Tami Zakaria

Tami Zakaria of JPMorgan Chase & Co. asked if the Power Systems segment could see improved incremental margins once its new capacity expansion is fully online next year.

Answer

CFO Mark Smith affirmed that the company's aspiration is for Power Systems margins to go higher over time and that having new capacity fully installed should theoretically help, all else being equal. However, he cautioned against expecting dramatic short-term changes, noting the business's complexity and the many variables at play.

Tami Zakaria of JPMorgan Chase & Co. asked if the Power Systems segment could achieve even better incremental margins once its new capacity expansion is fully online next year, suggesting current build-out activities might be creating temporary inefficiencies.

Answer

CFO Mark Smith acknowledged the logic, stating that while there are many moving variables, the company aspires for Power Systems margins to go higher over time. He agreed that once new capacity is fully installed and running against strong demand, performance is 'usually better.' However, he cautioned against expecting dramatic changes in the near term.

Tami Zakaria asked for the price-cost benefit in the first quarter and inquired about the manufacturing footprint and import mix for the Distribution and Components segments.

Answer

CFO Mark Smith reported a net positive price-cost impact of approximately 2% on gross margin, resulting from a 3% price-cost benefit partially offset by a 1% negative volume impact. He explained that the Distribution segment is a reseller, while the Components segment has U.S. manufacturing but faces tariff exposure through its complex global supply base.

Tami Zakaria commented on the healthy Distribution segment guidance and asked for a breakdown between core distribution and power generation-related services. She also inquired about the magnitude of the EPA27 prebuy embedded in the current North American truck outlooks.

Answer

CFO Mark Smith explained that while aftermarket parts provide a stable base, the primary swing factor for the Distribution segment's strong growth is power generation demand from data centers. Regarding the prebuy, Smith noted that a stronger second half is built into the forecast, driven partly by demand ahead of regulations, but acknowledged that the exact timing and magnitude are uncertain.

Tami Zakaria of JPMorgan Chase & Co. highlighted the company's impressive incremental margins and asked if the long-term target of over 25% could be revised upward, given the success in Power Generation and new product introductions.

Answer

CFO Mark Smith acknowledged the strong recent performance but stated that Cummins would not be updating its long-term targets at this time, deferring detailed guidance to the February call. He noted that while the core business has performed well, the Accelera segment has faced incremental headwinds since the company's last Analyst Day.

Tami Zakaria asked about Trimble's leverage ratio of 1.2 turns, inquiring if the company would consider increasing leverage for share buybacks or opportunistic acquisitions, and its overall thoughts on the current low leverage. She also questioned the operating margin expectations for next year, given the mid to high single-digit top-line growth guidance, asking if similar year-over-year improvements should be expected.

Answer

CFO Phil Sawarynski stated that Trimble prioritizes investing back into the business to drive ARR growth, focusing M&A on tuck-in acquisitions within construction software, and committing over a third of free cash flow to share buybacks. He emphasized evaluating the best ROI for capital allocation. Regarding operating margins for 2026, Mr. Sawarynski noted that only the top-line revenue guide was provided, with more details on EPS and margins to follow in the next earnings call.

Tami Zakaria asked for clarification on the $10 million quarterly tariff impact, its country of origin, and the company's revenue exposure to U.S. federal sources, questioning any potential impact from government cost-cutting measures.

Answer

CFO Phil Sawarynski clarified that the $10 million tariff impact is primarily from products imported into the U.S. from Canada and Mexico that are not USMCA compliant, with minimal impact from China. He also stated that direct federal revenue exposure is very small, in the single-digit millions for the remainder of the year, and was already conservatively factored into guidance.

Tami Zakaria of JPMorgan Chase & Co. asked for clarification on the source of the $10 million quarterly tariff impact and questioned the company's revenue exposure to U.S. federal government spending.

Answer

Executive Phil Sawarynski clarified that the $10 million tariff impact is primarily from products imported to the U.S. from Canada and Mexico that are not USMCA compliant, rather than from China. Regarding federal exposure, he stated it was minimal, accounting for only single-digit millions in the forecast for the remainder of the year, making any potential government spending cuts immaterial to their outlook.

Asked for clarification on the source of the $10 million tariff impact and the company's revenue exposure to the U.S. federal government and potential related cost cuts.

Answer

The executive clarified that the $10 million tariff impact is mainly from products coming into the U.S. from Canada and Mexico that are not USMCA compliant, not primarily from China. Regarding federal government exposure, it was already a small part of the guide, has been reduced further, and is now in the single-digit millions, so any further cuts would not have a material impact.

On behalf of Tami Zakaria from JPMorgan, a colleague asked about the planned cadence for the new $1 billion share repurchase authorization and which business areas drove the improved FY25 guidance compared to the Investor Day outlook.

Answer

CFO Phil Sawarynski detailed a plan to execute $625 million in buybacks over Q1 and Q2, followed by repurchases of at least one-third of free cash flow. He noted the company has ample capacity for M&A. He also explained the improved guidance was driven by underlying strength in the AECO and Field Systems businesses, which offset a $40 million FX headwind.

Tami Zakaria of JPMorgan inquired about customer sentiment following recent Fed rate movements and its potential impact on 2025 activity. She also asked about the company's long-term incremental margin targets after recent divestitures.

Answer

Executive Robert Painter noted anecdotally increased customer confidence but highlighted that Trimble's business is now more resilient with over 60% recurring revenue. He pointed to the untapped potential of the bipartisan infrastructure law as a key factor. Executive Phil Sawarynski reiterated that the company is biased towards the high end of its prior long-term operating leverage model of 30-35% and could see about 100 basis points of EBITDA margin expansion annually over a multiyear period.

Tami Zakaria inquired about customer sentiment following Fed rate movements and asked for early thoughts on long-term incremental margin targets after recent hardware-centric divestitures.

Answer

Executive Robert Painter noted anecdotal increases in customer confidence but emphasized the business is more resilient today with over 60% recurring revenue. Executive Phil Sawarynski reiterated that the company is biased toward the high end of its 30-35% operating leverage model and expects about 100 basis points of EBITDA margin expansion over a multiyear view.

