist Securities asked for the full-year margin outlook and cadence for South America, inquired about potential new restructuring actions, and requested the sales and profit expectations for the PTx segment embedded in the 2025 guidance.

Answer

CFO Damon Audia projected South America's full-year 2025 margins to be similar to 2024's mid-to-high single-digit range, starting with a negative Q1. He confirmed existing restructuring plans and a new $75 million savings initiative, adding that discretionary levers are available if needed. For the combined PTx segment, he expects 2025 revenue to be relatively flat compared to 2024's level of approximately $850 million.

Jamie Cook questioned the feasibility of AGCO's Q4 margin guidance, asking how the company expects to achieve a 10% margin, up from 5.5% in Q3, amidst lower sales and pricing headwinds. She also inquired about the disconnect between bloated dealer inventories and an unchanged retail sales forecast, seeking context on planned production cuts for the Americas in early 2025.

Answer

Damon Audia, Senior Vice President & CFO, explained that the Q4 margin ramp is supported by higher production in Europe, the shift of some sales from Q3 to Q4 due to a dealer issue, seasonal strength, and accelerating cost savings. He noted that while inventory units are down, the 'months of supply' metric is up due to a weaker 2025 outlook, confirming significant production cuts will continue, with AGCO likely to underproduce retail demand in early 2025.

Jamie Cook asked for clarification on the implied lack of incremental margins in the 2026 engine business guidance, considering tariffs, pricing, and potential Section 232 benefits. She also questioned the implied distribution margins below 14% for 2026, given investments in that business.

Answer

Mark Smith, CFO, explained that distribution margins are impacted by tariff dilution and modest investments in international systems upgrades, but the underlying business remains strong. For the engine business, he noted that 2026 would focus on tariff recovery and new product launch preparations rather than significant net pricing, with some dilution from tariffs. Jennifer Rumsey, Chair and CEO, added that uncertainty around the 232 tariff engine offset program and U.S. content definition impacts the margin outlook for engines and components.

Jamie Cook questioned the implied lack of incremental margins for the engine business in 2026, considering tariffs, pricing, and potential Section 232 benefits, and sought clarification on distribution segment investments impacting its implied margins.

Answer

CFO Mark Smith clarified that tariffs represent a net 50 basis point full-year drag on EBITDA percentage for 2026, affecting engines and distribution. He noted modest investments in distribution for system upgrades and that significant net pricing (excluding tariffs) is not anticipated for 2026. Chair and CEO Jennifer Rumsey added that clarity on Section 232 engine offset program details is still pending, contributing to margin uncertainty.

Jamie Cook asked about the outlook for engine margins in Q4, including the ability to cover tariff costs, and the sustainability of strong power systems margins into 2026, questioning if margin targets should be raised given production ramp-up capabilities.

Answer

CFO Mark Smith addressed engine margins, citing complexities like product changeover and engineering budgets, and anticipated a similar Q4 performance despite lower volumes. CEO Jennifer Rumsey highlighted the power systems' strong performance from strategic improvements and capacity expansion, driven by data center demand, committing to profitable growth but not expecting the same incremental margin trajectory in future years.

Jamie Cook inquired about the expected engine margins for the fourth quarter and the company's strategy for covering tariff costs. Additionally, Cook asked for insights into the Power Systems segment's 2026 outlook, including production ramp-up capabilities, price-cost dynamics, and whether current strong performance necessitates raising margin targets.

Answer

Mark Smith, Chief Financial Officer, addressed engine margins, noting the complexity of product changeover, new platform preparations, and managing costs amidst lower volumes and parts slowdown. Jennifer Rumsey, Chair and Chief Executive Officer, highlighted the Power Systems segment's strong performance, driven by strategic improvements and increased power generation demand, particularly from data centers. Rumsey confirmed continued investment for profitable growth but cautioned against expecting the same incremental margin trajectory in future years.

Jamie Cook from Truist Securities questioned the drivers behind the strong Distribution segment margins and the improved Component segment margins despite a sales decline, asking for quantification of any product coverage benefits. She also inquired about the outlook for the North American truck cycle in 2026 and 2027.

Answer

CFO Mark Smith explained that Distribution margins benefited from strong power generation and parts demand, plus positive pricing. For Components, he noted a prior-year product coverage issue made for a favorable comparison, worth about 50 basis points, but warned margins will face pressure from volume declines. CEO Jennifer Rumsey described the truck cycle as highly uncertain due to economic conditions, tariffs, and regulations, suggesting a potential 2027 emissions rule could drive a pre-buy, but the timing remains unclear.

Jamie Cook from Truist Securities asked about the drivers behind strong margins in the Distribution and Components segments and sought an outlook on the North American truck cycle for 2026-2027.

Answer

CFO Mark Smith explained that Distribution margins benefited from strong power generation and parts demand, while Components margins were helped by the absence of a prior-year product coverage issue. Chair and CEO Jennifer Rumsey described the truck cycle as highly uncertain due to tariffs and regulations, noting that while a 2027 pre-buy is possible if regulations hold, the immediate outlook is weak with no clear catalyst for recovery.

Jamie Cook inquired about the quantifiable impact of trade tariffs on Cummins' business, which segments would be most affected, and the visibility of backlogs.

