Mike Halloran

Mike Halloran asked about the disconnect between IDEX's strong order momentum and its conversion to revenue, particularly with the introduction of longer-cycle applications, and when this dynamic is expected to normalize. He also requested an update on life sciences trends, the outlook for the year, and how client expectations correlate with IDEX's projections.

Answer

Eric Ashleman, President and CEO of IDEX, explained that the revenue flow dynamic includes traditional Q1 softness in FMT due to weather (water and agriculture franchises) and a newer HST component. Larger orders, particularly in materials processing technologies, captured late in Q4, have longer lead times, pushing revenue conversion into Q2. He noted that assurance levels are significantly higher this year, especially in HST, due to a substantial backlog build. For life sciences, Eric Ashleman described 2025 as stable, low single-digit growth, driven by pharma applications but pressured by academic research, with the Q4 government shutdown adding uncertainty. He anticipates continued low single-digit growth, with ongoing innovation and new product releases, while monitoring factors like NIH funding and China-related dynamics.

Mike Halloran asked about the disconnect between the strong orders and building momentum in HST and its conversion to revenue, seeking clarification on when normalization is expected. He also requested an update on Life Sciences trends, client expectations, and the segment's guide for the year.

Answer

Eric Ashleman (President and CEO) explained that revenue flow includes typical seasonal dynamics (FMT) and newer ones from HST's larger, longer-lead-time orders, pushing some Q4 revenue into Q2. He noted HST's backlog grew over $100 million year-over-year, providing higher assurance. Life Sciences saw stable, low single-digit growth in 2025, driven by pharma, with some pressure from academic research and a Q4 government shutdown, and is expected to continue at low single-digit growth in 2026.

Mike Halloran asked for details on the Pool business, including the flattish Q1 guidance, price and volume dynamics, current inventory levels, and confidence in the business normalizing throughout the year. He also inquired about Pentair's capital priorities beyond the dividend, specifically interest in share buybacks and the actionability of M&A opportunities.

Answer

CEO John Stauch and CFO Nick Brazis explained that the Pool guide is pragmatic, assuming no residential recovery in 2026, with sell-in balancing sell-out in Q1 and volume expected to be flat for the year. CEO John Stauch discussed Pentair's healthy balance sheet, commitment to continued dividend raises, and evaluating buybacks versus bolt-on M&A based on what creates the best longer-term value for shareholders.

Mike Halloran asked for details on the pool business's Q1 guidance, specifically regarding flat performance, price/volume dynamics, and inventory levels, and the confidence in normalization throughout the year. He also questioned Pentair's capital priorities beyond dividends, focusing on buybacks and M&A opportunities.

Answer

CEO John Stauch emphasized a pragmatic pool guide for 2026, assuming no residential recovery, with any recovery in 2027 being potential upside. CFO Nick Brazis added that Q4 sell-in was slightly up relative to sell-out, balancing in Q1, with volume expected to be flat for the year but up from Q2 to Q4. John Stauch noted a healthy balance sheet and strong cash generation, prioritizing dividend increases, and then evaluating buybacks versus bolt-on M&A like Hydra-Stop or GulfStream for long-term value.

Mike Halloran asked about the carryover pricing percentage into next year, assuming no further incremental price increases. He also inquired about any competitive benefits or notable dynamics observed due to tariffs, comparing Pentair's footprint to others in the industry.

Answer

CFO Bob Fishman estimated a 1% to 2% price carryover for next year. CEO John Stauch stated that competitive dynamics regarding tariffs are largely a common playing field, as companies chase similar commodities and access points. He noted Pentair's China purchases are reduced to approximately $100 million and emphasized efforts to find alternatives for future tariff challenges.

Mike Halloran asked about the carryover pricing into next year, specifically the percentage impact if no incremental price increases were implemented. He also inquired about any competitive benefits or notable competitive dynamics related to how tariffs are affecting Pentair versus others in the industry.

Answer

CFO Bob Fishman stated that the company expects a price carryover of 1-2 points into the next fiscal year. CEO John Stauch commented on tariffs, noting that all competitors are generally on a common playing field regarding supply chains and commodity access. He highlighted Pentair's success in reducing China purchases to approximately $100 million and expressed confidence in current mitigation strategies while actively seeking alternatives for potential future challenges.