Asked about customer sentiment following Fed rate cuts and whether it could lead to an acceleration in activity. Also inquired about long-term incremental margin targets following recent divestitures.

Answer

Anecdotally, there is more customer confidence, but it's too early to tell definitively. The business is more resilient than in past cycles due to its software and recurring revenue mix. For the long-term model, the company is biased above the midpoint of its 5-8% revenue growth target, with gross margin expansion and operating leverage at the high end of 30-35%, potentially leading to 100 bps of EBITDA margin expansion over a multi-year period.

Tami Zakaria inquired about the drivers of increased warranty costs in the quarter and the outlook for Access segment pricing for the remainder of the year.

Answer

Matt Field, EVP and CFO, and John Pfeifer, President and CEO, clarified that the warranty costs were a one-time Q3 item related to defense vehicles built during 2021-2022 supply chain shortages, not an ongoing issue or related to the postal vehicle. Matt Field stated a negative pricing environment in access this year due to weak external demand, but anticipated a different pricing environment in 2026 due to tariffs.

Tami Zakaria asked for clarification on the drivers behind the increased warranty costs in the quarter and their outlook. She also sought an update on Access segment pricing trends, specifically whether positive pricing or increased discounting is expected for the year.

Answer

CFO Matt Field attributed the warranty costs to a one-time item in Q3 related to defense sector vehicles built with interim parts during 2021-2022 supply chain shortages, which is now considered resolved. He clarified that Access pricing has seen a negative environment this year due to weak external demand, with a different pricing environment expected in 2026 due to tariffs.

Tami Zakaria from JPMorgan Chase & Co. asked for more clarity on the company's plan to increase share buybacks, inquiring if there was a specific target amount or if it would be managed as a percentage of free cash flow.

Answer

CFO Matthew Field stated that he expects total share repurchases for the year to 'roughly double, maybe a little bit more' than the $120 million repurchased last year. He clarified that the amount is not determined as a direct percentage of free cash flow but is based on the company's execution and overall comfort level with its performance.

Tami Zakaria asked about the margin outlook for the Access segment in Q2, given its Q1 resilience, and sought clarification on whether the $1 EPS tariff headwind represents a partial-year impact.

Answer

CFO Matthew Field stated that he expects Access margins in Q2 and Q3 to be stronger than Q1, with minimal tariff impact in Q2 due to inventory. Both he and CEO John Pfeifer confirmed the $1 headwind is a partial-year 2025 figure, primarily affecting the second half, and that the company is actively working on mitigation plans for 2026 and beyond.

Tami Zakaria from JPMorgan Chase & Co. asked about the assumed mix of internal combustion engine (ICE) versus battery electric vehicle (BEV) units in the NGDV production ramp-up. She also inquired about the company's exposure to potential tariffs on imports from Mexico and Canada and its mitigation plans.

Answer

CEO John Pfeifer stated that the NGDV production mix is consistent with previous discussions and that the company is on schedule, with the USPS delighted with the new vehicles. On tariffs, he emphasized that Oshkosh is primarily an American manufacturer for the U.S. market and has a resilient global footprint, allowing it to make adjustments to mitigate impacts, similar to how it shifted production to Europe to counter recent tariffs there.

Tami Zakaria inquired if Oshkosh is considering raising production capacity for the Vocational segment given its strong backlog and demand visibility. She also asked about any pleasant surprises from the AeroTech acquisition one year after its completion.

Answer

EVP and CFO Michael Pack confirmed that increasing Vocational capacity is a 'huge focus,' with investments underway in existing facilities and at the new Murphysboro plant. On AeroTech, Pack highlighted strong technology and commercial synergies, while CEO John Pfeifer added that the strength of AeroTech's customer relationships was a positive surprise.

Tami Zakaria asked about the 100 basis point decline in the Americas segment's EBITDA margin, whether it was expected, its drivers, and any tariff headwinds.

Answer

Shyam Kambeyanda, President and CEO, confirmed the decline was partly expected, attributing it to investments in sales and growth initiatives for 2026 and tariff-based impacts late in the quarter. He expressed confidence in margin expansion for 2026 through manufacturing shifts and restructuring initiatives.

Tami Zakaria inquired about the specific drivers of the tariff-related volume headwind in the Americas, particularly in Mexico, and sought details on management's confidence in a second-half recovery. She also asked for a comparison of the announced $30 million in savings to prior years.

Answer

President & CEO Shyam Kambeyanda explained the headwind was from local customers in Mexico delaying orders post-tariff implementation, but noted confidence in an automation rebound due to a strong order book. CFO Kevin Johnson added that cost savings have been ramping up over the past three years, shifting from footprint rationalization to back-office automation and EBX initiatives.

Inquired about the specifics of the tariff-related volume headwind in the Americas, the reasons for confidence in a second-half recovery, and the trend of cost savings compared to previous years.

Answer

The tariff headwind was an unexpected delay in orders from local customers in Mexico, which is expected to abate. Confidence in recovery is high for the automation business due to a strong order book. Cost savings are accelerating as the company shifts focus from footprint rationalization to back-office automation and EBX initiatives.

Tami Zakaria of JPMorgan Chase & Co. inquired about the tariff-related volume headwind in the Americas, particularly in Mexico, and the company's confidence in a second-half recovery. She also asked for context on the announced $30 million in 2025 cost savings compared to prior years.

Answer

President & CEO Shyam Kambeyanda explained the headwind was an unexpected reaction from local customers in Mexico, but he expressed confidence in a second-half automation recovery based on existing orders. CFO Kevin Johnson noted that cost savings have been ramping up over the last three years, shifting from footprint rationalization to back-office automation and EBX initiatives.

Tami Zakaria questioned if it was time for ESAB to update its 2028 target of 22%+ EBITDA margin, given the company's strong current performance and favorable mix shift.

Answer

CEO Shyam Kambeyanda acknowledged the company's strong momentum but stated the focus remains on hitting existing targets before setting new ones. He emphasized that while there is potential for further margin expansion, the company is committed to balancing profitability with reinvesting for long-term growth in areas like innovation and AI.