Answer

Chief Financial Officer Mark Smith explained that Cummins would not quantify the tariff impact due to high uncertainty, noting the primary concern is the broader economic effect. He stated costs would be passed on with an expected lag. Chair and CEO Jennifer Rumsey added that the Power Systems business has a resilient multi-year order board, while the on-highway Engine and Components businesses are more sensitive to economic sentiment, as reflected in recent weak truck orders.

Jamie Cook asked about the drivers of the strong Power Systems margin guidance despite a muted revenue forecast and whether previous targets now seem conservative. She also inquired if Cummins has altered customer contract terms to better absorb potential cost increases from future tariffs.

Answer

CFO Mark Smith attributed the Power Systems margin strength to continued supply chain efficiencies, productivity gains, and some pricing. On tariffs, Smith stated that while the company's strategy is to produce locally, it would look to pass on any incurred tariff costs to the market. He emphasized the focus is on controlling internal costs and scaling growth effectively.

Jamie Cook of Truist Securities asked if Cummins is adjusting its large engine capacity expansion plans and how much new capacity might benefit 2025. She also requested quantification of the retroactive pricing benefit in the Engine segment and the hurricane impact in the Components segment.

Answer

CEO Jennifer Rumsey confirmed that a 30% capacity increase on the 95-liter engine achieved this year will carry into 2025, with a project to double capacity coming online late next year. CFO Mark Smith quantified the retroactive pricing's impact as roughly 50 basis points for the total company in Q3. He stated the hurricane impact was in the 'low tens of millions of dollars' and emphasized a continued focus on cost discipline.

Jamie Cook asked CEO Bob Pragada about the balance between top-line revenue growth and margin expansion in the context of AI's impact on Jacobs' business model, specifically whether the company prioritizes one over the other. Cook also asked CFO Venk Nathamuni about the drivers of expected margin improvement in I&AF during the second half of the year, inquiring if it's primarily due to mix, self-help initiatives, or other factors, to achieve the full-year adjusted EBITDA margin forecast.

Answer

CEO Bob Pragada stated that in a resource-constrained market, AI enables Jacobs to achieve both top-line growth and margin improvement simultaneously by operating efficiently and driving efficiencies in solutions, rather than having to choose between them. CFO Venk Nathamuni outlined several drivers for I&AF margin expansion, including continued operating leverage (OpEx growing slower than revenue), gross margin drivers from Investor Day such as global delivery step-up, and favorable commercial models with life sciences and advanced manufacturing clients. CEO Bob Pragada added that advanced facilities bookings in the second half will contribute to the linear progression of margins.

Jamie Cook asked about the balance between revenue growth and margin expansion in the context of AI's impact on Jacobs' business model, specifically whether the company prioritizes quicker top-line growth or greater operating profit/margin. Cook also asked CFO Venk Nathamuni about the drivers of expected INAF margin improvement in the second half of the year, inquiring if it's primarily due to mix or self-help initiatives.

Answer

Chair and CEO Bob Pragada stated that in a resource-constrained market, AI enables Jacobs to achieve both top-line growth and drive efficiencies, so it's not a choice or pivot between the two. CFO Venk Nathamuni cited several factors for INAF margin expansion: continued operating leverage (OpEx growing slower than revenue), gross margin drivers from Investor Day (global delivery step-up, commercial models with life sciences and advanced manufacturing clients). Mr. Pragada added that advanced facilities bookings in the second half will contribute to the linear progression in margins.

Jamie Cook of Truist Securities inquired about any unusual factors contributing to the margin performance in Jacobs' Infrastructure and Advanced Facilities (INAF) segment and the expected margin cadence for FY26. She also asked about Jacobs' strategy for leveraging AI, potential margin opportunities beyond current announcements, and how it compares to more bullish peer targets.

Answer

CFO Venk Nathamuni noted solid margin performance across the business, with a sequential and seasonal slowdown expected in Q1 FY26 due to fringe benefit costs, followed by linear progression. Chair and CEO Bob Pragada highlighted Jacobs' five-year journey with AI, emphasizing its role as an accelerant and differentiator for client solutions, citing examples like Aqua DNA, Palantir partnership, Nvidia collaboration, and StreetLight Data, all contributing to margin expansion by moving up the value chain.

Jamie Cook asked about the margin performance and cadence for the Infrastructure and Advanced Facilities segment in fiscal 2026, and strategically questioned how Jacobs is leveraging AI, particularly regarding potential margin opportunities compared to peers.

Answer

CFO Venk Nathamuni noted solid margin performance in INAF, with Q1 FY2026 expected to have a seasonal slowdown due to fringe benefits, followed by linear progression. Chair and CEO Bob Pragada highlighted Jacobs' five-year journey with AI, emphasizing its role as an accelerant and differentiator for client solutions, citing examples like Intel, Aqua DNA, Nvidia partnership, and StreetLight Data, which contribute to differentiated growth and margin expansion by moving up the value chain.

Jamie Cook asked about the company's appetite for broader M&A beyond the potential increase in its PA Consulting stake. She also questioned the achievability of the high end of the full-year EPS guidance given the first-half results.

