Randy

Randy asked about the progress and timing of CNH's targets to reduce Ag dealer owners by a third by 2030 and increase sales through dual-brand dealers, questioning if the progress would be linear or back-end loaded.

Answer

CEO Gerrit Marx stated that the advancement on multi-branding is steady, with a few significant deals in the near term followed by a long grind through the rest of the network. He cited a recent large deal in northeastern Germany converting a competitor's network to CNH multi-brand. Marx clarified that the goal is not to have all brands everywhere but to implement dual-branded dealerships where it makes strategic sense across North America, South America, and Europe, focusing on external competition rather than internal brand rivalry.

Randy asked for insights into the underlying demand trends in automation orders, differentiating between new products like Kollmorgen Essentials and robotics versus traditional markets, and sought an outlook for the shippable backlog in 2026. He also inquired about the residential HVAC outlook for 2026, given higher-than-expected destocking in Q4, and confidence in H2 alleviation.

Answer

CEO Lewis Pinkham reported automation orders were up 9% in the quarter and 6% on a 12-month rolling basis, noting Kollmorgen Essentials contributed only $1 million in Q4 but is gaining momentum. He reiterated expectations for double-digit growth in robotics. For residential HVAC, Mr. Pinkham maintained an outlook of high single-digit decline for 2026, with the largest impact in H1 and a potential H2 rebound driven by easier comparisons rather than market improvement. CFO Rob Rehard also participated in the discussion.

Randy asked about the 'inning' of mega project spend, seeking a longer-term outlook beyond 2026, given the expectation of another strong year. He also requested more color on the cost actions mentioned in the prepared remarks to offset headwinds and their expected contribution to margins and progression throughout the year.

Answer

Ted Grace, Chief Financial Officer, stated that the outlook for mega projects is very healthy and not in the later innings, driven by 6-8 tailwinds including infrastructure, technology, power, and data centers. Matthew Flannery, President and Chief Executive Officer, explained that cost actions are focused on mitigating repositioning costs through improved tools and oversight, along with other hard cost reductions. He noted that benefits would build throughout the year, not as a 'light switch,' with more mitigation opportunities arising during peak volume quarters.

Randy asked for United Rentals' long-term outlook on mega project spend, using an 'innings' analogy to gauge its maturity, and sought color on the cost actions being taken to offset headwinds in 2026, including their expected contribution to margins.

Answer

CFO Ted Grace stated that the outlook for mega projects is very healthy, and they don't believe it's in the later innings, citing multiple tailwinds across infrastructure, technology, and power. CEO Matthew Flannery explained that cost actions are focused on mitigating repositioning costs, especially during peak activity, and other hard cost reductions, all embedded in the guidance to protect margins and ensure profitable growth. He noted that benefits would progress throughout the year, not as a 'light switch.'

Randy inquired about margin drivers beyond volume and price for 2026, specifically cost-down and manufacturing efficiency initiatives. He also asked for an overview of the M&A pipeline, past acquisition sizes, and target areas.

Answer

CEO Mike Shabe identified product mix (larger capacity products), continuous cost-down opportunities (executed cautiously to maintain quality), and factory efficiency optimization as key margin drivers. Regarding M&A, Mr. Shabe noted the company's capability, having completed 16 smaller tuck-in distributor acquisitions in the U.S., emphasizing that M&A supplements strong organic growth and is not a necessity, with ongoing conversations but no immediate manufacturing-side targets.