Tami Zakaria of JPMorgan Chase & Co. questioned the drivers of the strong volume growth in the EMEA & APAC segment, asking if it was due to market share gains or specific end-market exposure. She also requested a refresher on ESAB's equipment versus consumables share in North America and the strategy to close the gap.

Answer

CEO Shyam Kambeyanda attributed the EMEA & APAC success to long-term (8+ years) investments in local teams, market leadership in India and the Middle East, and a strong product portfolio, confirming that the company is gaining share. Regarding North America, he acknowledged equipment share is currently low but noted that brand recognition has grown 200% and the company is confident in its long-term strategy to gain share by selling value.

Tami Zakaria asked where the churning healthcare customers are going, given Stericycle's strong market share, and whether the company expects to win them back once the ERP system is stable, or if these customers are not profitable enough to pursue.

Answer

EVP Enterprise Strategy and President Rafael Carrasco explained that exit interviews are conducted, and often only a portion of a customer's business is lost, as no other competitor can handle an entire hospital network. He expressed confidence in winning back these customers as they will gravitate back to a single provider.

Tami Zakaria asked about where WM Healthcare Solutions customers who are churning are going, whether it's due to price, network, or other factors, and if WM expects to win them back once the ERP system stabilizes.

Answer

Rafael Carrasco (EVP Enterprise Strategy and President) explained that exit interviews revealed customers often don't lose the entire customer, but a piece, as no other competitor can handle the entire hospital network. He expressed confidence in winning back customers due to the desire for a single provider.

Tami Zakaria asked for clarification on Herc Holdings Inc.'s strategy to combine general rental locations, specifically whether the plan for 50 additional specialty locations implies the closure and merger of 100 general rental branches. She also questioned if the company would revisit its cost and revenue synergy targets now that the acquired businesses are on a unified platform.

Answer

Aaron Birnbaum, SVP and COO, clarified that the 50 new specialty locations are primarily fueled by maturing 'branch-in-branch' specialty businesses, not by closing 100 general rental locations. He noted only a handful of H&E branches near existing Herc locations would be consolidated and repurposed into specialty branches. Mark Humphrey, SVP and CFO, stated that revisiting synergy targets is an ongoing process, acknowledging that the original $125 million cost synergy buckets may evolve, and new efficiencies from the unified platform will contribute to incremental margin gains.

Tami Zakaria asked for clarification on the strategy of combining general rental locations to create 50 additional specialty locations, specifically whether it implies closing a significant number of general rental branches. She also inquired if Herc Holdings Inc. would revisit its cost and revenue synergy targets now that the businesses are on a unified platform.

Answer

Aaron Birnbaum, SVP and COO, clarified that the strategy is not about closing 100 general rental locations but rather repurposing a handful of redundant branches into specialty locations and scaling specialty businesses within existing general rental branches. Mark Humphrey, SVP and CFO, noted that revisiting synergy targets is an ongoing process, with efficiency reviews expected to drive incremental margin and efficiency, even if the original synergy buckets evolve.

Tami Zakaria asked if the company's current guidance embeds a recession scenario and whether the synergy targets for the H&E acquisition account for potential customer attrition.

Answer

CFO W. Humphrey responded that the guide does not assume a recession but rather a flat local market offset by mega project growth. He confirmed they have embedded a 10% customer churn 'dis-synergy' into their model, with 60% in year one and 40% in year two post-close, which he described as in line with or above normal attrition.

Tami Zakaria asked for Herc's strategic view on the acquisition of a competitor by a larger peer and inquired about the relative growth expectations for specialty versus general rental revenue in 2025.

Answer

CEO Lawrence Silber stated that Herc does not comment on specific deals but views industry consolidation as a positive that creates a more stable market. CFO W. Humphrey noted the 2025 fleet purchase will be slightly more weighted to specialty to meet customer needs, but it will not meaningfully change the overall fleet mix.

Tami Zakaria asked for commentary on the relative growth of specialty versus general rental revenue in the quarter. She also sought to understand the organic growth trend in local accounts, excluding the impact of recent acquisitions and greenfield openings.

Answer

CEO Lawrence Silber confirmed that specialty rental revenue grew at a double-digit rate but did not provide a more specific figure. On local markets, he stated that overall organic growth was in the 7% range and that the underlying local market behavior stabilized in Q3 at a level consistent with the end of Q2.

Tami Zakaria asked about the component segment's growth, which inflected positively in Q3, inquiring if this growth is expected to accelerate in Q4 and build momentum into 2026, or what a normalized growth rate might look like. She also asked for clarification on the Kazakhstan deal, specifically if the 300 locomotives are delivered over 15 years or if deliveries could be more front-end loaded.

Answer

President and CEO Rafael Santana noted that the component business is largely tracking to plan, with the main exception being a roughly $100 million impact from lower railcar builds year-over-year. He highlighted strong international performance and growth opportunities, particularly in the industrial segment driven by demand for heat exchangers (including from AI-driven power generation). Regarding Kazakhstan, Santana explained that the deal provides coverage for a growing region, driven by existing volume growth, new lines, and aging locomotives. CFO John Olin clarified that the 300 locomotives are for 10 years, serving as a baseload, and the previous contract was exhausted sooner due to accelerated demand.

Tami Zakaria asked about the component segment's growth, which inflected in Q3, and whether this growth is expected to accelerate in Q4 and build momentum into 2026, or what a normalized growth rate might look like. She also sought clarification on the Kazakhstan deal, specifically if the 300 locomotives are spread over 15 years or if deliveries would be more front-end loaded.

Answer

President and CEO Rafael Santana noted that most businesses are tracking to plan, with railcar builds being a notable exception (a USD 100 million impact vs. last year, worse than expected). He expressed satisfaction with the team's progress, international performance, and growth in industrial demand, particularly for heat exchangers (AI-driven). Regarding Kazakhstan, Santana explained the contract provides coverage for a market expected to accelerate due to volume growth, new lines, and aging fleet renewal. CFO John Olin clarified that the 300 locomotives are scheduled for delivery over 10 years, noting that the previous contract was exhausted sooner due to demand.