Answer

Chair and CEO Bob Pragada stated that the timing of the PA Consulting investment decision is on schedule and that the company's current focus is on organic execution and capital returns, not further M&A. CFO Venk Nathamuni defended the full EPS guidance range, expressing confidence that the combination of revenue growth and margin expansion in H2 supports the outlook.

Jamie Cook asked for an update on AMETEK's M&A pipeline for 2026, specifically if there are sizable deals available. She also inquired about any unusual factors impacting the implied margins for 2026, beyond the known impact of FARO.

Answer

Chairman and CEO David Zapico expressed excitement about a strong M&A pipeline, including a good mix of normal and larger quality deals, noting AMETEK's capacity to deploy over $5 billion while maintaining an investment-grade rating. On margins, Mr. Zapico highlighted strong core operating margins (up 100 basis points in Q4 2025) and core incrementals (45% in Q4). For 2026, the company is prudently guiding for 35% reported incremental margins and 30 basis points of margin expansion, acknowledging initial dilution from lower-margin acquisitions like FARO but emphasizing long-term value creation.

Jamie Cook inquired about AMETEK's M&A pipeline for 2026, specifically asking about the potential for sizable deals. She also questioned the implied margins for 2026 relative to the top-line guide, considering positive price-cost, the impact of FARO, and any other unusual factors affecting segment margins.

Answer

Chairman and CEO David Zapico addressed the margin question first, highlighting strong core operating margins (up 100 basis points in Q4 2025) and core incrementals (45% in Q4). For 2026, he guided to 35% reported incremental margins and 30 basis points of margin expansion, describing it as prudent. Mr. Zapico explained that new acquisitions like FARO, with lower initial margins, cause dilution but AMETEK has a strong capability to improve them, evidenced by a 12%-13% return on capital. Regarding M&A, he stated the pipeline is strong with a good mix of normal and larger deals, and AMETEK has the financial capacity to deploy over $5 billion while maintaining an investment-grade rating, making M&A a key differentiator for performance.

Jamie Cook of Truist Securities questioned the puts and takes of the updated guidance, its level of conservatism, and the assumptions regarding tariff costs. She also asked about the margin outlook for the Electromechanical Group (EMG).

Answer

Chairman and CEO David Zapico confirmed the guide includes a small benefit from the Ferro acquisition and acknowledged "a bit of conservatism" in the Q3 forecast. He stated the previously mentioned $100 million tariff headwind is no longer a concern for the year. For EMG, he affirmed that its strong margin expansion, with core margins up 260 basis points, is expected to continue through the second half of the year.

Jamie Cook asked about the margin trajectory for the EMG segment, given positive order momentum in Paragon. She also questioned if the complex trade environment has put larger M&A on hold and noted the absence of specific Q2 guidance.

Answer

CEO David Zapico explained that specific Q2 guidance was withheld due to uncertainty around the timing of $70 million in U.S.-to-China shipments, though the full-year outlook was reaffirmed. He projected margin upside for Paragon in the second half. Regarding M&A, Zapico asserted the pipeline is robust and they are not backing off, viewing market dislocation as an opportunity.

Jamie Cook of Truist Securities asked about the cadence of orders, whether recent improvements could be a pre-buy ahead of elections, and the expected progression of growth throughout 2025 given the flat Q1 guidance.

Answer

Executive David Zapico described a typical quarterly order cadence with December being the strongest month, and noted this strength continued into January. He stated that customers have not indicated any pre-buy activity. Zapico characterized the flat Q1 guidance as a prudent start to the year, expecting growth to improve as destocking mitigates.

Jamie Cook inquired about the positive organic growth observed across Parker-Hannifin's three technology platforms within Diversified Industrial for the first time since June 2023, asking if this trend was specific to Parker or indicative of a broader market cycle. Cook also asked about the implications of Filtration's positive growth for the recently announced Filtration Group acquisition, questioning if Parker acquired the business at a cyclical bottom.

Answer

Chairman and CEO Jennifer Parmentier confirmed that the positive organic growth was a combination of Parker-specific performance and a return in some short-cycle businesses, noting low single-digit organic growth in distribution. Parmentier also expressed belief that Filtration Group's sales would increase, similar to Parker's Filtration business, highlighting the complementary technologies and market fit.

Jamie Cook inquired about the positive organic growth across Parker's Diversified Industrial technology platforms (Motion Systems, Flow Process Control, and Filtration and Engineered Materials), asking if it's specific to Parker or a broader cycle trend. She also asked about the implications of positive growth in Parker's Filtration business for the upcoming Filtration Group acquisition, suggesting it might have been acquired at a cyclical bottom.

Answer

Jennifer Parmentier, Chairman and CEO, explained that the positive growth is a combination of Parker's specific performance and a return in some short-cycle businesses, noting low single-digit organic growth in distribution. Regarding Filtration Group, she believes its growth will also increase, citing its historical mid-single-digit CAGR and complementary technologies.

Jamie Cook of Truist Securities inquired about the drivers behind the exceptionally strong margins in the North American segment in Q4, which occurred despite a sales decline. She also asked about the potential risk to the 2026 forecast if the anticipated industrial recovery fails to materialize.