Mike Halloran asked about the timeline for Clean Energy & Fueling (DCEF) segment to reach its mid-20% margin target. He also inquired about the push-pull of capacity management, considering growth needs versus internal initiatives to manage capacity lower, and if incremental capital would be deployed for expansion.

Answer

CEO Richard Tobin stated that DCEF should reach the low 20s this year, with further acceleration depending on mix and the completion of footprint transition by year-end. He expressed excitement about the longer-term cryogenic opportunity. Regarding capacity, he noted CapEx is coming down in 2026 due to completion of expansions and restructuring, with a new greenfield plant in North Carolina expected by 2027, indicating a flexible model for quick expansion.

Mike Halloran asked about the timeline for Dover to achieve its mid-20% margin target for the Clean Energy & Fueling segment. He also inquired about the push-pull dynamics of capacity management, specifically if incremental capital would be deployed for expansion, the current state of the network, and remaining pairing opportunities, given comments about capacity constraints and internal initiatives.

Answer

CEO Richard Tobin stated that Clean Energy & Fueling margins should reach the 'low 20s' this year and then be walked up, depending on mix and the completion of footprint transitions by year-end. He expressed excitement about the longer-term cryogenic opportunity. Regarding capacity, he noted CapEx is coming down in 2026 due to project completion, with a new greenfield plant in North Carolina expected by 2027, and a flexible model for quick expansion.

Mike Halloran from Baird asked for more context on the increased competitive intensity in the wholesale channel, specifically how it impacts pricing and market share, and how this balances with the company's strength in the retail segment. He also inquired about the expected earnings and revenue cadencing through 2026, highlighting any significant first-half versus second-half dynamics.

Answer

CEO Steve Shafer explained that wholesale channel pressure stems from low new home construction and retail expansion, intensifying competition among existing leaders, particularly in the last six months. CFO Chuck Lauber detailed that 2026 revenue and earnings cadence is expected to normalize closer to 50/50 between halves, unlike 2024/2025 which saw higher first-half volumes due to price increases. He noted tough first-half comps, rising input costs (steel up 10%), carryover tariffs, and continued first-half pressure in China due to subsidy discontinuation.

Mike Halloran asked about the increased competitive intensity in the wholesale channel, seeking context on its impact on price and share, and how it balances with strength in the retail side to affect the cumulative market. He also inquired about the cadencing of earnings and revenue through 2026, considering various moving pieces and 1H/2H dynamics.

Answer

CEO Steve Shafer explained that A. O. Smith has significant share in both retail and wholesale, participating in channel movements. He noted that low new home construction and retail inroads into professional services are pressuring the wholesale channel, intensifying competition among existing leaders. CFO Chuck Lauber detailed that 2026 will differ from 2024/2025, with a more normalized 50/50 or 51/49 split between front and back half volumes, unlike previous years' front-half pull-forward due to price increases. He also highlighted expected 10% steel price increases, carryover tariffs, and other cost headwinds, along with China's first-half pressure due to discontinued subsidies, with anticipated recovery in the second half.

Mike Halloran from Baird asked about trends in residential discretionary spending, specifically regarding proactive water heater replacement. Halloran also inquired whether the pricing actions taken by A. O. Smith were sufficient to achieve price-cost positive or neutral margins, or if a gap would remain relative to inflation, particularly looking ahead to 2026.

Answer

Charles Lauber, Chief Financial Officer, stated that the proactive replacement rate remains resilient, consistently above 30% based on quarterly surveys, though it is continuously monitored. Regarding pricing, Lauber confirmed that price increases typically aim to cover margin plus cost, and while there's some pressure on Q4 margins, the company is currently comfortable with its price-cost relationship. He deferred further commentary on 2026 pricing until the next quarter.

Mike Halloran asked about trends in residential discretionary spending, specifically regarding proactive water heater replacements. He also inquired if current pricing actions were sufficient to achieve price-cost positive or neutral outcomes, considering inflation and tariffs.