Tami Zakaria sought to clarify if Wabtec's pricing actions in response to tariffs could apply to its existing backlog or would be limited to new orders. She also asked about the foreign exchange assumptions embedded in the full-year guidance.

Answer

CEO Rafael Santana explained that pricing is managed across the entire 'basket of business' with a customer, which includes new orders, modernizations, and multiyear agreements, rather than on an item-by-item basis. This allows for a balanced and fair approach. CFO John Olin confirmed that the updated guidance incorporates the company's latest view on currency exchange rates for the remainder of the year.

Tami Zakaria inquired about PACCAR's strategy for parts and component sourcing, given the Section 232 tariff offset extending through 2030, and whether the company plans to expand its U.S. footprint. She also asked if PACCAR would consider giving back some pricing to gain long-term market share as tariff headwinds are offset.

Answer

CEO R. Preston Feight stated that it's too early to comment on specific adjustments suppliers might make to their production setups, but PACCAR is initiating conversations. Regarding pricing, Feight emphasized PACCAR's goal to provide great trucks and transportation solutions at a fair price. He noted that as costs decrease, customers should benefit, which in turn should create market share opportunities for PACCAR.

Tami Zakaria inquired about PACCAR's strategy for parts and component sourcing, including potential U.S. footprint expansion, given the 3.75% Section 232 value offset extending through 2030. She also asked if PACCAR plans to pass on tariff savings to customers to gain long-term market share, leveraging its U.S. manufacturing advantage.

Answer

Preston Feight, CEO, stated it's too early to comment on specific supplier adjustments to production setups but PACCAR feels good about its current supply base and is initiating conversations about component growth positioning. He emphasized PACCAR's commitment to providing great trucks and transportation solutions, being paid fairly, and that as costs decrease, it should benefit customers and create market share opportunities for PACCAR.

Tami Zakaria questioned the European outlook for next year, asking if PACCAR plans to produce to demand or continue to underproduce relative to the market. She also inquired about pricing indications for 2025 orders.

Answer

President and CFO Harrie Schippers explained that European volumes were impacted by weakness in Central and Eastern Europe. CEO Preston Feight added that the European team has maintained strong price discipline and that PACCAR intends to build to demand in 2025. Regarding new orders, Feight mentioned positive customer conversations and acknowledged current price/cost tension but expects it to ease through 2025.

Tami Zakaria inquired about the operational timeline and annual capacity of the new engine remanufacturing plant and asked for the reasons behind the revised, lower outlook for the South American market.

Answer

EVP Kevin Baney stated the engine remanufacturing plant will be operational in Q1 of next year and will have a run-rate capacity of about 5,000 engines annually. CEO & Director R. Preston Feight explained the South America outlook reduction is primarily driven by Brazil, where interest rate hikes have negatively affected consumer confidence and investment in trucks.

Tami Zakaria of JPMorgan Chase & Co. asked for the operational timeline and annual capacity of the new engine remanufacturing plant and sought details on the reasons for revising the South American market outlook downward.

Answer

EVP Kevin Baney stated the engine remanufacturing plant will be operational in Q1 of next year with a full run-rate capacity of about 5,000 engines annually. CEO & Director R. Preston Feight attributed the lower South American outlook primarily to Brazil, where significant interest rate hikes have dampened confidence and investment.

Tami Zakaria sought clarification on the Q2 gross margin guidance, asking if potential Section 232 tariffs were included and what was driving the 13-14% range. She also inquired about the potential tariff impact on the Parts business and its sourcing mix.

Answer

CEO Preston Feight clarified the 13-14% Q2 margin guide includes tariffs as they stand today, and any changes from the Section 232 investigation would likely represent upside. CFO Harrie Schippers added that for the Parts business, it's much easier to pass on cost increases with immediate effect, minimizing margin impact.

Tami Zakaria inquired about the geographical drivers for the Q1 delivery guidance and asked for PACCAR's current perspective on its Amplify battery joint venture investment, considering potential administrative shifts regarding BEVs.

Answer

CEO Preston Feight explained that the Q1 delivery forecast reflects a normalization in the robust medium-duty market, a Q4 pre-buy in Mexico, and fewer production days in South America, while US Class 8 deliveries are expected to be flat to slightly up. He strongly reaffirmed the strategic importance of the Amplify JV, stating it is a long-term objective to provide customers with a full powertrain portfolio and secure a low-cost, high-quality battery supply.

Tami Zakaria asked for clarification on Deere's plan to produce to retail demand in fiscal 2026, questioning if production would rise more than retail sales due to underproduction in 2025.

Answer

Josh Beal, Director of Investor Relations, explained that while Large Ag production would track retail sales, the Small Ag & Turf and Construction & Forestry segments would see an additional lift. This is because they were underproduced by approximately 10% in fiscal 2025, so simply building in line with retail demand in 2026 will provide a production tailwind.

Tami Zakaria inquired about the timing of the recent government farm aid package and its potential to create a tailwind for equipment demand in late 2025 or early 2026.

Answer

CFO Josh Jepsen stated that based on historical precedent, the company expects farmers will use the aid primarily to strengthen balance sheets, pay down debt, and purchase inputs. He indicated that the funds are not expected to be a significant driver of new equipment demand in fiscal 2025, though they could potentially help move some used inventory.

Tami Zakaria of JPMorgan Chase & Co. questioned the drivers behind the implied EBITDA margin step-down in the second half of 2025 and asked if the planned share repurchase program would leave sufficient capital for potential acquisitions.

Answer

CFO Jack Kienzler detailed the factors for the second-half margin outlook, citing typical seasonality, moderating share gains after a strong first half, and higher decrementals from lower first-fit volume. CEO Steph Disher addressed capital allocation, emphasizing that inorganic growth is the top priority and the 1-3% repurchase range provides flexibility, supported by the company's strong cash generation capabilities, especially post-separation from Cummins.