Answer

Chairman & CEO Jennifer Parmentier attributed the strong North American margins to a favorable sales mix, particularly within the Engineered Materials and Filtration groups, combined with excellent execution of the Win Strategy. Regarding guidance risk, she expressed confidence in the forecast, highlighting the company's proven ability to expand margins and deliver results even in negative organic growth environments.

Jamie Cook of Truist Securities highlighted the exceptional Q4 margin strength in North America despite declining sales and asked for an explanation. She also questioned the potential risk to the FY26 outlook if the industrial recovery stalls and aerospace cannot compensate.

Answer

Chairman and CEO Jennifer Parmentier attributed the strong North American margins to a favorable sales mix, particularly within the Engineered Materials and Filtration groups, alongside strong Win Strategy execution. Regarding FY26 risk, she expressed confidence in the 1% industrial growth guide and the company's proven ability to expand margins even in negative organic growth environments, stating they can deliver the guided results.

Jamie Cook from Truist Securities requested more detail on the divergent order trends in Latin America (+10%) and EMEA (-8%). She also asked if structural improvements from the Win Strategy could lead to above-average incremental margins during the next market recovery.

Answer

CFO Todd Leombruno described the performance in Latin America as stellar and broad-based. He and CEO Jenny Parmentier attributed the EMEA weakness to a challenging, widespread demand environment. Regarding margins, Mr. Leombruno reiterated that 30% incremental margin remains the best-in-class target, and the company is focused on achieving it through disciplined execution.

Jamie Cook inquired about the drivers behind the revised 70% incremental margin guidance for the year, questioning the impact of the divestiture versus core business performance. She also asked for details on the positive turn in international orders, specifically the size and market drivers of growth in Asia.

Answer

CFO Todd Leombruno attributed the strong incremental margins primarily to exceptional Q1 performance of 95%, strong growth and margin expansion in the Aerospace segment, and effective cost controls in the industrial businesses. CEO Jenny Parmentier added that the Asia Pacific region, representing about 11% of total sales, saw a pickup in transportation and semiconductor markets, with robust growth in India and Southeast Asia.

Jamie Cook questioned the sustainability of high Aerospace margins, asking if they are overly dependent on the aftermarket, which could become a headwind. She also asked if the 27% adjusted EBITDA margin target is conservative, given current performance with depressed industrial markets.

Answer

Executive Jennifer Parmentier stated that while the aftermarket is strong (forecasted at 50% of aerospace for the full year), the company is confident in its ability to continue expanding aerospace margins. Regarding the overall targets, she expressed pride in the team's performance, especially on the industrial side, and affirmed their commitment to the existing targets. Executive Todd Leombruno added that the targets are holistic, encompassing growth and cash flow, not just margins, and that progress is still needed on all fronts.

Jamie Cook inquired about the apparent discrepancy between Oshkosh's 2026 Access segment guidance, implying a 6-7% decline, and the more optimistic CapEx outlook from United Rentals and double-digit retail sales growth in North American Construction. Cook also sought clarification on the Transport segment's 4% margin despite an implied 20% sales increase, asking for insights into margin progression throughout the year.

Answer

CEO John Pfeifer explained that Oshkosh's balanced approach to 2026 Access outlook considers strong mega-projects (data centers, infrastructure) alongside pressure in private non-residential construction, which impacts many independent rental companies. CFO Matt Field stated that the 2026 Transport segment guide reflects new contract pricing (FMTV in H2), steady NGDV production increases, anticipated further NGDV orders, lower defense export volume, and new product development investments, with stronger performance expected in the second half.

Jamie Cook inquired about the implied 6-7% decline in Oshkosh's access guidance for the year, noting a disconnect with United Rentals' CapEx guide and CAT's North American Construction retail sales. She also asked for color on the transport segment's 4% margins despite implied 20% sales growth, and how margins are expected to progress through the year.

Answer

President and CEO John Pfeifer explained that Oshkosh's access outlook takes a balanced approach, acknowledging strong mega-projects but also pressure in private non-residential construction, which impacts independent rental companies more. EVP and CFO Matt Field stated that the 2026 transport guide reflects new contract pricing, steady NGDV production increases, and anticipated further NGDV orders, with the second half expected to be stronger.

Jamie Cook inquired about Oshkosh's competitive position in the Access equipment market, specifically regarding potential market share gains due to its manufacturing footprint and tariffs. She also asked for quantification of discounting in the Access market and its future trajectory.

Answer

CEO John Pfeifer highlighted Oshkosh's 'local-for-local' strategy and strong U.S. manufacturing footprint as advantageous against tariffs, emphasizing focus on customer-driven innovation for long-term share. CFO Matt Field stated that Q3 saw a 3%-4% all-in discount level in Access, which was considered reasonable given the external environment, with tariff-related pricing expected in 2026.

Jamie Cook asked about Oshkosh's competitive position in the Access equipment market, particularly regarding potential market share gains due to its manufacturing footprint and tariffs, and sought quantification of discounting in the access market.

Answer

John Pfeifer, President and CEO, highlighted Oshkosh's 'local-for-local' manufacturing strategy and JLG's innovation as competitive advantages, especially against non-U.S. competitors. Matt Field, EVP and CFO, stated Q3 access discounting was 3-4% 'all-in,' considering it reasonable, and noted tariff-related pricing would be a 2026 factor.