Answer

Charles Lauber, CFO, stated that proactive replacement remains resilient, with survey results consistently above 30%, though they continue to monitor for developing trends. Regarding price-cost, he explained that price increases typically aim to cover margin plus cost, and while there's some pressure on Q4 margins, they are currently comfortable with their price-cost relationship. He noted the last price increase was effective in Q2.

Mike Halloran from Baird questioned whether Graco experienced any pull-forward demand in the fourth quarter, particularly in the contractor segment, and sought an update on the 'green shoots' observed in Q3. He also inquired about the pricing assumptions embedded in the low single-digit organic growth guidance and the timing of price implementations across segments.

Answer

President and CEO Mark Sheahan and CFO David Lowe indicated no significant pull-forward demand in Q4, but noted encouraging signs in the home center channel and commercial opportunities. They anticipate 1-1.5% pricing realization for the year, with many 2026 price adjustments having been accelerated into late 2025, and further adjustments expected mid-year for key channel partners.

Mike Halloran inquired about any signs of pull-forward demand in the fourth quarter, particularly in the contractor segment, and asked for an update on the 'green shoots' referenced in the third quarter. He also questioned the price assumption embedded in the low single-digit organic growth guidance, whether it includes a volume growth assumption, and the timing of pricing implementation by segment, including any new pricing for 2026.

Answer

President and CEO Mark Sheahan and CFO David Lowe stated there was no significant pull-forward demand in Q4. They noted a pickup in the home center channel, expressing cautious optimism for the contractor segment due to commercial opportunities, hopes for residential repaint (linked to lower mortgage rates), and new products. For pricing, they indicated an expected 1-1.5% realization for 2026, noting that some 2026 price adjustments were accelerated into Q3 and Q4 of 2025, with no significant new price changes for early 2026, and mid-year adjustments for key channel partners.

Mike Halloran inquired about the implied fourth-quarter outlook, specifically whether the expected growth inflection is driven by pricing, demand, or other factors, and when price-cost dynamics are expected to turn positive for Graco.

Answer

CEO Mark Sheahan clarified that the fourth-quarter guide implies hitting the low end of the low single-digit range, driven by incremental pricing actions, stable to better order rates in Q3, and easier year-over-year comparisons in the Contractor business, rather than a fundamental improvement in demand. He also stated that price-cost would definitely turn positive in Q4, noting Q3 gross margin was up excluding the Corab acquisition impact.

Mike Halloran inquired about the factors driving Graco's implied fourth-quarter growth guidance, asking if it stemmed from pricing, demand improvement, or other elements, given above-normal seasonality. He also asked when price-cost dynamics would turn positive and tariff drag would normalize.

Answer

CEO Mark Sheahan clarified that guidance implies hitting the low end of low single-digit growth, driven by incremental pricing, stable to better Q3 order rates, and easier Q4 contractor comparisons, not a fundamental demand improvement. He confirmed price-cost would turn positive in Q4, noting Q3 gross margin was up excluding the Corab acquisition.

Mike Halloran of Baird asked for details on the strategic rationale behind the ColorService acquisition and what catalysts are needed to improve customer confidence in the core construction and DIY markets.

Answer

President and CEO Mark Sheahan detailed that the ColorService acquisition was a strategic move into adjacent dosing technology, expanding their reach into new industries. Regarding construction, he identified improved housing affordability as the critical 'green shoot' needed to unlock significant pent-up demand.

Mike Halloran asked about the ATS segment, specifically if semiconductor growth is broadening beyond AI/cloud applications, and the expected margin trajectory for the Medical and Fluid Solutions (MFS), Industrial Precision Solutions (IPS), and Advanced Technology Systems (ATS) segments for the upcoming year.

Answer

CEO Sundaram Nagarajan noted that semiconductor strength remains concentrated in AI and cloud computing, with automotive stabilizing and general electronics showing decent but lower growth. CFO Daniel Hopgood stated that IPS and ATS margins are at a good starting point, while MFS's 40%+ margin in the quarter was a notable achievement, with upper 30s% being more sustainable due to portfolio changes and operational tailwinds.

