Jerry Revich

Jerry Revich requested an update on Deere's expectations for See & Spray technology in 2026, including projected deliveries of retrofit kits in the U.S. and anticipated acres covered, along with any progress on the subscription buildout observed in fiscal year 2025.

Answer

Josh Beal, Director of Investor Relations, noted that factory-install take rates for See & Spray in the 2026 early order program are similar to 2025, with retrofit orders typically placed in winter. He highlighted that returning customers in 2025 covered 20% more acres on average, indicating technology effectiveness and increased utilization. Deanna Kovar, President of Worldwide Agriculture and Turf Division, added that See & Spray is expanding globally, and growth in acres covered is expected in 2026, with customers continuing to realize significant savings.

Jerry Revich requested an update on See & Spray expectations for 2026, including deliveries of retrofit kits and acres covered, along with progress on the subscription buildout in fiscal 2025.

Answer

Josh Beal, Director of Investor Relations, noted that See & Spray take rates for 2026 early order programs are similar to 2025, with retrofit orders expected over winter. He highlighted that returning customers increased their covered acres by 20% in 2025, validating the technology's value. Deanna Kovar, President of Worldwide Agriculture and Turf Division, added that with an increasing install base and global expansion, acres covered are expected to grow in 2026.

Jerry Revich asked about Deere's pricing philosophy, noting its strong track record of pricing for value, and questioned if there was any scenario where the company might not fully offset tariff costs with price in 2026.

Answer

CFO Josh Jepsen stated that while Deere intends to get price, they are taking a 'measured approach,' mindful of the significant price increases customers have absorbed over the last few years. He emphasized that the company is heavily focused on other levers it can control, such as production cost mitigation through material sourcing, logistics, and overhead efficiencies, to protect margins.

Jerry Revich requested a global update on precision ag adoption, specifically asking about expectations for Ag Essentials and See & Spray kits, and the latest metrics for engaged and highly engaged acres.

Answer

Executive Josh Beal reported strong momentum, with over 1,500 Precision Ag Essentials kits ordered in Brazil year-to-date and over 1,200 orders for the new Starlink-enabled JDLink Boost solution. Globally, engaged acres grew 15% year-over-year to 455 million, with highly engaged acres up over 30%. CFO Josh Jepsen added that the tech stack is a key competitive advantage, converting owners of competing equipment to Deere.

Jerry Revich inquired about the specifics of Deere's 'pool funds' program, asking for an expansion on how these funds are used to facilitate trade-ins for late-model used equipment and the potential magnitude of this financial lever.

Answer

An executive explained that the pool funds program was designed to build balances during strong sales years to provide stability in downturns. These funds are now being deployed by dealers to reduce used inventory. The 2025 net price guidance of 1% for the Production and Precision Ag segment already accounts for higher incentive rates directed toward these pool funds. CFO Josh Jepsen added that targeted incentives in Q4 drove a strong retail finish and an upper-teens inventory reduction in earthmoving equipment, positioning the company well for 2025.

Jerry Revich asked which end markets would drive the high end of the fiscal 2026 top-line outlook and contribute to exiting the year with a teens growth rate. He also sought further details on the fivefold increase in the data center pipeline, including scope expansion and the base from which this growth is occurring.

Answer

CFO Venk Nathamuni noted expected continued momentum throughout the year, with Q4 benefiting from an extra week. Chair and CEO Bob Pragada stated that life sciences and data centers, if they maintain their pace, would drive the high end of the range, along with accelerated semiconductor fabrication and momentum in international transportation and major cities/places prospects. Bob Pragada clarified that the data center business is currently around $200 million and could grow to the size of the life sciences business in a few years. The fivefold pipeline increase is broad-based across hyperscalers, NEO cloud providers, and multi-tenant players, with scope expanding into battery limits, water/power requirements, and alternative delivery models.

Jerry Revich asked about the growth runway in the Middle East and India and sought clarification on U.S. growth trends. He also inquired about project risk, asking if other projects of similar vintage or risk profile exist in the portfolio following the recent write-down.

Answer

Chair and CEO Bob Pragada described the growth potential in the Middle East and India as substantial and unconstrained by resources due to a global delivery model. He clarified that U.S. net service revenue is growing. He also reaffirmed that the company's project risk governance is strong and the write-down was a highly infrequent event, not indicative of broader portfolio risk.

Jerry Revich asked for a reasonable long-term margin target for the legacy People & Places business (now Infrastructure and Advanced Facilities). He also inquired about any notable operational performance differences resulting from the company's new, narrower focus after the Amentum spin-off.

Answer

CEO Bob Pragada deferred providing a specific long-term margin target, stating that more clarity would be given at the upcoming Investor Day, but reiterated confidence in the FY25 margin expansion. He identified the biggest operational change as a renewed external focus on clients' businesses, moving away from an internal focus on transactions. He cited the strong Q3/Q4 sales performance, 22% backlog growth, and 1.67x book-to-bill as direct proof of this successful shift.

Jerry Revich asked when per-truck costs might decline, about the current backlog mix, how PACCAR's improved margin profile might affect future cyclicality, and for the company's estimate of the incremental cost for EPA 2027 trucks.

Answer

CEO Preston Feight noted a per-truck cost decline is possible but is offset by labor cost factors. He confirmed the backlog remains strong in vocational trucks. Feight agreed that PACCAR is at a 'structurally stronger' performance level that should persist. For EPA 2027, he estimated a cost increase in the $10,000 to $15,000 range, to which CFO Harrie Schippers added the impact of extended warranty costs.

Jerry Revich inquired about the drivers of strong sequential price improvement in Q2, the outlook for pricing in Q3 given the backlog, discussions with the government on Section 232 tariffs, and the estimated per-unit financial impact of tariffs in Q3.

Answer

CEO & Director R. Preston Feight explained that the impact of tariffs was present in Q2 and is expected to increase in Q3 under the current structure. He noted significant variability due to potential court rulings and new tariff announcements. Feight stated that PACCAR builds over 90% of its U.S. trucks domestically and is hopeful for a favorable Section 232 outcome, estimating the quarterly tariff effect could be around $75 million.

Jerry Revich of Goldman Sachs inquired about the drivers of strong Q2 sequential price improvement, the pricing outlook for Q3 given tariff impacts, the status of Section 232 trade policy discussions, and the estimated per-unit cost of tariffs.