Jamie Cook asked for an allocation of the $1 tariff headwind and the $0.50 in mitigation efforts across the business segments and inquired about customer sentiment in the Access segment.

Answer

CFO Matthew Field stated that while the majority of the direct tariff cost would hit the Access segment, the mitigation offsets would be broad-based across the company, making a precise allocation difficult. CEO John Pfeifer reported that Access customer sentiment remains positive, supported by a healthy $1.8 billion backlog, strong fleet utilization rates, and no notable order cancellations.

Jamie Cook from Truist Securities questioned Oshkosh's pricing strategy for Access equipment, such as using firm pricing versus escalators, in the event of new tariffs. She also asked about any perceived risk to the USPS NGDV contract regarding price, EV mix, or schedule under a potential new administration.

Answer

CEO John Pfeifer responded that the Access business has mitigation plans for various tariff scenarios, aiming to minimize or eliminate the need for price increases by leveraging its global footprint. Regarding the USPS contract, he expressed confidence, stating the program is critical for the Postal Service's productivity, and Oshkosh is prepared to deliver whatever mix is ordered, noting the USPS is 'absolutely delighted' with the vehicles.

Jamie Cook questioned the repeated lowering of the free cash flow guide and the large ramp implied for Q4. She also asked if discussing 2025 decrementals for Access implies a sales decline and whether there is a risk of pricing turning negative.

Answer

EVP and CFO Michael Pack attributed the Q4 cash flow ramp to working capital timing, particularly the conversion of unbilled receivables in the Defense segment. Regarding Access, he clarified they are not yet calling for a down year but acknowledged market softness, stating it's too early in negotiations to speculate on specific margin outcomes but expects them to remain solid.

Jamie Cook inquired if any one-time factors or unannounced pull-forwards contributed to the strong backlog growth, excluding the AIP announcement. She also asked if Caterpillar expects to sustain double-digit backlog growth through 2026 and if the company is outgrowing the market due to competitive positioning, products, or dealer network.

Answer

CEO Joe Creed confirmed no significant one-time or unannounced factors in the quarter's orders, acknowledging the inherent lumpiness in Resource Industries orders. He stated that while backlog growth is positive, increasing product shipments while orders rise is also a key focus. Creed highlighted Caterpillar's market leadership in Power and Energy and outperformance in Construction Industries, attributing success to competitive positioning and product offerings, despite extended lead times.

Jamie Cook asked if the recent strong backlog growth included any one-time factors or pull-forwards, and whether Caterpillar expects to maintain double-digit backlog growth exiting 2026. She also questioned if Caterpillar is currently outgrowing the market due to competitive positioning, product offerings, or dealer network strength.

Answer

CEO Joe Creed confirmed no significant one-time or unannounced factors in the Q4 order strength, though he noted the lumpiness of Resource Industries orders. He emphasized that while backlog growth is important, the focus is on shipping more product as capacity increases. Creed stated that Caterpillar outpaced the industry in Construction Industries and is a market leader in Power and Energy due to its scale and wide offering, maintaining extended but competitive lead times for data center solutions.

Jamie Cook of Truist Securities questioned the impact of ongoing capacity additions on the Energy & Transportation segment's sales and margins in 2025 and beyond.

Answer

CEO Joe Creed expressed satisfaction with the Energy & Transportation (E&T) segment's performance and growing backlog. He clarified that current throughput improvements are from efficiency gains, with major capacity investments expected to yield a step change towards the end of 2026 and into 2027. He added that as capacity comes online, he expects operational efficiency to improve further.

Jamie Cook asked a long-term strategic question about whether Caterpillar's margin volatility could decrease over time, potentially settling into a narrower and structurally higher range due to business diversity, services growth, and strong operational execution.

Answer

Joe Creed, COO and incoming CEO, agreed with the premise, stating that a key goal of the services strategy is to dampen cyclicality. He pointed to secular growth trends in power and the discipline of the O&E model as contributors to stability. CFO Andrew Bonfield added that the current margin target range was based on a 2010-2016 performance period and that the business is now more resilient, making the low end of that range less likely to be revisited.

Jamie Cook of Truist Securities asked for details on the Energy & Transportation shipment delays in Q4 and questioned why the segment's 2024 top-line growth wasn't stronger, seeking clarity on how capacity constraints will affect 2025.

Answer

Executive D. Umpleby explained that the 125% capacity increase for large engines is a multi-year effort that did not significantly impact 2024. Executive Andrew R. Bonfield specified the Q4 delays were mainly in services and international locomotives, which should ship in H1 2025, and reiterated the expectation for E&T sales growth in 2025.

Jamie Cook asked for specifics on the incremental large engine capacity expansion, including the capital investment, long-term revenue opportunity, and implications for Energy & Transportation segment margins.

Answer

Chairman and CEO Jim Umpleby did not quantify the capital investment but confirmed the goal is to increase large engine output capability by over 125% compared to 2023. He identified data center demand as a primary driver for both backup and distributed power generation. He noted an opportunity for margin expansion in the segment due to higher volumes and favorable mix but did not provide a specific target.

Jamie Cook asked about PACCAR's concerns regarding the supply chain's ability to ramp up if demand significantly improves, identifying potential bottlenecks and PACCAR's mitigation strategies. She also attempted to quantify the margin impact in Q4 from the shift to local-for-local manufacturing.

