Tim Thein

Tim Thein asked for clarification on the industrial business's growth rate embedded in the 4Q guidance, comparing it to Q3's 3%, and inquired about recent order activity trends. He also sought an update on the progress of realizing growth initiatives for the Dodge business, including the new service center and product introductions, and how these contribute to Dodge's underlying growth prospects.

Answer

CFO Rob Sullivan stated that the 4Q industrial growth rate embedded in guidance is slightly below 3%, but recent order activity has been strong, making them comfortable with the forecast. He added that the company is in the "middle innings" of integrating Dodge, having realized significant cost synergies, and is now deploying new initiatives like the service center and product introductions, which are expected to drive future growth.

Tim Thein inquired about the industrial business's Q4 growth rate, which was guided to be comparable to Q3's 3%, asking about recent order activity trends relative to this forecast. He also sought an update on the progress of realizing growth initiatives for the Dodge business, including its global expansion and new service center.

Answer

CFO Rob Sullivan stated that the Q4 industrial forecast is slightly below 3%, but recent order activity has been good, making them comfortable with the forecast. He added that the Dodge integration is in the 'middle innings' for growth initiatives, with new service centers and product deployments underway, promising bright prospects for the business.

Tim Thein asked about Cummins' capital allocation flexibility in light of a potential spinoff by its AMT joint venture partner, and sought clarification on total data center revenue for 2025 and its embedded growth in 2026.

Answer

Chair and CEO Jennifer Rumsey stated it's premature to comment on the Eaton-Cummins joint venture spinoff but expects continued partnership. Executive Director of Investor Relations Nick Arens clarified that data center revenue for 2025 was about $3.5 billion, hitting the upper bound of the 30%-35% growth expectation from $2.6 billion in 2024, split between power systems and distribution.

Tim Thein asked about Cummins' capital allocation flexibility, specifically if the potential spinoff of Eaton's AMT venture partner could lead to an opportunity for Cummins to increase its stake. He also requested the total data center revenue for 2025 and what is embedded in the 2026 outlook across power systems and distribution.

Answer

Jennifer Rumsey, Chair and CEO, stated it's premature to comment on the Eaton-Cummins joint venture spinoff but expects continued partnership. Mark Smith, CFO, clarified that total data center revenue for 2025 was approximately $3.5 billion (up from $2.6 billion in 2024), distributed between the power systems and distribution businesses.

Tim Thein from Raymond James asked if Cummins is seeing increased demand for reciprocating engines for primary power generation and questioned the drivers of the high margins in the Distribution segment.

Answer

Chair and CEO Jennifer Rumsey stated that while the 'speed to power' theme is a strategic area of interest, Cummins' business today remains primarily focused on backup power. CFO Mark Smith explained that the strong Distribution margins were the result of broad-based operational improvements across its international operations, not just benefits from the power generation market.

Tim Thein from Raymond James inquired if Cummins is seeing increased demand for reciprocating engines for primary power generation, given the 'speed to power' theme and long lead times for turbines. He also asked for drivers of the high margins in the Distribution segment.

Answer

CEO Jennifer Rumsey stated that while Cummins is strategically evaluating the primary power market, its business today remains focused on backup power and is not yet meaningfully impacted by this trend. CFO Mark Smith explained that the strong Distribution margins are the result of broad-based operational improvements, including in international operations, in addition to strong parts and power generation sales.

Tim Thein asked for comments on the vocational segment's backlog and its influence on the 2026 revenue composition, specifically inquiring about the expected step-down in Refuse Collection Vehicles (RCVs) and the revenue split across Fire & Emergency (F&E) and AeroTech.

Answer

CEO John Pfeifer affirmed the vocational segment's healthy backlog, noting strong demand and order rates for fire apparatus and airport products, supported by customer investments and market conditions. Pfeifer acknowledged temporary pressure in the refuse and recycling business due to a short-term lull in CapEx, but expressed confidence in the long-term growth and overall exceptional performance of the vocational segment, driven by technology and operational improvements.

Tim Thein asked for comments on the vocational segment's backlog and its influence on the 2026 revenue composition, specifically inquiring about a potential step-down in Refuse Collection Vehicles (RCVs) and the split across Fire & Emergency (F&E) and AeroTech.

Answer

President and CEO John Pfeifer confirmed that the vocational segment's backlog remains very healthy across fire and airport markets, with continued strong order rates. He noted some temporary pressure in the environmental business (RCVs) due to a reluctance in CapEx, but expressed confidence in the long-term growth and overall strong performance of the vocational segment, driven by technological innovations.

Tim Thein asked about expectations for Q4 Access order activity, its composition (e.g., national rental companies), and the implications of more stock units (Build My Pierce) on product mix and margins for the Vocational segment's 2028 target.

Answer

John Pfeifer, President and CEO, clarified that the updated EPS guidance range was primarily influenced by Q4 Access orders for Q4 delivery, reflecting customer decisions on equipment intake. For the Pierce business, he stated improved output would reduce backlog and that there was no specific margin differential between Build My Pierce units and fully customized units.