Answer

CEO & Director R. Preston Feight explained that the impact of tariffs on price versus cost will increase in Q3, noting variability based on policy outcomes. He estimated a quarterly tariff effect of around $75 million. Feight also commented on the Section 232 investigation, suggesting a decision could come sooner than the maximum 270-day period.

Jerry Revich asked for quantification of the profit-per-truck headwind from tariffs and whether it could be recovered in Q3. He also questioned the feasibility of shifting medium-duty truck production to U.S. plants to mitigate potential tariff impacts.

Answer

CEO Preston Feight stated it was too difficult to forecast Q3 recovery until there is more clarity on tariff policy. Regarding production flexibility, he acknowledged the capability exists within PACCAR's plants but affirmed the company likes its current manufacturing layout and has no plans to change it.

Jerry Revich asked about the expected cadence of per-truck operating costs and how PACCAR would react if EPA 2027 regulations were altered, potentially creating a split regulatory environment between California and the rest of the U.S.

Answer

President and CFO Harrie Schippers noted that truck content and costs increased in 2024 due to new regulations in Europe but expects these cost levels to be relatively stable entering 2025. CEO Preston Feight expressed high confidence in PACCAR's ability to adapt to any regulatory changes, viewing it as an opportunity to outperform competitors by quickly providing customers with the right products for any environment.

Jerry Revich asked about the conversion rates from in-home consultations (IHCs) to orders and whether they are returning to levels seen in previous cycles, given the high level of interest.

Answer

President and CEO Aaron P. Jagdfeld explained that close rates were under pressure in Q1, which is a typical historical pattern following a surge in demand that strains sales and installation capacity. He noted the rate of decline has moderated and the company models a recovery for the remainder of the year, consistent with past cycles, cautioning that close rates mature over time.

Jerry Revich asked for an expansion on the sales cadence for the home standby business in 2025, noting that the typical 'pig through the python' effect from a demand surge did not seem to be materializing in the Q1 outlook.

Answer

CFO York Ragen clarified that with lead times normalized, the 2025 guidance assumes a return to normal historical seasonality, which is more weighted to the second half of the year. CEO Aaron P. Jagdfeld added that unlike in the past, the company did not enter the year with a large backlog because its increased production capacity satisfied the Q4 surge, removing the 'emotional ordering' from the system. This results in a more normal, sequential growth pattern starting from Q1.

Jerry Revich of Goldman Sachs asked if record web traffic was translating into record in-home consultations (IHCs) and questioned the implied sequential guidance for the residential standby business from Q3 to Q4.

Answer

President and CEO Aaron P. Jagdfeld confirmed that October was on track to be a record month for IHCs. CFO York Ragen clarified the sequential guidance, explaining that while home standby shipments will increase from Q3 to Q4 as production ramps, this will be offset by a decline in portable generator shipments, which had surged in Q3. This mix shift makes the total residential segment growth appear flatter sequentially.

Jerry Revich asked about the price-cost outlook for cement over the next 3-6 months, the impact of tariffs on imported wallboard and cement, and the expected margin performance for the wallboard business.

Answer

CFO D. Kesler stated that while the June quarter has heavy maintenance costs, he expects cement margins to improve over the year, especially if volumes rebound. CEO Michael Haack clarified that wallboard and cement from Mexico and Canada are excluded from tariffs, and tariffs on cement from other countries are not substantial, having a low impact. For wallboard, Kesler noted that while near-term demand is uncertain, the company is well-positioned for margin expansion when homebuilding recovers more meaningfully.

Jerry Revich asked why wallboard pricing and margins are more sustainable in this cycle compared to the 2015 timeframe. He also inquired about potential strategic opportunities in wallboard and the expected demand cadence for cement in calendar 2025.

Answer

CFO D. Kesler attributed wallboard margin sustainability to structural industry changes, primarily the scarcity of synthetic gypsum, which has raised competitors' cost structures. He noted Eagle's raw material access is a key advantage and confirmed they continue to explore opportunities. For cement, he expects normal seasonality with optimism for the construction season beginning in the June quarter.

Jerry Revich from Goldman Sachs asked for an update on the company's cement additive mix following the Texas slag facility addition, the monthly cadence of cement demand during the quarter, and the outlook for December quarter shipments.

Answer

CFO Craig Kesler described the new Houston slag facility as complementary to the Texas cement business and mentioned a longer-term partnership with Terra CO2 for other alternative materials. He declined to provide a monthly volume breakdown but noted that market-specific issues like a hurricane in Texas and general project push-outs affected the quarter. For the December quarter, he stated that results are weather-dependent but could benefit from a favorable comparison to the prior year, which experienced adverse weather.

Jerry Revich asked for a breakdown of the company's tariff mitigation strategy, questioning the split between supply changes and pricing. He also inquired if tariffs could present a competitive advantage for Manitowoc's U.S. operations, requested details on the China-specific portion of the $45 million tariff impact, and asked about the drivers behind the demand recovery in Europe.

Answer

President and CEO Aaron Ravenscroft outlined four mitigation buckets: price increases, surcharges, alternative sourcing, and vendor cost-sharing. He noted that it's too early to determine if there's a competitive benefit due to currency fluctuations like the yen. Management declined to provide a specific breakdown of the China tariff impact, stating it's a mix of various factors. Regarding Europe, Ravenscroft described the recovery as broad-based and typical for a market rebounding from a very low point, rather than a significant boom.

Jerry Revich requested a breakdown of AECO's strong ARR growth, specifically the contribution from Trimble Construction One (TC1). He also asked for quantification of the 'longer sales cycle' comment and its impact, and about the timing of stranded cost removal post-divestiture.

Answer

CEO Robert Painter stated that TC1 now accounts for two-thirds of ACV bookings and is a key driver of cross-sell efforts. He clarified that longer sales cycles are confined to the largest customers and do not meaningfully alter the outlook. CFO Phil Sawarynski added that stranded costs from the mobility divestiture will be a headwind in 2025 but are expected to be neutralized in 2026, with margins improving through the year.

Asked for a breakdown of the drivers for AECO's strong ARR growth, clarification on the impact of longer sales cycles on future growth, and details on margin progression and the timing of stranded cost removal.

