Nicole DeBlase

Nicole DeBlase asked about the significant increase in CST orders, questioning if it signals a market rebound or easier prior-year comps. She also inquired about the performance of Europe commercial, which was down mid-single digits in Q3, and the reasons behind it.

Answer

CEO David Gitlin highlighted the tremendous performance of the container business, which was up 50% in Q3 and projected up 30% for the year, driven by share gains and new products. He noted North American truck trailer was flattish but expected good Q4 growth, though it's too early to call a strong rebound. For Europe commercial, Mr. Gitlin attributed the Q3 decline primarily to timing issues, expecting double-digit growth in Q4 and strong backlog for next year. He also mentioned that the rentals business was down due to year-over-year comparisons with the Olympics in Paris.

Nicole DeBlase of Deutsche Bank asked about the significant increase in CST orders, questioning if it signals a market rebound or easier prior-year comps, and sought details on container versus truck/trailer performance. She also inquired about Europe commercial's mid-single-digit decline in Q3, asking if it was a timing issue and about data center pursuits in the region.

Answer

CEO David Gitlin highlighted tremendous performance in the container business, up 50% in the quarter and projected up 30% for the year due to share gains from new products. He noted North America truck trailer was flat but moving in the right direction, while European truck trailer was down a few percent. For Europe commercial, he attributed the Q3 decline to a timing issue, expecting double-digit growth in Q4 and strong backlog for next year, driven by robust data center pursuits.

Nicole DeBlase asked about EMEA margins, specifically if Q3 was the low watermark, the path back to mid-20s margins, and whether this can be achieved through restructuring alone or if volume growth is essential.

Answer

CFO David Fallon confirmed that Q3 was likely the low watermark for EMEA margins. He expects a combination of sales acceleration in EMEA in Q4 (up mid-teens sequentially) and addressing operational inefficiencies (including those related to tariffs) to drive significant margin improvement in Q4. He noted that many supply chain actions to mitigate tariffs were put in place to address inefficiencies in EMEA, and their impact would be seen in Q4.

Nicole DeBlase asked about the cadence of cost synergy realization for the Prolec GE acquisition and the impact of industry-wide capacity expansion on pricing within the Prolec business.

Answer

CFO Ken Parks stated that cost synergies, estimated at $60 million-$120 million by 2028, are not expected to be a 'huge hockey stick' but will start flowing relatively soon after the anticipated H1 2026 closing, focusing on G&A, design, and leveraging best practices. CEO Scott Strazik added that Prolec GE is already a well-run business with 25% EBITDA margins, suggesting 'reverse synergies' from Prolec's practices. He expects synergies to materialize from 2027 onwards.

Nicole DeBlase asked about the cadence of cost synergy realization for the Prolec GE acquisition, what drives faster savings, and the impact of industry capacity expansion on pricing within the Prolec GE business.

Answer

CFO Ken Parks stated that cost synergies ($60-$120 million by 2028) would start flowing relatively soon after the acquisition closes in H1 2026, driven by G&A and design leveraging, without requiring large investments. CEO Scott Strazik added that Prolec GE's 25% EBITDA margins indicate it's already well-run, and some synergies might be 'reverse synergies' from learning Prolec GE's best practices. He expects synergies to cut in during 2027 and beyond, focusing on accelerating fulfillment and quality.