Tim Thein asked about expectations for Access segment order activity in Q4, particularly its composition and the role of National Rental Companies (NRCs), as well as implications of more stock units and 'Build My Pierce' offerings on product mix and margins within the vocational segment.

Answer

CEO John Pfeifer explained that the updated EPS guidance range primarily reflects Q4 Access orders for Q4 delivery, influenced by customer decisions on equipment intake. He noted that improved output in the Pierce fire truck business will continue to draw down backlog, and there is no specific margin differential between 'Build My Pierce' units and fully customized units.

Tim Thein of Raymond James Financial, Inc. questioned if the 20% growth in the Fire & Emergency segment was expected to continue from a product mix standpoint in the second half. He also asked for clarification on whether the positive sales mix in the Access segment was driven by product or geography.

Answer

CEO John Pfeifer affirmed that the strength in the Pierce fire apparatus brand is expected to continue, supported by ongoing investments and capacity increases. CFO Matthew Field explained the favorable Access segment mix was due to multiple factors, including a stronger geographic mix in North America and a stronger-than-expected mix of independent customers year-over-year.

Tim Thein asked about United Rentals' 2026 plan for fleet productivity, specifically if it assumes the ability to outgrow assumed inflation, and inquired about the timing and cadence of fleet loadings and CapEx in 2026, given some pull-forward in Q4 2025.

Answer

CEO Matthew Flannery confirmed that the 2026 guidance embeds the expectation of achieving at least the 1.5% hurdle for fleet productivity to offset inflation, though mix can cause quarterly lumpiness. He expects a normal CapEx cadence for 2026, with 15-20% in Q1, 70-75% in the middle quarters, and the balance in Q4, similar to previous years.

Tim Thein asked about the 2026 fleet productivity plan, specifically if United Rentals expects to outgrow assumed inflation. He also inquired about the timing of fleet loadings and CapEx in 2026, considering some CapEx was pulled forward into Q4 2025.

Answer

Matthew Flannery, President and Chief Executive Officer, confirmed that the 2026 guidance embeds the expectation to at least reach the 1.5% inflation hurdle and achieve positive fleet productivity for the full year, despite potential Q1 lumpiness due to mix. He expects a normal cadence for CapEx deployment in 2026, with approximately 15-20% in Q1, 70-75% in the middle quarters, and the balance in Q4, similar to previous years.

Tim Thein inquired if the growth in the mobile aftermarket business is expected to settle from its strong Q1 performance for the balance of the year, asking for underlying assumptions. He also asked for insights into the benefits from footprint optimization, specifically what they might yield exiting the year and as a starting point for next year's savings.

Answer

CEO Tod E. Carpenter confirmed that a settling of mobile aftermarket growth is a fair assumption, noting low single-digit OE growth versus double-digit independent channel growth in Q1, and anticipating typical Q2 OE balance sheet management. CFO Brad Pogalz referred to the full-year guidance, stating that 55% of operating profit is expected in the second half, largely from gross margin expansion and footprint optimization benefits as projects complete.

Tim Thein of Raymond James Financial asked about the Mobile aftermarket outlook, the scale of the new Mighty partnership, and the duration of the power gen super cycle. He also followed up on whether the company is seeing a change in the large project pipeline related to North American re-industrialization.

Answer

Chairman, CEO & President Tod Carpenter explained that for fiscal 2026, Mobile aftermarket growth will be driven more by the independent channel, following a restocking-led bounce in the OE channel in fiscal 2025. He confirmed the power gen super cycle continues with no end in sight and a very long backlog, but declined to comment on the scale of a single customer partnership. Regarding re-industrialization, he stated the project pipeline remains solid and is not abating, but has not accelerated to a notable degree.

Tim Thein from Raymond James asked for preliminary thoughts on fiscal 2026, particularly regarding optimistic markets or geographies. He also inquired about the current inventory levels within the mobile aftermarket channels.

Answer

CEO Tod Carpenter deferred specific fiscal 2026 guidance but emphasized that the company is performing at a record level despite OE market headwinds, positioning it for significant leverage when the cycle turns. On inventory, he stated that levels in both the OE and independent aftermarket channels are at comfortable 'pull-through levels,' suggesting normal seasonal demand ahead.

Tim Thein inquired about Deere's expectations for production costs in 2026, excluding the impact of tariffs, given the observed build-up in these costs throughout 2025, and sought guidance on the overall equipment operations' production cost outlook.

Answer

Josh Beal, Director of Investor Relations, stated that excluding the incremental $600 million in tariffs, production costs are expected to be slightly unfavorable in 2026. He cited unfavorable overheads, particularly in large ag, and headwinds from the North American labor contract's step-up year, partially offset by favorability in profit sharing due to lower income levels. Material costs, excluding tariffs, are expected to be slightly negative but close to flat, including indirect tariff impacts. Josh Jepsen, CFO, emphasized ongoing opportunities for cost reduction in product and process.

Tim Thein inquired about the outlook for production costs in 2026, excluding tariffs, and how various factors contribute to the overall equipment operations' production cost expectations.