Answer

The executive explained that TC1 is the primary driver for AECO growth, making up two-thirds of ACV bookings. The longer sales cycles are with the largest customers and don't meaningfully change the outlook. Regarding margins, stranded costs from a divestiture will be a headwind in 2025 but neutral by 2026, with margin improvement through the year driven by the ramp-up of prior Transporeon bookings.

Jerry Revich of Goldman Sachs Group, Inc. questioned the primary drivers of AECO's strong ARR growth, the potential impact of longer sales cycles, and the path to achieving full-year margin targets given stranded costs from a divestiture.

Answer

Executive Robert Painter attributed the AECO ARR growth primarily to the Trimble Construction One (TC1) platform, which now accounts for two-thirds of bookings. He confirmed longer sales cycles are limited to large enterprise ERP deals and do not change the outlook. Executive Phil Sawarynski added that margins will improve throughout the year as Transporeon revenue ramps and stranded costs from the mobility divestiture, a 2025 headwind, are managed toward a neutral impact by 2026.

On behalf of Jerry Revich from Goldman Sachs, a colleague asked for details on the performance of Transporeon, including organic growth and retention, and inquired about the product vitality within the Field Systems portfolio.

Answer

CEO Robert Painter reported that Transporeon achieved record bookings in Q4 and for the full year, with over 20% growth, despite a challenging freight market. He also highlighted significant innovation in Field Systems, citing a $2.5 billion R&D investment over five years that has produced new products like the BX992 for machine control and the R980 for surveying, driving a 21% ARR growth in the segment.

Jerry Revich questioned the 2025 preliminary outlook, asking about the hardware revenue assumptions required to meet the organic growth range given strong ARR momentum. He also asked about the M&A pipeline and valuations for recent acquisitions.

Answer

Executive Phil Sawarynski clarified the 2025 outlook, noting Field Systems will see low single-digit growth due to headwinds from the CAT JV evolution, though this is profit-neutral. Executive Robert Painter added that the M&A pipeline is focused on AECO software tuck-ins and is balanced against a commitment to share buybacks, not anticipating large-scale capital deployment.

Jerry Revich from Goldman Sachs asked about the hardware revenue assumptions embedded in the preliminary 2025 outlook, given the strong ARR momentum. He later inquired about the M&A pipeline, capital deployment potential for tuck-in acquisitions, and valuation parameters of recent deals.

Answer

Executive Phil Sawarynski clarified that the 2025 outlook assumes low single-digit growth for the Field Systems segment, impacted by headwinds from the federal business and a revenue shift related to the evolving CAT JV, though this is profit-neutral. Executive Robert Painter added that the M&A pipeline is focused on software tuck-ins within AECO, balanced against a commitment to share buybacks, and does not anticipate large-scale capital deployment.

Asked for clarification on the 2025 preliminary outlook, specifically the hardware assumptions needed to reach the high end of the growth range. Later inquired about the M&A pipeline, potential capital deployment for tuck-in acquisitions, and valuation parameters of recent deals.

Answer

The 2025 outlook assumes low single-digit growth for Field Systems due to headwinds from the Fed business and a shift in CAT JV revenue, though this is profit-neutral. The M&A pipeline is focused on AECO software tuck-ins, balanced with a commitment to share buybacks. The company has significant capital firepower but doesn't anticipate deploying all of it on M&A.

Jerry Revich requested a quantitative update on the HomeSafe program's progress, specifically on customer satisfaction scores and vendor sign-ups. He also asked about the expected timing for a final investment decision (FID) on the Lake Charles LNG project.

Answer

President and CEO Stuart Bradie reported that HomeSafe's customer satisfaction has risen to nearly 90% due to technology adoption, improved customer care, and timely claims settlement. He noted that supplier capacity continues to increase. For Lake Charles LNG, he directed the question to Energy Transfer's own earnings call, but noted other LNG projects in Indonesia and Oman are in early stages, creating a staggered timeline.

Jerry Revich of Goldman Sachs questioned the potential risk factors for the 2025 Government Solutions guidance if award slowdowns occur and asked for an explanation of the lower equity income in Q4, including the Plaquemines contribution.

Answer

President & CEO Stuart Bradie expressed confidence in the guide, noting that after accounting for HomeSafe and LinQuest, the base business growth assumption is in the low single digits, which is a conservative and balanced view given potential uncertainties. EVP & CFO Mark Sopp explained the Q4 equity income dip was due to two main factors: a non-cash accounting adjustment on a contingent liability and a scope increase on the Plaquemines project that lowered the percentage of completion temporarily.

Jerry Revich asked about the changes in industry discipline over the past 5-6 years that have made risk terms on large-scale energy projects more attractive for KBR. He also requested an outlook on expected bookings over the next few quarters from heritage technologies like ammonia and plastics recycling.

Answer

President and CEO Stuart Bradie explained that new project development models, like those used by Venture Global, allow customers to manage risk directly, creating a market for KBR's preferred services-based, no-EPC-risk profile. For heritage tech, he noted that the catalyst for new Hydro-PRT plastics recycling licenses will be the successful start-up of three plants by early 2025, with bookings expected later that year. He added that the ammonia market remains attractive, particularly in the Middle East, with continued buoyancy expected in 2025.

Jerry Revich inquired about volume trends seen in March and April, pricing expectations for aggregates and cement, and the drivers behind the strong margin expansion in International Solutions.

Answer

Executive Randy Lake noted that after weather impacts in Jan/Feb, activity picked up to high single-digits in March/April. He reaffirmed guidance for low single-digit aggregate volume growth and mid-to-high single-digit pricing for the year. Executive Jim Mintern attributed the International Solutions margin performance to a recovery in Western Europe, strong infrastructure-led demand in Eastern Europe, a good pricing environment, and positive contributions from the Adbri acquisition.

Jerry Revich inquired about the embedded assumptions for U.S. aggregates volume and pricing in the 2025 guidance and asked if outsized margin improvements are expected from recently acquired assets.

Answer

COO Randy Lake stated that for 2025, CRH anticipates low single-digit volume growth and mid-to-high single-digit pricing growth for aggregates, supported by strong backlogs. He added that margin improvement is a core expectation for all acquisitions, driven by operational, commercial, and procurement synergies, citing the Hunter acquisition as a successful example.

Jerry Revich asked about the sustainability of the Power Systems segment's high margins and Cummins' strategic response if the EPA 2027 regulations were altered.