Answer

CEO Preston Feight acknowledged that while PACCAR has strong supplier relationships and has shared forecasts for sequential growth, a too-significant ramp in Q3/Q4 could stress supplier systems, potentially leading to price acceleration. He declined to quantify the Q4 margin impact from the local-for-local shift, stating it was significant but complex to measure and not expected to carry forward.

Jamie Cook asked about PACCAR's concerns regarding the supply chain's ability to ramp up if demand significantly improves, identifying potential bottlenecks and PACCAR's mitigation strategies. She also attempted to quantify the impact of the manufacturing shift for local-for-local production on Q4 gross margins.

Answer

CEO Preston Feight stated that while PACCAR has strong supplier relationships and provides forecasts, a too-significant ramp in Q3/Q4 could stress supplier systems, potentially leading to price acceleration. He declined to quantify the exact impact of the manufacturing shift on Q4 gross margins, noting its complexity, but confirmed it was significant and not expected to recur in future quarters.

Jamie Cook asked about PACCAR's potential for incremental market share gains following the Section 232 announcement and the capacity of its Denton and Chillicothe plants to support such growth. She also questioned if the 12% gross margin in Q4 would be the trough for margins and if PACCAR anticipates earnings growth next year, even with a flat market, given Section 232 benefits.

Answer

Preston Feight, CEO, expressed confidence in PACCAR's ability to gain market share, citing significant past investments in factory capacity, paint facilities, automation, strong supplier relationships, and industry-leading products. He confirmed that with tariffs peaking in October, the gross margin cadence through Q4 will be positive, and continued improvement is anticipated into next year. Mr. Feight stated that a market at the midpoint of 250k units for 2026 bodes well for PACCAR's earnings and margin growth.

Jamie Cook asked about PACCAR's potential for incremental market share gains following the Section 232 announcement, considering factory capacity at Denton and Chillicothe. She also questioned if the 12% gross margin in Q4 would be the trough, and if PACCAR anticipates earnings growth in 2026 even with a flat market.

Answer

CEO R. Preston Feight expressed confidence in PACCAR's ability to gain market share due to investments in factories, products, and operations, ensuring ample capacity. Regarding margins, Feight indicated that with tariffs peaking in October and declining through Q4, the trend would be positive, leading to continued improvement into Q1 2026. He suggested that a market at the midpoint of 250,000 units for next year bodes well for earnings and margin growth.

Jamie Cook requested the specific price versus cost breakdown for the Parts aftermarket business, similar to what was provided for trucks. She also asked if PACCAR could achieve above-average incremental margins during the next cyclical upswing.

Answer

President and CFO Harrie Schippers provided the figures for the Parts segment, stating price was up 3% and costs were up 4% in the quarter. CEO Preston Feight addressed the second question, agreeing with the premise that PACCAR is well-positioned to deliver 'excellent performance' and strong incremental margins in the coming years due to its premium products and operational discipline.

Jamie Cook asked about the reasons for Q2 deliveries and margins exceeding expectations, whether the guided 13% Q3 margin could be a cyclical bottom, and for color on the 2026 outlook.

Answer

CEO & Director R. Preston Feight attributed Q3 delivery guidance to normal European shutdowns and market adjustments. He suggested that the 13% margin could represent a cycle bottom, highlighting PACCAR's structurally stronger performance compared to past cycles with similar delivery volumes. For 2026, he expressed optimism, expecting improvement driven by clarity on regulations and tariffs.

Jamie Cook from Truist Securities asked about the reasons for Q2 deliveries and margins exceeding expectations, whether Q3's guided 13% margin could be a cyclical bottom, and for color on the 2026 outlook.

Answer

CEO & Director R. Preston Feight attributed Q3 delivery guidance to normal European shutdowns and market adjustments. He suggested Q3 could represent a margin bottom, highlighting PACCAR's structurally stronger performance compared to past cycles with similar delivery volumes. He expressed optimism for 2026, expecting clarity on regulations and tariffs to drive improvement.

Jamie Cook asked for more detail on the Q1 margin miss despite in-line deliveries, specifically requesting the price-cost breakdown for trucks and parts. She also questioned the company's comfort with industry inventory levels and its own order book.

Answer

CEO Preston Feight attributed the margin pressure to a 1% increase in costs while pricing was relatively flat, largely due to tariff impacts that were not in effect for the full quarter. He stated that PACCAR's inventory is at 3.1 months versus the industry's 4 months, a level they are comfortable with, especially given their higher mix of vocational trucks.

Jamie Cook requested specifics on the price-versus-cost dynamic for the truck and parts segments in Q4 and its implication for 2025. She also asked if Q1 represents the trough for margins and if incremental margins could return in the second half of the year.

Answer

CEO Preston Feight specified that for the truck segment in Q4, price versus cost was negative, with price at -0.6% and cost at +2.7%, but he expects this to trend favorably through 2025. President and CFO Harrie Schippers added that as the market improves in the second half, margin development should improve accordingly, supporting a return to incremental margins.