Tami Zakaria asked about the quarterly cadence of pricing increases to reach the full-year 3.2% target and requested a scenario analysis on the net impact if Section 232 tariffs were enacted while China tariffs were rolled back.

Answer

CFO Jack Kienzler detailed a pricing ramp, expecting over 3% in Q2, building to the 4-5% range in Q3 and Q4. CEO Stephanie Disher elaborated on tariff impacts, explaining the current focus is on mitigating China and Mexico tariffs through certifications and supply chain adjustments before passing on costs. She stated that any future tariffs, like from Section 232, would be handled with the same principles of mitigation first, followed by price adjustments to remain margin-dollar neutral.

Tami Zakaria questioned the 2025 pricing outlook, asking if the guided 1% could increase in the second half due to tariffs or inflation. She also asked for an evaluation of first-fit win efforts since the separation and if new wins could offset weak OEM forecasts.

Answer

CEO Steph Disher confirmed the 1% pricing guidance reflects actions already taken and does not assume a second-half increase, though they will monitor conditions. On first-fit, she explained wins are longer-cycle but noted a 2024 win will benefit 2025 and that the company is reinvesting in account management to drive further share growth.

Tami Zakaria sought clarification on whether volumes were expected to be positive in the fourth quarter and asked about the magnitude of pricing the company is considering for 2025.

Answer

CEO Stephanie Disher responded that while the company expects to continue gaining market share, overall volumes face downward pressure from fewer selling days and further declines in the heavy-duty first-fit market. Regarding pricing, she did not provide a specific 2025 figure but referenced the company's long-term growth algorithm, which targets 1% to 2% price growth through the middle of the cycle.

Tami Zakaria of JPMorgan Chase & Co. sought to clarify the new revenue run rate for the Assessment, Permitting & Response segment after excluding the one-time emergency response project, and also asked about the company's plans for share buybacks for the remainder of the year.

Answer

CFO Allan Dicks noted that after accounting for about $5.5 million in M&A contributions and normal seasonality, the current level is indicative of the new run rate. President & CEO Vijay Manthripragada added that the aggregate business is now seeing organic growth in the low double-digit territory. Regarding buybacks, Vijay clarified that they are an option to maximize shareholder value but not a current preference or commitment. Allan Dicks reiterated that the focus remains on deleveraging and funding organic growth.

Tami Zakaria of JPMorgan Chase & Co. sought clarity on the new revenue run-rate for the Assessment, Permitting & Response segment, excluding the one-time emergency event, and asked about the company's plans for share buybacks.

Answer

CFO Allan Dicks confirmed the segment's higher run-rate, noting it includes about $5.5 million from prior-year M&A and is subject to typical Q2/Q3 seasonality. President & CEO Vijay Manthripragada added that the company's overall organic growth is now in the low double-digits. Regarding capital allocation, both executives stated that buybacks are an option but not a current priority. The focus remains on organic growth, deleveraging, and cash flow generation, with the redemption of preferred stock having been completed ahead of schedule.

Tami Zakaria from JPMorgan Chase & Co. asked for an update on Middleby's direct-to-customer initiatives, specifically regarding the potential for direct sales of equipment and parts through online channels.

Answer

CEO Timothy FitzGerald clarified that while Middleby does not sell directly to end-users, the company has significantly increased direct engagement through its innovation centers, culinary teams, digital tools, and service initiatives. He emphasized that these efforts are designed to surround the end-user and strengthen channel partnerships, rather than bypass them, with new digital tools already being deployed to enhance this engagement.

Tami Zakaria from JPMorgan Chase & Co. asked for an update on the company's direct-to-customer initiatives and whether there were plans to establish a direct sales channel online for equipment and parts.

Answer

CEO Timothy FitzGerald explained that while Middleby does not sell directly to end-users, its go-to-market strategy involves significant direct engagement through innovation centers, culinary teams, and digital tools for education. He clarified they work with and strengthen their channel partners and are not planning a direct e-commerce sales channel, but are deploying new digital tools to enhance customer interaction.

Tami Zakaria questioned if the $150-$200 million tariff impact estimate was based on current rates and what a potential reversal could look like. She also asked if the 'vast majority' of this year's free cash flow would be allocated to the share buyback.

Answer

Executive Timothy FitzGerald clarified that the tariff impact range already assumes a 20-40% reduction from the gross number, but it could decrease further depending on negotiations. Regarding the buyback, he affirmed the company's commitment to deploying 'essentially the entirety' of its free cash flow for share repurchases this year, while still considering other factors.

Tami Zakaria asked about targets for increasing the parts and services revenue mix for both the remaining and spun-off companies, and requested historical context on how this mix has evolved over the past five years.

Answer

Executive Timothy FitzGerald confirmed that Middleby has initiatives to grow service revenue in both businesses, leveraging tools like IoT. Executive Bryan Mittelman added that the mix has grown most in the Food Processing segment as customers outsource maintenance, while the Commercial segment's mix has been stable and Residential's remains the lowest.

Tami Zakaria asked about current trends in the services side of the Commercial Foodservice segment and whether Middleby has plans to increase its service capacity and technician fleet.

Answer

Executive Timothy FitzGerald acknowledged the industry-wide shortage of service technicians post-COVID and detailed Middleby's focused strategy to address it. This includes hiring technicians into their network and providing industry-leading training at their new facilities. He noted that the number of service agents has grown significantly over the past 18 months as a result of these efforts.

Tami Zakaria from JPMorgan Chase & Co. sought clarification on the flat outlook for the Energy end market, asking what assumptions it includes for North American rig counts. She also inquired about the growth trajectory for the Aerospace and Defense market, questioning if the projected growth would be steady throughout the fiscal year.

Answer

President and CEO Sanjay Chowbey clarified that the flat revenue outlook for Energy is driven by price increases related to higher material costs, which offsets an expected mid-single-digit decline in piece volume and rig counts. For Aerospace and Defense, he projected low double-digit growth for the year, expecting performance to strengthen as supply chain constraints ease and OEM production improves.