Answer

CFO Mark Smith confirmed the Power Systems results had no significant one-off items but noted aftermarket sales were unusually high, attributing the strong performance to broad operational improvements. CEO Jennifer Rumsey stated that while they anticipate revisions to GHG Phase III rules, they still expect NOx regulations for 2027 and are proceeding with new product platform launches as planned.

Jerry Revich noted the strong year-over-year growth in revenue per unit in Power Systems and asked for an update on expected supply base throughput for large products in 2025. He also asked for a calibration of the China truck market's profit contribution and potential for incremental margins.

Answer

Chair and CEO Jennifer Rumsey attributed 2024 revenue growth to new Centum product launches and capacity ramp-ups. CFO Mark Smith added that units are not a perfect indicator due to a mix shift toward larger, higher-priced generator sets. Smith confirmed China typically contributes 15-20% of earnings and that the business is well-positioned to convert higher volume into profit with attractive incremental margins.

Jerry Revich of Goldman Sachs Group Inc. asked for details on the Engine segment's outstanding margin performance and operating efficiencies. He also inquired about demand expectations for the new natural gas engine, including potential market share.

Answer

CFO Mark Smith attributed the Engine segment's strong margins to ongoing operational improvements, robust medium-duty demand, and a retroactive pricing agreement in the light-duty business that benefited Q3. CEO Jennifer Rumsey stated that Cummins believes its new natural gas engine could achieve up to an 8% market share, driven by fleet interest in both decarbonization and lower operating costs, citing a significant order from UPS.

Jerry Revich inquired about the feasibility of long-term manufacturing transitions to mitigate tariff impacts and whether the current challenging environment could accelerate M&A activity in the fragmented industrial filtration market.

Answer

CEO Stephanie Disher responded that Atmus is not contemplating long-term manufacturing shifts, instead focusing on short-term actions like USMCA certifications and optimizing delivery routes. On M&A, she confirmed it remains a core strategy and the team continues to evaluate targets, although the uncertain economic landscape has increased the difficulty.

Jerry Revich asked if the company's current strong margin performance is a sustainable 'cruising altitude' or if further improvements are expected. He also inquired about the assumptions for the China first-fit market and the company's ability to scale production if demand improves.

Answer

CEO Steph Disher affirmed that the guided 19-20% adjusted EBITDA margin range is a strong, sustainable level, with the company's focus now shifting to using its transformed supply chain to drive top-line growth. Regarding China, she stated the outlook is for continued weakness with low visibility, but confirmed Atmus has the operational flexibility to scale up production if market conditions were to surprise to the upside.

Jerry Revich asked for details on the fourth-quarter outlook, particularly margin drivers, and inquired about the company's visibility into the 2025 margin profile, including pricing and cost factors.

Answer

CEO Stephanie Disher explained that Q4 revenue would be impacted by fewer working days and a continued decline in the heavy-duty truck market. CFO Jack Kienzler added that a $4 million variable compensation benefit from Q3 would not repeat, affecting sequential margins. Regarding 2025, Disher expressed confidence in sustaining margin gains but noted the unusual market condition of both first-fit and aftermarket segments being at a cyclical bottom, with recovery timing still uncertain.

Jerry Revich inquired about the drivers behind the strong Q1 Environmental Solutions (ES) margin performance and the outlook for its moderation. He also asked how Terex is managing new orders amid tariff uncertainty to maintain price-cost neutrality and what assumptions underpin the tariff guidance.

Answer

CFO Jennifer Kong-Picarello attributed the strong ES margin to a sequential sales increase, record throughput driving favorable factory absorption, and early integration synergies, noting margins would moderate due to expenses for production ramp-ups. CEO Simon Meester added that the company is in "full mitigation mode" for tariffs, prioritizing supply chain adjustments before using pricing and surcharges to maintain price-cost neutrality.

Jerry Revich asked about the sustainability of the Environmental Solutions Group's (ESG) strong Q4 margin performance and whether the market share momentum in Aerial Work Platforms (AWP) is continuing. He also inquired about Terex's ability to mitigate potential new tariffs on North American trade.

Answer

Executive Simon Meester attributed ESG's success to strong execution, stating they are "firing on all cylinders" and expect the performance to continue. Executive Julie Beck confirmed strong bookings support the 2025 outlook. Regarding tariffs, Meester emphasized that Terex has significant operational flexibility, including dual-sourcing and unused capacity in its U.S. factories, to mitigate potential impacts without a significant effect on guidance.

Jerry Revich of Goldman Sachs inquired about the outlook for decremental margins in 2025 as production normalizes and asked how the Monterrey facility transition is being impacted by recent demand shifts.

Answer

CFO Julie Beck stated that AWP margins will be impacted by lower Q4 production but should trend toward normal decremental targets in 2025. CEO Simon Meester added that considering all adjustments and the ESG acquisition, Terex is comfortable with its typical 25% decremental/incremental target for 2025. Beck also noted that while the Monterrey facility is performing well, its benefits are currently offset by lower production volumes at other plants, though it remains a key long-term advantage.

Jerry Revich asked about Allison's production flexibility, specifically its ability to reduce overtime if vocational demand slows, and questioned if inventory levels were increased due to tariff uncertainty.

Answer

COO G. Bohley explained that they have already reduced overtime in the separate medium-duty plant due to softer demand. For the still-robust severe service lines, reducing overtime would be the first step if demand wanes. He clarified that elevated inventory is not due to tariffs but is to support the significant ramp-up in the Defense business expected in the second half of the year.

Jerry Revich asked for clarification on the comparison to 'premier industrials' regarding organic growth and content gains, and also inquired about the level of manufacturing cost inflation embedded in the 2025 guidance.

Answer

G. Bohley, COO, CFO & Treasurer, justified the comparison by citing Allison's consistent cash flow, stable municipal business, and ability to expand margins even on lower volume. On costs, he explained that while overall manufacturing costs are guided down, purchased component costs are expected to rise due to raw material inflation and negotiated supplier price increases. Performance improvements are expected to offset some inflationary pressures.

Jerry Revich asked if the higher truck costs associated with EPA 2027 regulations could increase Allison's penetration rates and also questioned the sustainability of the strong Class 8 straight truck demand given declining backlogs.