Mike Halloran from Baird inquired about the broadening of semiconductor applications within the ATS segment, specifically whether growth extends beyond traditional strong areas like AI and cloud computing. He also asked for clarity on the margin trajectory for IPS, ATS, and Medical segments for the upcoming year, questioning if the current robust levels are sustainable.

Answer

Sundaram Nagarajan, President and CEO, confirmed that strength in semiconductors remains concentrated in AI and cloud computing, with automotive stabilizing and general electronics showing lower but decent growth. Daniel Hopgood, Executive Vice President and CFO, stated that IPS and ATS margins are good jump-off points, while Medical's 40%+ EBITDA margin was a notable achievement, with upper 30s being more sustainable, partly due to portfolio changes and operational tailwinds.

Mike Halloran asked about Alliance Laundry's Q4 growth trajectory, specifically the moderation to mid-single digits, and the dynamics influencing international segment margins.

Answer

CEO Mike Schoeb explained that the Q4 growth moderation reflects a return to a normalized 5% CAGR after two years of double-digit growth, influenced by tough prior-year comparisons, with no change in underlying demand. Regarding international margins, Mike Schoeb cited customer mix and temporary new product launch effects, while CFO Dean Nolden highlighted a year-to-date 15% EBITDA growth and over 100 basis point margin improvement, narrowing the gap with North America.

Mike Halloran asked about the revenue growth trajectory into Q4, specifically why it's moderating to mid-single digits, and sought clarification on international margin trends for Q4 and the appropriate baseline moving forward.

Answer

CEO Mike Shabe explained that the Q4 moderation reflects a return to a more normalized growth rate after two years of double-digit growth, influenced by tough prior-year comparisons, with no change in demand or customer sentiment. Regarding international margins, Mr. Shabe noted that Q3 saw impacts from customer mix and new product launches like Stax X, but overall margin parity between U.S. and international markets remains close. CFO Dean Nolden added that year-to-date international revenue grew 10% and EBITDA grew 15%, improving adjusted EBITDA margin by over 100 basis points.

Mike Halloran asked about the end market outlook for the second half of the year, what assumptions are embedded in the guidance regarding sequential dynamics, and current channel inventory levels. He also inquired about the puts and takes for the margin line in the back half, specifically regarding price-cost performance and how it bridges from the first half.

Answer

CFO Scott Cottrill indicated that the second-half guidance implies a slight year-over-year degradation, driven by demand uncertainty, and is conservative. CEO Scott Barbour added that inventory levels are normal, and market friction from the government shutdown and interest rate uncertainty is present, but ADS is outperforming. Scott Cottrill reiterated that price-cost is stable, and the margin outlook is demand-driven, applying a 30-40% incremental-decremental margin approach.

Mike Halloran asked about the expected performance of end markets in the second half of the year, the assumptions embedded in the guidance regarding sequential dynamics, and the current state of channel inventory. He also inquired about the puts and takes for the margin line in the back half, specifically regarding price-cost dynamics.

Answer

Scott Cottrill (EVP, CFO, and Secretary) indicated that the implied second-half guidance assumes a slight year-over-year degradation, reflecting a conservative demand outlook and utilizing a 30-40% incremental-decremental margin approach. Scott Barbour (CEO and President) added that inventory levels are appropriately sized for the current tepid demand, noting market friction from the government shutdown and interest rate uncertainty. He confirmed that price-cost remains stable, with no unusual manufacturing, transportation, or SG&A trends expected.

Mike Halloran asked about Flowserve's environmental perspective, including the pipeline, funnel, and conversion rates, and how the underlying trajectory for 2026 aligns with the company's long-term framework. He also inquired about pricing dynamics, market receptivity, competitive landscape, and the forward outlook for price-cost.

Answer

Scott Rowe, Flowserve's President and CEO, highlighted strong aftermarket performance, with the OE business becoming a smaller, more resilient part of the portfolio. He described the project environment as constructive, particularly for power and nuclear, and noted a five-year low in Middle East energy projects with future funnel opportunities. Regarding pricing, Mr. Rowe explained that U.S. pricing has been aggressive due to tariffs, with sticky prices in the aftermarket, leading to a price-cost neutral or slightly positive outlook. He acknowledged project pricing remains competitive but Flowserve is selective in bidding for large pump projects.