Tami Zakaria of JPMorgan Chase & Co. inquired about the drivers for the flattish outlook in the Energy end market for fiscal 2026, particularly regarding North American rig counts. She also asked about the expected growth cadence for the Aerospace and Defense market throughout the fiscal year.

Answer

Sanjay Chowbey, President, CEO & Director, clarified that the flat Energy revenue outlook is the result of higher pricing from material costs offsetting an expected mid-single-digit decline in piece volume and rig counts. For Aerospace and Defense, he projected low double-digit growth for the year, anticipating conditions will steadily improve as OEM production ramps up and supply chain issues are resolved.

Tami Zakaria requested clarity on the full-year 2% pricing outlook, asking if it includes recent tariff-related surcharges, and also inquired about the specific price-versus-cost performance in Q3.

Answer

President and CEO Sanjay Chowbey clarified that the ~2% price realization outlook for the year excludes the impact of tariff surcharges, which are intended to offset the direct cost of tariffs. CFO Pat Watson added that in Q3, price versus raw material cost was balanced for the Infrastructure segment, unlike the prior-year period which faced a headwind.

Tami Zakaria questioned the historical impact of Federal Reserve rate cuts on demand and asked for clarification on how to model the business day impact for the remainder of the fiscal year.

Answer

CFO Pat Watson opined that lower rates are constructive but have a variable lag of several quarters, noting that customer sentiment has not yet turned positive. He then specified the workday impact for the upcoming quarters: +0.5 days in Q2, -0.5 in Q3, and -0.5 in Q4, resulting in a minimal net effect for the year.

Tami Zakaria of JPMorgan Chase & Co. inquired about Caterpillar's medium- to long-term plans for mitigating tariff impacts and if these headwinds will structurally affect the company's margin targets.

Answer

CEO Joe Creed explained that while all options, including sourcing changes and pricing, are being considered, the company requires more certainty before implementing long-term actions. He emphasized Caterpillar's global footprint and its commitment to mitigating the impacts over time, highlighting that short-term "no regrets" actions like cost controls are already underway.

Tami Zakaria asked for clarification on the $250-$350 million Q2 tariff impact, questioning whether this figure should be annualized for the second half of the year or if it represents a specific quarterly run-rate.

Answer

Andrew Bonfield, CFO, explained that the Q2 figure is not a simple run-rate to be annualized. He noted that not all tariffs will be in effect for the full quarter and that the company expects to implement further mitigation actions as the year progresses. Bonfield also highlighted that a significant portion (over 50%) of the tariff impact comes from China, and any potential trade deals could substantially reduce this cost.

Tami Zakaria of JPMorgan Chase & Co. asked about the composition of order growth in the fourth quarter, specifically inquiring how construction and resource industries orders performed sequentially compared to the third quarter.

Answer

Executive Andrew R. Bonfield stated that Energy & Transportation was the primary driver of order growth. He added that Resource Industries saw some improvement from large contracts, while Construction Industries orders were broadly flat for the quarter.

Tami Zakaria inquired about the 2025 outlook for the Resource Industries segment, asking if demand is expected to stabilize, improve, or remain weak after a year of declining volumes.

Answer

Chairman and CEO Jim Umpleby declined to provide 2025 guidance but expressed long-term optimism for mining, driven by the energy transition. He noted the recent volume drop was mainly due to tough comparisons for articulated and off-highway trucks. Positive indicators include high equipment utilization, an aged fleet, low numbers of parked trucks, and strong customer inquiry activity for large mining trucks.

Tami Zakaria of JPMorgan Chase & Co. questioned the company's share buyback strategy, asking if repurchases would continue while the Dana acquisition is pending and what the plan is post-close.

Answer

COO G. Frederick Bohley affirmed that the capital allocation policy is unchanged and the company can simultaneously fund the business, pay down debt, and return cash to shareholders. He stated they will remain opportunistic with buybacks, citing a strong belief in the company's long-term value and a three-year stock price target north of $200 per share.

Tami Zakaria noted the strong pricing realization of nearly 5% in the quarter and asked if a mid-single-digit percentage increase is a reasonable expectation for the full year.

Answer

COO G. Bohley confirmed the Q1 pricing figure was closer to 500 basis points, ahead of the initial 400 basis point guidance. He indicated that for the full year, pricing would likely be 'a little north of the 400 basis points' and agreed that a mid-single-digit outcome is possible.

Tami Zakaria asked for a breakdown of the volume versus price components within the 2025 North America On-Highway guidance, noting the enterprise-wide price increase of 400 basis points.

Answer

G. Bohley, COO, CFO & Treasurer, confirmed the 400 basis point price increase is broad-based, with North America On-Highway as a key driver due to new, shorter-duration long-term agreements. He clarified that the segment's guided 1% revenue growth implies a year-over-year volume decline, primarily driven by an expected slowdown in the medium-duty market, which aligns with industry forecasts.

Tami Zakaria asked for clarification on the incremental volume from the India facility investment and for an assessment of where the market currently stands in the vocational truck upcycle.

Answer

CEO David Graziosi clarified the India investment doubles the manufacturing footprint to increase component fabrication for the 3000 and 4000 Series, boosting global on-highway capacity by 10-20%, not assembly capacity. Regarding the cycle, he described vocational demand as 'unprecedented' with no signs of a near-term pullback, fueled by infrastructure spending and a potential 2027 pre-buy, though industry capacity constraints are a limiting factor.

Tami Zakaria of JPMorgan Chase & Co. inquired about the expected operating margin cadence for the Agriculture segment in the second half of the year, asking if the typical seasonal pattern of a Q3 dip followed by a Q4 rebound would hold.

Answer

CFO Jim Nicholas confirmed that the historical seasonal pattern for Agriculture segment margins is expected to repeat in 2025. He guided for a slight step-down in margins from Q2 to Q3, followed by a strong rebound in Q4, which will align with the company's full-year guidance for the segment.

Tami Zakaria of JPMorgan Chase & Co. asked for clarification on the implied operating margin cadence for the second half of the year and the basis for management's confidence in a modest demand recovery in 2026.