Answer

CEO David Graziosi responded that while Allison is well-positioned for 2027, he is not certain it will necessarily impact long-term penetration rates. CFO Fred Bohley addressed demand, stating there are 'no signs of it slowing down,' citing early-stage stimulus programs and a potential pre-buy. He added that industry-wide capacity constraints are a governor on production, which may extend the demand cycle.

Jerry Revich of Goldman Sachs asked for context on Granite's aggregates cash gross profit per ton compared to peers, the potential for future improvement, the demand cadence from January through April, and the anticipated impact of tariffs on equipment procurement.

Answer

President and CEO Kyle Larkin attributed the difference in cash gross profit per ton versus peers to geographic and product mix factors but emphasized significant internal improvements from operational focus and investments. He projected Materials cash gross profit margins would expand by over 3% in 2025. He noted strong demand in January/February, some weather impact in March, and a strong April. Regarding tariffs, Larkin stated the company anticipates cost increases and mitigates this by pre-ordering capital equipment well in advance.

Jerry Revich asked for the free cash flow expectations for 2025 and sought clarity on the drivers of strong Q4 2024 cash generation, specifically asking if project closeouts were a factor. He also inquired about Granite's 2025 inflation expectations and how they are being incorporated into project bids.

Answer

CFO Staci Woolsey projected 2025 operating cash flow at 9% of revenue and free cash flow around 50% of EBITDA, noting that 2024 benefited from normalizing receivables. She clarified that Q4 cash flow was not driven by unusual closeouts but by normal collections, including one large milestone payment. CEO Kyle Larkin added that they anticipate inflation around 3% in 2025, which is already factored into pricing. He emphasized that current contracts are 100% designed with supplier coverage, mitigating inflation risk.

Jerry Revich from Goldman Sachs asked about the feasibility of moving Fendt production to the U.S. to counter tariffs and for an update on the competitive landscape for retrofit kits, including AGCO's pricing strategy (upfront vs. subscription).

Answer

CEO Eric Hansotia explained that moving major production requires long-term stability that is currently lacking, though component sourcing is more flexible. He announced the launch of a new guidance technology, the NAV960, and stated that AGCO is experimenting with both upfront and subscription pricing models for its precision ag technology, intending to use a mix to best serve different markets and be 'farmer-focused'.

Jerry Revich of Goldman Sachs Group, Inc. asked CEO Eric Hansotia to elaborate on AGCO's philosophy on upfront versus subscription pricing for technology. He also asked for the expected margin run-rate for the South America business in Q2 and Q3 2025.

Answer

CEO Eric Hansotia explained that AGCO's "Farmer-First" strategy favors one-time, upfront pricing, as farmers prefer to own assets and minimize recurring costs, though subscriptions are used selectively for new technologies. CFO Damon Audia reiterated the South American margin cadence, expecting a negative Q1, slightly positive Q2, and a significant jump in profitability in Q3, the region's strongest seasonal quarter.

On behalf of Jerry Revich, Adam Bubes asked for details on the drivers of the strong sequential margin expansion guided for Q2 and requested an update on the company's landfill gas projects.

Answer

Executive Luke Pelosi explained that the sequential margin improvement is typical due to higher seasonal volumes, and the Q2 guide implies over 100 basis points of underlying core margin expansion. CEO Patrick Dovigi added that the operational RNG projects are tracking to plan and the remaining projects are expected to come online over the next 2.5 years without any current impediments.

Jerry Revich's representative asked about the mix of opportunities in the M&A pipeline by geography and business line, and for the assumptions on recycling prices and sensitivity in the 2025 guide.

Answer

CEO Patrick Dovigi stated the M&A pipeline is a mix of U.S. and Canadian opportunities focused on densifying existing markets, with an expected 75/25 split in capital deployment favoring the U.S. Executive Luke Pelosi explained that the guide is based on a year-over-year recycling price delta of about $40-$45 per tonne. He added that due to the transition to a fixed-fee EPR model, the sensitivity has been reduced, with every $10 change in price now impacting EBITDA by about $5.

Jerry Revich asked about the specific pricing and cost trends driving strong margin performance, the company's view on RNG markets, and the tax implications of a potential Environmental Services (ES) sale.

Answer

CFO Luke Pelosi clarified that margin strength comes from moderating cost inflation and prior pricing actions, not new increases. CEO Patrick Dovigi stated the RNG strategy is stable, with a long-term goal of a 60/40 split between voluntary and spot markets. On taxes for an ES sale, Dovigi noted a prior reorganization preserved favorable Canadian capital gains rates and estimated a potential tax bill of $500-$600 million, considering available losses in Canada.

Jerry Revich of Goldman Sachs Group, Inc. focused on the Magnesia Specialties business, noting it was the first time he recalled management saying it had 'earned the right to grow' via M&A. He asked for an expansion on what value-added M&A would look like in this segment.

Answer

Chair and CEO Ward Nye affirmed the statement, highlighting the segment's record performance driven by pricing actions and operational efficiency. He explained that the business shares key attributes with aggregates, such as high barriers to entry and pricing power, and provides a differentiated, counter-cyclical earnings stream that was crucial during the financial crisis. While aggregates remain the core focus, Nye stated that responsible organic and inorganic growth in Magnesia Specialties is something the company will actively look at to benefit shareholders.

Jerry Revich asked about the expected per-ton cost cadence in 2025 and whether gross profit per ton growth in the first quarter would be similar to the full-year outlook.

Answer

CEO Ward Nye highlighted successful cost management in Q4, with organic COGS flat despite revenue growth. CFO Jim Nickolas elaborated on the 2025 cadence, stating that underlying COGS inflation should be consistent throughout the year. However, the P&L effects from inventory reduction efforts will be a headwind primarily in the first half. Nickolas clarified that gross profit per ton growth should be in the low-teens consistently quarter-over-quarter, perhaps slightly lower in the first half but with less variation than suggested.

Jerry Revich asked for an explanation of the negative revision to the 2024 pricing guidance and the rationale behind the mid-to-high single-digit pricing outlook for 2025.

Answer

CEO C. Nye attributed the 2024 revision to weather-related project delays impacting geographic mix and fewer mid-year price increases than in the prior year, resulting in a low 80-basis-point carryover benefit for 2025. For 2025, he expressed confidence in achieving mid-to-high single-digit pricing, driven by strong fundamentals in heritage businesses and continued price optimization at acquired operations.

Jerry Revich from Goldman Sachs inquired about Vulcan's strategy for midyear price increases and the cost cadence for the remainder of the year, given the impressive price-to-cost spread achieved in the first quarter.