Mike Halloran inquired about the current environment from a pipeline and funnel perspective, the underlying trajectory of orders and conversion, and how this aligns with Flowserve's long-term framework, specifically looking ahead to 2026. He also asked about pricing dynamics, market receptivity, competitive landscape, and the forward outlook for price-cost.

Answer

Scott Rowe, President and CEO, explained that aftermarket business remains strong with consistent bookings over $600 million, driven by high utilization rates and improved capture rates, with tremendous long-term growth potential. For original equipment (OE) projects, which now represent a smaller, more resilient portion of the business, the environment is reasonably constructive, with Q3 showing improvement over Q2. He highlighted significant growth opportunities in power and nuclear, and anticipated improvement in Middle East energy projects by 2026. Regarding pricing, Mr. Rowe noted sticky prices in the run-rate and aftermarket segments, especially in the U.S. due to tariffs, leading to a price-cost neutral or slightly positive outlook. Project pricing remains competitive, but Flowserve is selective in bidding to ensure value creation.

Mike Halloran asked for an update on the tracking of new clean energy product launches, the process for achieving break-even in these categories, and early thoughts on reclaiming losses in 2026.

Answer

President and CEO Aaron Jagdfeld stated that while the long-term outlook for clean energy products is positive, 2026 will be tougher, requiring a recalibration of R&D spend. New products like PowerCell 2 and Power Micros are just launching, with limited data points. The North Star remains break-even by 2027, supported by rising electricity prices, declining technology costs, and potential interest rate pullbacks. He emphasized the need to see share gains in 2026 to avoid further recalibration, underscoring that it's not intended to be a perpetually money-losing business.

Mike Halloran asked for an update on the tracking of new clean energy product launches, the process for achieving break-even in these categories, and initial thoughts on reclaiming losses in 2026.

Answer

President and CEO Aaron Jagdfeld affirmed a positive long-term outlook for clean energy products, noting a recalibration of R&D spend as PowerCell 2 and Power Micro begin shipping. He reiterated the North Star of achieving break-even by 2027, despite an expected market contraction in 2026 due to reduced federal incentives. He emphasized the need for market share gains in 2026 and the company's commitment to profitability in this strategic area.

Mike Halloran asked about the global auto production outlook for the next year, ITT's expected outperformance, and the funnel conversion to orders specifically on the Industrial Process (IP) side, including customer sentiment.

Answer

Luca Savi, CEO and President, detailed Q3 auto production growth, with China up 9.7% and Europe/North America also up. He forecasted 2025 global auto production to be up 2% to 91 million vehicles, primarily driven by China, while Europe and North America are expected to be down low single digits. For 2026, he anticipates flattish to low single-digit growth, with ITT continuing to outperform the market by 360 basis points. Regarding the IP funnel, Mr. Savi noted it is sequentially up 22% in active quotes and up 9% year-over-year without energy projects, showing positive signs across North America, APAC, and Latin America, with green project opportunities also considerably up.

Mike Halloran inquired about ITT's perspective on global auto production trends for the upcoming year, specifically how the company anticipates tracking against the market baseline given its consistent outperformance metrics. He also asked for an update on the Industrial Process (IP) funnel, customer sentiment, and confidence in converting opportunities to orders.

Answer

CEO Luca Savi detailed Q3 global auto production, highlighting China's 9.7% growth, and provided a full-year 2025 forecast of 2% growth, primarily driven by China, with Europe and North America expected to be down. He projected a flattish to low single-digit increase for 2026, reiterating ITT's expectation to outperform the market by 360 basis points. Regarding the IP funnel, Mr. Savi noted a 22% sequential increase in active quotes and a 9% year-over-year increase excluding energy, with positive signs across North America, APAC, and Latin America, including a considerable rise in green project opportunities.

Mike Halloran (Baird) asked about the underlying market dynamics for Xylem heading into 2026, seeking confirmation of expectations for normal-ish growth despite current China headwinds. He also inquired about Xylem's long-term strategy and management approach for the China market.