Answer

SVP & CFO Damon Audia outlined the margin seasonality, projecting approximately 7.5% in Q3 and over 9% in Q4 to meet the full-year target. Chairman, President & CEO Eric Hansotia explained that the 2026 outlook is based on a proprietary data science model with around 200 variables, which has proven highly accurate, and is supported by improving farmer sentiment indicators.

Tami Zakaria from JPMorgan Chase & Co. asked about AGCO's pricing strategy for its premium Fendt brand in the event of new import tariffs, specifically whether the company would raise prices or absorb the costs.

Answer

CEO Eric Hansotia clarified that AGCO would not place the entire cost burden of a tariff on a single product line. The company's strategy is to first mitigate costs internally and with suppliers, and then any remaining impact would likely be spread across the broader product portfolio through pricing actions to maintain the relative market positioning and value proposition of all its brands.

Tami Zakaria of JPMorgan Chase & Co. asked about the drivers behind the strong Europe/Middle East (EME) margin in Q4 despite a sales decline and inquired about the potential mid-cycle margin for the region.

Answer

CFO Damon Audia attributed the resilient performance to market share gains and robust parts sales. For the long-term outlook, he stated that AGCO generally targets mid-teens operating margins for its regions, including Europe, at mid-cycle.

Tami Zakaria asked for the drivers behind the expectation for continued strong pricing in North America despite a suboptimal demand environment. Additionally, she requested an update on the company's balance sheet deleveraging plans following the recent debt paydown.

Answer

Damon Audia, Senior Vice President & CFO, attributed strong North American pricing to new product introductions and more selective discounting, especially in the rural lifestyle segment. On deleveraging, he confirmed the $500 million term loan was repaid and stated the company will likely use cash to pay down an additional $250 million of debt maturing in early 2025.

An analyst on behalf of Tami Zakaria asked for an update on the Materials Processing (MP) segment, seeking confirmation that margins are still expected to improve sequentially and inquiring about any signs of recovery in Europe.

Answer

President & CEO Simon A. Meester confirmed expectations for gradual sequential improvement in MP, supported by healthy fleet utilization, despite some caution extending rental conversions. SVP & CFO Jennifer Kong-Picarello added that the margin improvement would be skewed toward Q4, driven by higher factory absorption and a favorable geographical mix.

Tami Zakaria asked for clarification on the China tariff rate assumption in the $0.40 EPS impact guidance. She also inquired about the potential benefits to Terex's portfolio from the recently passed stimulus package in Germany.

Answer

CEO Simon Meester clarified that the guidance assumes a de-escalation of China tariffs to roughly 50% of their current level. Regarding Germany, he noted positive sentiment from customers and stated a stimulus would favorably impact the Material Handling, Aerials, and MP aggregates businesses, with main effects likely starting in 2026.

Tami Zakaria asked why the Environmental Solutions (ES) segment's mid-single-digit growth outlook for 2025 is below the historical high-single-digit rate of the acquired ESG business. She also requested segment-level detail for modeling the Q1 EPS, which is guided to be 10% of the full-year total.

Answer

Executive Simon Meester clarified that the ES segment guidance combines ESG with Terex Utilities, and growth is constrained by supply and capacity ramp-up on the Utilities side, not by ESG's performance. Executive Julie Beck explained that Q1 EPS will be impacted by seasonally lower Aerials revenue and continued production cuts to match demand, while the MP segment will also start slow. ESG is expected to be strong and steady.

Tami Zakaria from JPMorgan Chase & Co. asked about the potential for incremental wage pressure from ongoing industry labor strikes and the company's ability to mitigate this through pricing to protect the price-cost spread.

Answer

Founder, Chairman, President & CEO Patrick Dovigi stated that with only 10% of the workforce unionized and competitive wages already in place, GFL does not see strikes as a material risk. He pointed to declining voluntary turnover rates as an indicator that employees are fairly compensated, suggesting significant wage inflation pressure is not expected within their book of business.

Tami Zakaria from JPMorgan Chase & Co. inquired about the drivers behind the revised operating margin outlook and the margin performance of the Automotive OEM segment.

Answer

Senior VP & CFO Michael Larsen explained that the margin outlook was adjusted due to the dilutive effect of pricing actions taken to offset tariffs, which is an EPS-positive timing issue expected to be recovered. He and President & CEO Chris O'Herlihy expressed confidence in the Automotive segment's margin trajectory, with Larsen projecting margins solidly above 20% for the second half, putting them on track for their long-term goals. O'Herlihy added that ongoing enterprise initiatives and high-margin innovation are key drivers of this performance.

Tami Zakaria from JPMorgan Chase & Co. sought clarification on the full-year organic growth guidance of 0% to 2%, asking if it assumes that pricing gains from tariff actions will be offset by volume declines. She also asked about the timing of these pricing actions.

Answer

CFO Michael Larsen confirmed the guidance incorporates current demand, incremental tariff-related pricing, and lower auto build forecasts. He agreed that it's reasonable to assume higher pricing could offset potential volume softness in the second half. Larsen also stated that all divisions impacted by tariffs have already taken decisive pricing actions based on recent announcements, expressing confidence in their ability to manage the impact effectively.

Tami Zakaria requested details on ITW's direct import exposure from Mexico, Canada, and the EU amid tariff discussions, and asked about the embedded price/cost expectation for 2025.

Answer

CFO Michael Larsen quantified import exposure, stating that combined imports from China, Canada, and Mexico are less than 10% of U.S. domestic spend, making potential tariff impacts manageable. He also noted that the 2025 price/cost expectation is for a normal environment where price offsets cost increases on a dollar basis, consistent with historical performance.

Tami Zakaria asked about the price/cost dynamic in the quarter and the potential for enterprise initiatives to continue driving margin improvement into 2025. She also inquired about ITW's strategic view on high-growth trends like data centers and AI.