Answer

CEO James Hill stated that Q1 pricing momentum was strong, with a 7% increase (8.5% mix-adjusted), driven by January price hikes and a well-priced backlog. He affirmed the full-year price guidance of 5% to 7%. Hill noted that discussions for midyear increases have begun, with the impact expected to be more significant in 2026 than 2025. He attributed the strong margin performance to the successful execution of the 'Vulcan Way of Selling' and 'Vulcan Way of Operating' disciplines.

Jerry Revich of Goldman Sachs asked for details on cost performance, questioning if any part of the cost structure is now deflationary and seeking clarity on the Q1 cost-per-ton outlook.

Answer

CEO Tom Hill clarified that costs are not flat or deflationary, reiterating guidance for low-to-mid-single-digit increases in 2025. He specified that there is no deflation in key inputs, citing expected increases in diesel, wages (mid-single-digit), and electricity (high-single-digit), which will be partly offset by operating efficiencies. He also noted that quarterly costs can be choppy.

Jerry Revich inquired about how weaker volumes in 2024 are affecting the pricing cadence for 2025 and asked about the planned timing of price increases, such as January 1 versus April 1.

Answer

Chairman and CEO James Hill confirmed that the vast majority of price increases are planned for January 1, consistent with the strategy of the last few years. While acknowledging that lower volumes are not helpful for pricing, he noted that strong visibility into future public and residential demand supports a constructive pricing environment. SVP and CFO Mary Andrews Carlisle added that Q3 sequential pricing was in line with expectations, creating good momentum for Q4.

Jerry Revich asked about the contractual protections being implemented in new orders to shield against tariffs and whether the company's focus is on M&A or on executing through the current environment.

Answer

CEO John Pfeifer confirmed that protective terms were implemented after the last inflationary cycle but reiterated the strategy is to mitigate costs internally first. Regarding capital allocation, he stated that mitigating tariffs is 'job 1,' but the company maintains an 'always-on' M&A approach. However, he stressed that given the current stock valuation, returning capital to shareholders is an increasing priority.

Jerry Revich from Goldman Sachs inquired about the drivers behind the strong performance and outlook for the Vocational segment, particularly the growth in the core municipal fire truck business. He also asked about the expected exit rate margin for the Defense segment in 2025 as the USPS NGDV contract ramps up, and whether that would be a sustainable run rate for 2026.

Answer

CEO John Pfeifer attributed the Vocational segment's success to its resilience and growing margins, highlighting strong backlogs and order intake in the municipal fire truck business. He noted investments in throughput and capacity are underway to meet demand. Regarding Defense margins, CFO Matt Field stated that while the NGDV program is accretive, the company would not provide specific exit rate guidance but would share more at its upcoming Investor Day.

Jerry Revich asked for an update on the path to achieving the 9-10% margin target for the Defense segment, including the expected cadence for 2025 and 2026. He also inquired about potential decremental margins in the Access segment should demand weaken further.

Answer

President and CEO John Pfeifer projected a margin step-up in Defense in 2025, with a larger improvement in 2026, driven by new, better-priced contracts and the NGDV ramp. EVP and CFO Michael Pack noted Access incrementals are strong on a full-year basis and, while not providing specific decremental guidance, expressed confidence in delivering solid margins amid market softness.

Jerry Revich asked incoming CEO Joe Creed to outline his primary strategic priorities for the next two to three years, looking beyond the immediate focus on global trade and tariffs.

Answer

Joe Creed, COO and incoming CEO, reaffirmed his commitment to the current strategy, which he helped develop. His priorities include accelerating services growth to dampen cyclicality, using the O&E model for disciplined resource allocation, and focusing on OPACC dollar growth. He highlighted key growth opportunities in power generation for data centers, natural gas infrastructure, long-term mineral demand for RI, and critical infrastructure for CI, supported by technology like autonomy. He also committed to maintaining the company's capital return priorities.

Jerry Revich of Goldman Sachs asked about Solar Turbine lead times and Caterpillar's plans for increasing production capacity, particularly for the TITAN 350, in light of strong customer optimism.

Answer

Executive D. Umpleby stated that while backlog and inquiry activity are strong, capacity can be increased within existing facilities through measures like adding test cells, without needing new factories. He identified the supplier base as a potential limiting factor but affirmed they can meet demand without major new facility investments.

Jerry Revich asked about the sustainability of Caterpillar's high margin performance and whether recent pricing headwinds indicate a strategic shift between prioritizing margins versus market share.

Answer

Chairman and CEO Jim Umpleby responded that Caterpillar's primary goal is increasing absolute operating profit after capital charge (OPACC) dollars, not just margin percentage. He emphasized that the company remains focused on being competitive across its diverse markets and that the provided margin targets remain the best guide for investors.

Jerry Revich commented on the impressive cost control in the legacy business and asked if it was fair to assume cost inflation would slow further as comparisons ease. He also inquired about pricing trends in the voluntary market for landfill gas and the company's view on the biofuel task force.

Answer

EVP and CFO Devina Rankin agreed with the assessment, expressing confidence in achieving the upper end of the 50-100 basis point margin expansion target for the year. Executive Tara Hemmer confirmed voluntary market pricing is in the low $20s and noted that for 2025, about 75% of RNG volume is locked in, reducing sensitivity to RIN price changes. She also highlighted a 75% YoY increase in generated RNG volume.

Jerry Revich of Goldman Sachs asked about the scale of the commercial cross-selling opportunity for the new healthcare business, how WM is aggressively pricing to offset commodity risks in the base business, and whether landfill gas OpEx per MMBtu is higher in 2025 during the ramp-up phase.

Answer

Rafael Carrasco, head of WM Healthcare Solutions, and President and CEO Jim Fish confirmed that cross-selling is a major long-term opportunity but is not yet factored into 2025 guidance. Jim Fish attributed strong base business performance to sophisticated, granular pricing and disciplined cost control, including headcount reduction. EVP and CFO Devina Rankin acknowledged that higher OpEx, particularly electricity costs, is a factor in the renewable natural gas business ramp-up, impacting the 2027 outlook.

Jerry Revich asked about the realized returns on recycling automation investments versus initial underwriting, the expected economics of new landfill gas facilities, and the potential for pricing and cross-selling opportunities within the Stericycle business.