Answer

CFO Bill Grogan affirmed that the fundamental dynamics across all four segments remain strong for 2026, excluding China headwinds and a slight increase in "walkaway" revenue due to accelerated 80/20 initiatives. He highlighted resilient municipal demand and differentiated industrial technology. CEO Matthew Pine outlined Xylem's China strategy as staying the course but right-sizing the business for the current demand environment, including a significant workforce reduction (around 40%). He noted the market's hyper-competitiveness and will monitor it closely through the first half of 2026, with teams reallocating resources to align with market opportunities and technology.

Mike Halloran from Baird asked if there are any underlying marketplace dynamics that would prevent Xylem from achieving 'normal-ish' growth in 2026, beyond the known China headwinds. He also inquired about Xylem's long-term strategy for managing and addressing the China market.

Answer

CFO Bill Grogan affirmed that fundamental dynamics for all four segments remain strong, supporting normal growth, with the main headwinds being China and a slight increase in walkaway revenue from accelerated 80/20 progress. CEO Matthew Pine stated that Xylem is right-sizing its China business for the demand environment, including restructuring actions (e.g., 40% workforce reduction), while maintaining a long-term view but sizing for current market realities.

Mike Halloran with Baird inquired about Franklin Electric's end market outlook for 2026, focusing on water markets, expected sequential trends, and the anticipated drivers of growth (volume vs. price). He also asked for clarification on the energy systems margin profile.

Answer

CEO Joe Ruzynski stated that U.S. and Canada water markets are expected to remain subdued but anticipate volume growth driven by innovation, channel partnerships, and new products. He noted more optimism for international water market growth. CFO Jennifer Wolfenbarger and CEO Joe Ruzynski clarified that energy systems margins are expected to be in the low to mid-30% range, with tariffs being the primary year-over-year impact in Q3, partially offset by a September price increase effective in December.

Mike Halloran inquired about Franklin Electric's end market outlook for the upcoming year, specifically focusing on sequential trends, the balance of volume versus price growth in core water markets, and the expected margin profile for the Energy Systems segment.

Answer

CEO Joe Ruzynski indicated expectations for a subdued but volume-growing U.S. and Canada market, driven by innovation and channel relationships, while expressing more optimism for international water market growth. CFO Jennifer Wolfenbarger clarified that Energy Systems' price increases in December and supply chain normalization should help offset tariff pressures, with operating margins expected in the low to mid-30s for next year.

Pez on behalf of Mike Halloran from Robert W. Baird & Co. Incorporated asked for details on the drivers of margin phasing in the second half and for an update on the M&A funnel, including how acquisition opportunities have evolved.

Answer

President & CEO Aaron Saak and SVP & CFO Christina Cristiano detailed the margin drivers. For CPI, H2 margins will benefit from a mix shift towards higher-margin gaming sales. For SAT, margins will accrete due to accelerated synergies from the De La Rue integration and normal seasonality. Regarding M&A, Aaron Saak expressed confidence in closing another deal within a year, noting the funnel is the healthiest it's been and that recent acquisitions have opened new adjacencies like ID verification.

An analyst from Baird, speaking for Mike Halloran, asked about the performance of the commercial business, specifically the pull-through of legacy Hayward products with ClorKing customers. The second question concerned the M&A pipeline and capital allocation priorities given the healthy balance sheet.

Answer

President and CEO Kevin Holleran expressed excitement about the commercial business, which has doubled in size since the ClorKing acquisition, with meaningful organic growth as well. He stated the goal is for commercial to become a double-digit percentage of the overall mix. On capital allocation, Holleran prioritized organic growth investments first, followed by M&A, noting a healthy pipeline of opportunities. SVP & CFO Eifion Jones added that the strong balance sheet and cash flow also allow for shareholder returns, referencing the new $450 million share repurchase authorization.

An analyst, on behalf of Mike Halloran, asked about the sales process for the new Nexa SaaS platform, customer adoption, and whether field testing has revealed new areas for future organic or M&A investment.

Answer

CEO Robert Pagano described the Nexa sales process as different from traditional sales, focusing on solving specific customer problems through strategic accounts and demonstrating value with a payback of less than one year in pilot programs. He confirmed that learnings from Nexa are informing new product development and helping sell core products. CFO Shashank Patel added that learnings from existing leak detection platforms were integrated into Nexa.