Answer

CFO Michael Larsen explained that price/cost has normalized, with price dollars modestly ahead of cost dollars. CEO Chris O'Herlihy affirmed that enterprise initiatives will continue to be a significant contributor in 2025, driven by the company's continuous improvement DNA, calling 80/20 'the gift that keeps on giving.' On strategy, he stated that ITW evaluates all M&A opportunities against its disciplined criteria of sustainable differentiation, business model leverage, and proper valuation, rather than targeting specific sectors.

Tami Zakaria of JPMorgan Chase & Co. asked for more detail on the expected volume cadence for the remainder of the year and the pricing outlook for Q3 versus Q4.

Answer

CFO Brian Delghiaccio projected that volumes for the second half of the year would be flat to slightly negative. He expects Q3 to be flattish year-over-year due to contributions from event-driven landfill volumes, turning negative in Q4 as those projects conclude. On pricing, Delghiaccio reiterated the full-year outlook for 5% average yield on related revenue, implying a rate just under 5% for the second half.

Tami Zakaria asked to isolate the margin impact from weather and project timing in the Environmental Solutions segment and questioned if the 2025 guidance embeds a potential economic slowdown.

Answer

CEO Jon Vander Ark advised looking at Environmental Solutions margin trends over years rather than quarters due to mix variability but affirmed they expect margin expansion for the full year. He clarified the guidance did not assume a recession but rather a 'slow and steady recovery,' and they did not bake in a 'hockey stick rebound.'

Tami Zakaria of JPMorgan Chase & Co. sought clarification on whether the company could continue opportunistic share repurchases if the large M&A deals in its pipeline close, or if it would be an either/or outcome.

Answer

CFO Mary Whitney confirmed that Waste Connections has the financial flexibility and optionality to pursue all aspects of its capital allocation strategy simultaneously. She stated that executing on the M&A pipeline and conducting opportunistic share buybacks are not viewed as mutually exclusive.

Tami Zakaria asked for details on volume growth in the Starches and Sweeteners (S&S) subsegment for Q1 and the full-year 2025, given comments about weakening customer demand.

Answer

CEO Juan Luciano described overall demand in Carbohydrate Solutions as solid but not robust, reiterating guidance for the segment to be slightly lower than last year. He identified pockets of weakness, including lower results in Europe due to high corn costs, softness in the paper industry, and softer exports to Mexico amid tariff uncertainty.

Tami Zakaria asked if the expected high single-digit crush volume growth in Q4 is a reasonable starting point for 2025. She also asked how ADM is preparing for potential impacts from new tariffs that could be imposed by the incoming U.S. administration.

Answer

Chair and CEO Juan Luciano confirmed that, excluding regulatory uncertainty, the Q4 volume growth driven by the Spiritwood facility ramp-up is a reasonable baseline for 2025 under normal conditions. Regarding tariffs, he explained that ADM actively engages in scenario planning and that its global footprint provides the agility to adjust trade flows and adapt to new policies.

An associate for Tami Zakaria asked for confirmation that the Q1 inventory increase was tariff-driven, sought details on vendor agreements to mitigate tariff impacts, and inquired about the timing of the planned inventory unwind.

Answer

CEO Ryan McMonagle confirmed the primary tariff exposure is on chassis from Canada and Mexico. He explained that the company is mitigating costs by leveraging strong supplier relationships and tactically pulling forward chassis inventory purchases ahead of price increases. McMonagle also stated that the inventory reduction will be more weighted towards the second half of the year, with some additional inventory purchasing expected in Q2.

Tami Zakaria of JPMorgan Chase & Co. inquired about the expected progression of rental fleet utilization throughout 2025, given the strong quarter-to-date performance. She also sought to confirm the modeling assumption that Q1 would be the low point of the year within the guided 45/55 H1/H2 split.

Answer

CEO Ryan McMonagle projected that utilization would remain in the high 70s to low 80s range for the year, with normal seasonal increases in the spring and fall driven by transmission project demand. CFO Chris Eperjesy confirmed that Q1 is expected to be the low point of the year, consistent with a 45/55 first-half/second-half revenue and EBITDA split.

Tami Zakaria of JPMorgan Chase & Co. asked about the company's outlook for growth CapEx and OEC growth for the upcoming year, given the improving conditions in the transmission and distribution (T&D) market. She also inquired about the reasons for the lighter-than-expected gross margin in the APS (parts) segment.

Answer

CEO Ryan McMonagle indicated that while formal 2025 guidance is pending, a mid-single-digit fleet growth rate seems like a reasonable preliminary expectation. CFO Chris Eperjesy explained that the APS segment's gross margin was impacted by a mix shift away from higher-margin tool and accessory rentals, which were affected by the same utility market softness, as well as some increased material costs.

Tami Zakaria asked if there is a structural reason why specialty rentals are less penetrated in local markets compared to national accounts, and whether specialty could eventually become as significant at the local level.

Answer

Executive Matthew Flannery explained that the difference is not a structural barrier but a result of their go-to-market strategy. The company prioritizes cross-selling new offerings to its larger customer base, which typically handles more complex projects. He acknowledged that while Gen Rent is more mature and penetrated at the local level, there is a future opportunity for specialty to continue to grow its local presence as those business lines mature.

Tami Zakaria questioned the potential benefits to Bunge from the recent U.S. farmer disaster aid package and asked how the company's outlook would be affected if China shifted agricultural purchases from South America to the U.S.

Answer

CEO Gregory Heckman stated the farmer aid package has a minimal direct impact but is broadly positive as it supports farmer investment in future crops. On a potential trade flow shift, he emphasized that Bunge's balanced global footprint enables it to manage regional trade-offs and adjust its system to serve demand wherever it originates, whether North or South America.

Tami Zakaria of JPMorgan Chase & Co. requested a recap of how past tariffs, particularly on steel, have impacted Manitowoc's business and how the company is preparing for potential future tariffs.

Answer

President and CEO Aaron Ravenscroft explained that previous steel tariffs created a significant cost disadvantage in the U.S., which is now factored into their operations. He suggested that broad tariffs on imported cranes could be a net positive by leveling the competitive landscape. EVP and CFO Brian Regan added that currency fluctuations, which benefit a key competitor, are another major factor they monitor closely, alongside the potential for new tariffs.