Answer

SVP & Chief Sustainability Officer Tara Hemmer detailed strong recycling returns, including a 30% lower labor cost per ton and a 17% higher blended commodity value. She also noted a portfolio approach to landfill gas, with 40% of 2025 volume already contracted. Regarding Stericycle, EVP & CFO Devina Rankin stated that diligence has focused on operational integration rather than customer pricing, but the strategic growth thesis remains strong. EVP & COO John Morris added that Stericycle fits well as a fourth line of business where WM's operational playbook can be applied.

Jerry Revich asked about the drivers behind the company's strong pricing and customer retention rates, and inquired about the potential pricing upside for the Polymer Center output.

Answer

CFO Brian DelGhiaccio credited improved service delivery and higher Net Promoter Scores (NPS) for enabling strong pricing while maintaining high retention. CEO Jon Vander Ark noted that demand for recycled PET from the Polymer Centers is robust enough to sell out the facilities multiple times over. While he confirmed they are pricing appropriately, he declined to quantify the potential for future price increases, stating they will capture market upside as it develops.

Jerry Revich asked about the operational performance of the new Polymer Centers and requested the expected 2025 financial contribution from all sustainability investments. He also questioned the margin seasonality, given the strong Q4 2024 performance.

Answer

CEO Jon Vander Ark confirmed the Polymer Centers are performing well and meeting assumptions. CFO Brian DelGhiaccio quantified the 2025 contribution from sustainability investments at approximately $70 million in revenue and $35 million in EBITDA. He also explained that Q1 is seasonally the lowest margin quarter, making a sequential decline from Q4 normal.

Jerry Revich inquired about any one-time items affecting the quarter's strong performance, the reasoning behind the Q4 margin guidance step-down, and the operational progress of the polymer center rollout.

Answer

CFO Brian DelGhiaccio identified a 50-basis-point insurance recovery and a 10-basis-point bad debt adjustment as the main one-time items contributing to the strong quarterly performance. CEO Jon Vander Ark addressed the polymer centers, noting a delayed start due to permitting but confirming strong pricing and a positive volume ramp-up, with the Indianapolis facility remaining on its original timeline.

Jerry Revich asked about the multi-year runway for M&A, addressing concerns that opportunities might be slowing given the company's scale. He also inquired about the specific cost levers United Rentals could pull in a potential recession scenario to protect margins.

Answer

Executive Matthew Flannery responded that while they don't set M&A targets, they believe there is still plenty of runway, particularly in adding specialty offerings, and that chunky deals are still possible. Executive William Grace detailed the cost flexibility, noting about 50% of costs are highly variable with volume. Matthew Flannery added that in a downturn, decisions on the semi-variable cost base would depend on the depth and duration, referencing their decision during COVID to retain capacity, which ultimately paid off.

Adam Bubes, on behalf of Jerry Revich of Goldman Sachs, asked about the drivers of the strong 6.9% core price, trends in pricing retention, and the company's exposure to tariff-related inflation for its truck fleet.

Answer

Executive Ronald Mittelstaedt clarified that pricing plans are unchanged, with Q1 being a seasonal high point, and noted that price retention has improved year-over-year due to better service and a more surgical pricing approach. He also stated there is virtually no tariff exposure for the 2025 CapEx plan, as almost all truck chassis for the year are already secured.

Jerry Revich inquired about the progress of ramping up rail shipments to the Arrowhead landfill, the M&A opportunities this creates in the Northeast, and the company's strategy for handling volatility in recycled commodity prices.

Answer

Executive Ronald Mittelstaedt reported that daily tonnage at the Arrowhead landfill has nearly tripled to 7,000 tonnes since its acquisition, with a target of 8,000-9,000 tonnes by the end of 2025, driven by internalization from the Northeast. He confirmed this creates significant M&A opportunities and 'multiple bites out of the revenue dollar.' Regarding recycling, he stated the industry model now relies on raising processing fees to offset commodity declines, rather than subsidizing with solid waste price hikes.

Jerry Revich questioned if customer feedback on tariffs indicated a trend towards aging fleets and how the tariff situation might affect the Integration 3.0 strategy. He also asked about the expected growth rate for international aftermarket services.

Answer

CEO Rafael Santana explained Wabtec is managing supply chain shifts to minimize disruption and is using levers like USMCA, alternative sourcing, and pricing actions. CFO John Olin added that the Integration 3.0 strategy remains unchanged, with the $100M-$125M savings target unaffected. Regarding aftermarket, Santana noted that mature service businesses grow at 6-7% and that international fleets are running hard, with megawatt-hours up, suggesting strong service demand.

Jerry Revich from Goldman Sachs inquired about the drivers of the strong Q4 margin performance in the Transit segment and its expected cadence in 2025. He also asked about the seasonality of the core Services business when excluding modernizations.

Answer

CFO John Mastalerz attributed the strong 16.4% Q4 Transit margin to a favorable mix, with aftermarket sales up 11.5%, and significant savings from Integration 2.0. CEO Rafael Santana added that the Transit team remains focused on profitable growth. Regarding Services, John Mastalerz explained that the core parts business has a stable cadence, while quarterly volatility is driven by the timing of mod production, which can shift between the Services and Equipment P&Ls.

Jerry Revich questioned the drivers behind a significant improvement in days sales outstanding (DSO) and asked about the potential for continued margin expansion given that targets have been achieved early.

Answer

CFO John Olin clarified that receivables growth was largely in line with revenue growth when accounting for securitization timing. CEO Rafael Santana stated that significant momentum remains for margin expansion, driven by ongoing business simplification, continuous improvement, Integration 2.0, and portfolio optimization, committing to profitable growth for 2025 and beyond.

Jerry Revich asked for confirmation on the magnitude of the dollar utilization recovery in April and inquired about the state of pricing discipline within the equipment rental industry.

Answer

CFO W. Humphrey confirmed that dollar utilization improved in March to prior-year comparable levels and that this trend continued into April, setting up a normal seasonal cadence for the year. CEO Lawrence Silber added that they feel comfortable with industry pricing discipline, describing it as 'fairly constant and stable' and noting the industry is not overfleeted.

An analyst on behalf of Jerry Revich asked for expectations on rental rates moving into Q1 2025 and inquired about the M&A pipeline, particularly for specialty rental companies.