Jamie Cook asked if Fortive's Q4 guidance embeds the impact of the Fortive Accelerated initiatives (innovation, commercial acceleration) and if there's upside potential, and also requested a breakdown of the $63.6 million in 'other' adjusted operating profit.

Answer

President and CEO Olumide Soroye clarified that the Fortive Accelerated strategy underpins the financial framework for 2026-2027 (3-4% organic growth, margin expansion, high single-digit+ adjusted EPS growth), providing confidence in future performance, while the current year's guidance reflects existing macro conditions. CFO Mark Okerstrom later explained that the $63.6 million in 'other' operating income was predominantly related to separation-related stock compensation matters, fair market adjustments, and accelerated executive compensation due to leadership transition.

Jamie Cook asked if the 'Fortive Accelerated' initiatives for innovation and commercial growth were embedded in the current guidance, suggesting potential upside for the top line. She also inquired about the breakdown of the $63.6 million in 'other' adjusted operating profit, which was higher than usual, and its implications for Q4.

Answer

Olumide Soroye, Fortive's President and CEO, clarified that the 'Fortive Accelerated' strategy underpins the financial framework for 2026-2027 (3-4% organic growth, margin expansion, high single-digit+ adjusted EPS growth), providing confidence in future performance. The current year's guidance reflects existing macro conditions and other factors. Mark Okerstrom, Fortive's CFO, later explained that the incremental 'other operating income' was predominantly related to separation-related stock compensation matters, fair market adjustments, and accelerated executive compensation associated with leadership transition.

Jamie Cook of Truist Securities requested an update on trends in the semiconductor market as it relates to the PT segment and its 2025 expectations. She also asked about the likelihood of an inbound acquisition offer for PT derailing the planned spin-off.

Answer

SVP and CFO Charles McLaughlin stated it was a fair assumption that the company is moving forward with the spin-off and has evaluated all inbound offers. President and CEO James Lico noted that the high-speed compute segment of the semiconductor market has been good, while weaker aspects are tied to discrete consumer products. He said they are seeing some green shoots but have not factored a dramatic recovery into the 2025 plan.

Jamie Cook of Truist asked about the drivers of the strong margins in the Precision Technologies (PT) segment despite weak organic growth and sought context on the path to the previously stated 2025 EPS target of $4.50.

Answer

SVP and CFO Charles McLaughlin attributed the PT margin strength to prior restructuring actions and the accretive EA Elektro-Automatik acquisition. President and CEO James Lico reiterated that the $4.50 EPS target was aspirational, not a guide, and is challenging given the current revenue base. He emphasized the company is on a path for strong EPS growth in 2025 but did not commit to a specific figure.

Jamie Cook asked about the margin divergence between the Enterprise Visibility and Mobility (EVM) and Asset Intelligence and Tracking (AIT) segments, inquiring if tariffs disproportionately impacted one segment. She also sought insights into Elo's expected growth for 2026, following its Q4 revenue contribution.

Answer

CFO Nathan Winters attributed the margin divergence primarily to mix, with strong AIT growth and higher-margin RFID contributing positively, while EVM's data capture declined. He clarified that tariffs primarily impact the AIT segment, with full mitigation expected by Q2 2026. CEO Bill Burns expressed continued excitement for the Elo acquisition, noting its similar growth profile and value proposition to Zebra. He confirmed Elo is performing as expected, with opportunities in point-of-sale rollouts and self-serve kiosks, and operational synergies progressing as anticipated for 2026.

Jamie Cook asked about the margin divergence between the Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM) segments, specifically if tariffs were impacting one more than the other, and any nuances for 2026. She also inquired about Elo's expected performance in 2026, given its similar growth profile and Q4 revenue contribution.

Answer

CFO Nathan Winters attributed the margin difference to portfolio mix, with strong AIT growth and higher RFID margins, while EVM's data capture was down. CEO Bill Burns added that tariffs are expected to be fully mitigated by Q2 2026, primarily benefiting AIT as EVM has a mobile computing exemption. Regarding Elo, Mr. Burns expressed continued excitement, noting its strategic positioning and similar growth/value proposition. He confirmed Elo is performing as expected, with opportunities into next year including POS rollouts and self-serve kiosk wins, and operational synergies are progressing.

Jamie Cook inquired about the demand picture, asking if there was any change in demand throughout the quarter or into April, and requested more detail on the company's plans to mitigate tariff risks.

Answer

CEO William Burns stated that strong demand from late 2024 carried through Q1 and into April, with no significant change in customer purchasing behavior despite tariff uncertainty. He confirmed a dedicated team is managing mitigation strategies, including the ongoing diversification of their manufacturing footprint and supply chain, which has been a multi-year effort.

Jamie Cook inquired about the extent to which large orders contributed to Q3 results and what is implied for Q4. She also asked about the sustainability of gross margins at the 49% level into 2025, given the strong exit rate.

Answer

CEO William Burns explained that large order activity, which was absent in late 2023, is returning to normal seasonality in H2 2024, though 2025 visibility remains limited. CFO Nathan Winters noted that Q3's high gross margin benefited from lower large-deal volume and expects a sequential decline in Q4 as the mix of large deals increases, making it a wildcard for 2025.

Jamie Cook of Truist Securities asked about the levers CNH can use to grow earnings in 2026 beyond production volume, such as cost savings and quality improvements, and also inquired about the company's pricing strategy by region.