Answer

CFO W. Humphrey stated the company will no longer provide specific rate metrics but confirmed that positive pricing is embedded in the 2025 guidance. CEO Lawrence Silber described the M&A pipeline as 'prevalent' and noted the company is prepared to participate in market consolidation opportunistically, evaluating targets for cultural and geographical fit.

Jerry Revich inquired about the outlook for time utilization in Q4 and into 2025, considering the impact of recent hurricanes. He also asked about the expected exit rate for pricing and whether that level is sufficient to maintain stable margins.

Answer

President and CEO Lawrence Silber stated that while a hurricane-related uplift is expected, it's too early to quantify its full impact on time utilization. He noted that core fleet efficiency was positive, but M&A activity created a temporary drag. Regarding pricing, he suggested the exit rate would be in the low-to-mid single-digit range, which, all else being equal, should be sufficient to support stable margins.

Jerry Revich asked for an update on the M&A pipeline, the potential scale of capital deployment for the year, and the types of acquisitions being considered. He also followed up on tariffs, asking about the company's cement inventory levels and the diversity of its import sources.

Answer

CFO Lawrence Wilt noted that the company's M&A focus is on synergistic adjacencies but had no specific deployments to announce. CEO Vassilios Zarkalis (responding to the follow-up) confirmed that Titan America has multiple import sources, including Greece, Turkey, and Egypt, which provides significant flexibility. He also stated that the company is maintaining its standard inventory policy, feeling confident in its ability to serve its markets without special measures.

Jerry Revich asked for a breakdown of above-trend Fire and Ambulance orders between market share gains and industry demand, and questioned if the company would consider surcharges in a scenario of higher-than-expected cost inflation.

Answer

CFO Amy Campbell attributed the strong Fire orders primarily to elevated industry demand, which remains above long-term trends, but declined to comment on specific market share figures. CEO Mark Skonieczny confirmed that applying surcharges is a mechanism the company could and has used in select situations to manage significant, unexpected cost increases, allowing them to track and potentially remove the charges later.

Jerry Revich inquired about the key drivers behind the year-over-year margin improvement in the Fire & Emergency (F&E) segment, seeking a breakdown between pricing, inflation, and productivity. He also asked for clarification on the 30% difference between the book-to-bill ratios for units versus revenue, and for an update on RV dealer inventory levels.

Answer

CFO Amy Campbell explained that for legacy F&E, revenue grew in the low to mid-teens, with approximately 60% from price/mix and 40% from volume, leading to significant year-over-year and sequential EBITDA margin growth. While unable to break down the 1.3x dollar book-to-bill between price and content, she noted the introduction of semi-custom units. CEO Mark Skonieczny added that RV dealer inventories are down 20% since the start of the calendar year, approaching pre-COVID levels, with retail sales outpacing wholesale shipments.

On behalf of Jerry Revich, Adam Bubes asked about the likelihood of reaching the high end of the 9-11% Utilities margin target for 2025 and requested an update on the company's solar crew count.

Answer

CFO Ken Dodgen stated that achieving the high end of the margin range is increasingly likely, with expectations for low-to-mid 10% margins, potentially higher with storm work. CEO Tom McCormick reported they have 18 solar teams and are building a 19th, with a focus on quality and margin improvement over sheer team count growth, though they could reach 20-21 teams.

Adam Bubes, on behalf of Jerry Revich, asked about customer retention trends in Industrial and Field Services given aggressive pricing, and whether the SKSS segment is now fully caught up on pricing actions.

Answer

Co-CEOs Eric Gerstenberg and Michael Battles responded that there has been 'no real change' in customer churn due to pricing, with attrition being minimal. Regarding SKSS, Battles stated they are a price taker on base oil and guidance assumes no market price recovery. An executive added they will remain dynamic with used motor oil collection pricing to offset any further deterioration in base oil prices.

Jerry Revich from Goldman Sachs asked for details on the phasing of efficiency gains versus operating leverage throughout 2025. He also requested information on Gates' competitive positioning in the data center liquid cooling market.

Answer

CFO L. Mallard clarified that efficiency gains, primarily from material savings, are expected to be linear, while operating leverage should improve as the year progresses and volumes recover from a soft Q1. CEO Ivo Jurek detailed the data center strategy, highlighting differentiated products like its industrial pumps and a new proprietary coupling design expected later in the year, which he believes positions Gates to compete effectively against peers.

Asked about the drivers of the sequential performance in aggregates cash gross profit and inquired about the 2025 aggregates pricing strategy, specifically if they are building in an extra cushion for inflation volatility.

Answer

The sequential aggregates profit comparison was affected by a particularly favorable geographic mix in Q2 and lapping very high mid-year price increases from the prior year. For 2025, they are confident in 6-9% aggregates pricing, achieved through a combination of price increases and disciplined cost control. Their focus is on expanding the price-net-of-cost margin, and their operational excellence initiatives have successfully limited aggregate cost inflation to about 2% this year.

Asked about historical long-term contracts from Argos, their impact on current pricing, and when they are expected to roll off. He followed up by asking for a quantification of how much the company is 'underearning' due to these contracts.

Answer

The company confirmed that some legacy Argos contracts are below market rates. The bulk of these will be repriced over the next 12-18 months. They reiterated their initial assessment that there is a $10-$15 per ton pricing opportunity to capture, which is a key part of their commercial synergy target over the next 12-24 months.

Asked about the strong 35% EBITDA margin in the Argos cement business and its expected cadence, and also requested an explanation for the acquisition-related balance sheet adjustments like higher DD&A.

Answer

The company is focused on reaching its 45% EBITDA margin North Star target for the combined cement business by improving plant operations, reducing costs, and driving pricing momentum. The balance sheet changes were standard purchase accounting; acquired assets were revalued upwards based on appraisals, which reset and increased the annual DD&A forecast. The goodwill amount was as expected.

Asked about the potential for unit costs in aggregates and cement to decrease, specifically if cost inflation could slow to the low single-digit range due to improved productivity and normalizing labor markets.

Answer

The company expects overall cost inflation to moderate from high-single digits in 2023 to mid-single digits in 2024. Key drivers include labor inflation slowing to 4-5%, a significant tailwind from diesel fuel hedging ($6-8M in savings), and supply chain cost inflation moderating to mid-to-high single digits. While a significant decrease isn't guaranteed, the trend is favorable and supports margin expansion goals.