Answer

CEO Gerrit Marx confirmed that full-year pricing will be positive, driven by new product features and the need to offset tariff impacts. He outlined a three-part strategy to counter tariffs: pricing actions, cost-sharing with suppliers, and internal cost discipline, noting that year-to-date quality expenses are significantly down. He added that pricing power is stronger in markets with recovering demand, like parts of Europe, and more muted in North America.

Jamie Cook of Truist Securities asked for details on where Customer-Back Innovation (CBI) is succeeding outside of automotive and inquired about the updated foreign exchange impact assumption in the new guidance.

Answer

President & CEO Chris O'Herlihy highlighted Welding as a standout for CBI, contributing over 3% to its growth, and also noted successes in Food Equipment and Automotive in China. He confirmed ITW is on track to meet its 2.3% to 2.5% CBI yield goal for the year. Senior VP & CFO Michael Larsen added that based on current rates, the company now expects a modest FX tailwind for the year, a shift from the headwind anticipated previously.

Jamie Cook of Truist Securities questioned the absence of a slide on Customer-Back Innovation (CBI) and its expected revenue contribution for 2025. She also asked for confirmation on the assumed headwind from Product Line Simplification (PLS).

Answer

President and CEO Christopher O'Herlihy affirmed that ITW is on track to meet its full-year CBI contribution target of 2.3% to 2.5%. CFO Michael Larsen added that they avoid giving lumpy quarterly updates on the metric. Larsen also confirmed that the full-year headwind from PLS is still expected to be 100 basis points, primarily impacting the Specialty Products, Automotive, and Construction segments.

Jamie Cook asked about the potential headwind to the Automotive business from a market shift back to ICE from EV, and questioned CEO Chris O'Herlihy on his confidence in the 30%+ margin target given the focus on CBI.

Answer

CFO Michael Larsen clarified that ITW's content and margin profile are similar for both ICE and EV vehicles, making the company agnostic to the mix shift. CEO Christopher O'Herlihy addressed the margin target, stating that CBI is an enabler of higher margins and that quality organic growth and margin expansion go hand-in-hand, with the path to 30% paved by operating leverage, not cost-cutting.

Jamie Cook asked for a breakdown of the drivers behind the strong growth in the Specialty Products segment, given the headwinds from product line simplification (PLS). She also questioned if CEO Chris O'Herlihy sees any business segments as more challenged in achieving their long-term organic growth targets.

Answer

CEO Chris O'Herlihy attributed the Specialty segment's strength to aerospace (up 30%), consumer packaging equipment, and favorable comps, reaffirming the segment is on track to be a long-term 4% grower. CFO Michael Larsen highlighted the segment's 31%+ margin, demonstrating the power of operating leverage. Regarding long-term growth, Chris O'Herlihy expressed strong conviction that all seven segments can achieve 4%+ growth, driven by the Customer-Backed Innovation (CBI) framework.

Jamie Cook from Truist Securities questioned if the growing, lower-margin ancillary business means United Rentals is becoming more of an EBITDA dollar story rather than a margin percentage story. She also asked for context on the 2026 CapEx outlook, noting a peer had guided to a decline.

Answer

EVP & CFO William Grace acknowledged the dilutive margin impact of ancillary services but stressed that the primary goal remains serving customers profitably and driving underlying margin expansion. President & CEO Matthew Flannery addressed the 2026 CapEx question by stating that while it's early, he would be surprised to see a cut, given the positive market environment, ongoing tailwinds, and the company's disciplined approach to fleet replacement.

Jamie Cook questioned management's confidence in achieving the 50-60% through-cycle incremental margin target given recent performance. She also asked about the M&A pipeline and strategic preferences for Specialty versus Gen Rent acquisitions following the termination of the H&E deal.

Answer

Executive William Grace reaffirmed confidence in the long-term incremental margin target, explaining that current slower growth and inflationary pressures are not expected to be permanent. Executive Matthew Flannery stated that the M&A pipeline remains robust, with a primary focus on adding new products and services, like the Yak and General Finance deals, and expanding capacity in high-growth specialty areas. He confirmed they have ample dry powder and capability for future deals.

Jamie Cook asked about the potential path to improved incremental margins in 2025, questioning if it relies solely on returning to double-digit growth or if other factors like mega-project mix or technology payoffs could contribute.

Answer

Executive William Grace noted that while 2025 guidance is pending, improved margins depend on multiple factors beyond just revenue growth. He highlighted that ongoing technology investments and the drag from an accelerated pace of new branch openings ('cold starts') are key considerations that impact profitability, alongside the normalization of the used equipment market.

Asked about recent demand trends in April and May, whether price increases in Contractor Solutions are expected to negatively impact volumes, and the timing for when strong bookings in Engineered Building Solutions will translate into revenue growth.

Answer

James Perry stated that for Engineered Building Solutions, strong bookings will lead to good top-line and margin growth over the near and medium term. For Specialized Reliability Solutions, demand picked up in March/April/May after a soft start to the year. For Contractor Solutions, they expect mid-to-high single-digit organic growth to continue, believing their strategy of offering a wider range of products helps them gain market share and supports volume growth even with pricing actions.