Answer

Chris Seibert, Manager of Investor Communications, stated that excluding the incremental $600 million in tariffs, production costs are expected to be slightly unfavorable in 2026 due to unfavorable overheads in large ag and North American labor contract step-ups, partially offset by lower profit sharing. Josh Jepsen, CFO, emphasized ongoing opportunities for cost reduction in product and process production.

Tim Thein questioned the wide range in Deere's operating cash flow guidance with only one quarter remaining in the fiscal year, asking how much was related to channel inventory uncertainty.

Answer

CFO Joshua Jepsen stated that the company feels confident about its inventory reduction progress. He clarified that the wide guidance range was maintained to acknowledge the uncertain environment, but the midpoint of their internal forecast has not changed, reflecting stability in their cash flow expectations.

Tim Thein asked for quantification of the cost savings expected for 2026, referencing a prior figure of $75 million to $80 million, and how that might frame the impact for the upcoming year. He also inquired if the company anticipates a normal sequential organic sales step-up of approximately 10% from Q4 to Q1, based on current channel and customer feedback.

Answer

CFO Mike DiSenza confirmed that the company is on track to deliver $75 million in savings, noting that Engineered Bearings is slightly ahead of plan while Industrial Motion is behind. He explained that these savings are second-half weighted (approximately 60/40), implying an incremental cost saving of around $15 million in the first half of 2026. Regarding the Q4 to Q1 sequential step-up, Mr. DiSenza stated there's no reason to believe it would be different from a typical seasonal step-up, based on current order patterns, though he refrained from providing specific 2026 guidance.

Tim Thein asked for quantification of the cost savings and footprint realignments expected to drive margin improvements in 2026, referencing a prior $75M-$80M figure. He also inquired if the pieces are in place for a normal sequential organic step-up from Q4 to Q1 2026, typically around 10%.

Answer

CFO Mike Discenza confirmed the company is on track to deliver $75 million in savings, noting it's slightly ahead in Engineered Bearings and behind in Industrial Motion. He clarified that these savings are second-half weighted (60/40), implying approximately $15 million of incremental cost savings in H1 2026. Mr. Discenza stated there's no reason to believe differently than a typical seasonal step-up from Q4 to Q1, with current order patterns not indicating otherwise.

Tim Thein from Raymond James Financial asked if there was a pull-forward of demand in the China wind business in the first half. He also inquired about the historical role of the distribution segment as a leading indicator around cycle inflection points.

Answer

EVP and CFO Philip Fracassa confirmed they believe there was some demand pull-ahead in China wind due to a regulatory change, which will likely lead to more muted growth in the second half. President & CEO Rich Kyle commented that the distribution channel is less cyclical than new equipment due to its maintenance component and that he wouldn't read too much into the recent small change in its outlook.

Tim Thein asked whether there was a pull-forward of demand in the China wind energy business during the first half and questioned the historical role of the distribution segment as a leading indicator around cyclical inflection points.

Answer

EVP and CFO Philip Fracassa confirmed the company believes there was some demand pull-ahead in China's wind market ahead of a June 1 regulatory change, which will likely mute second-half growth. President & CEO Richard Kyle advised against reading too much into the minor change in the distribution outlook, noting the segment is less cyclical than new equipment due to its significant maintenance and repair component.

Tim Thein from Raymond James Financial asked whether the company observed a pull-forward of demand in its China wind business during the first half. He also inquired about the historical role of the distribution segment as a leading indicator for cycle inflections.

Answer

EVP and CFO Philip Fracassa confirmed that there was a demand pull-forward in the China wind business ahead of a June 1st regulatory change, which is expected to result in more muted growth in the second half. President & CEO Rich Kyle commented that the distribution channel is generally less cyclical than OEM channels due to its MRO component and advised against over-interpreting the recent minor outlook change as a major cyclical indicator.

Tim Thein of Raymond James Financial asked if there was a pull-forward of demand in the China wind business during the first half. He also inquired about the historical role of the distribution segment as a leading indicator around cyclical inflection points.

Answer

EVP and CFO Philip Fracassa confirmed they believe there was some demand pull-ahead in the China wind market ahead of a June 1 regulatory change, which will result in more muted growth in the second half. President and CEO Richard Kyle explained that while the distribution channel can show inventory effects, it's generally less cyclical than new equipment, and he advised against reading too much into the current small changes.

Tim Thein of Raymond James Financial asked if there was a pull-forward of demand in the China wind energy business during the first half of the year. He also inquired about the historical role of the distribution segment as a leading indicator around cyclical inflection points.

Answer

EVP and CFO Philip Fracassa confirmed that the company believes there was a pull-ahead of demand in China's wind market ahead of a June 1 regulatory change, which is expected to result in more muted growth in the second half. President & CEO Richard Kyle commented that the distribution channel is generally less cyclical than new equipment due to its exposure to the maintenance cycle, and he advised against reading too much into the recent small change in its outlook.

Tim Thein asked about the pricing realized in the truck business during Q3 and expectations for Q4. He also inquired about early indicators of a market bottom, specifically the behavior and utilization rates of lease and rental customers within PACCAR Leasing.

Answer

Brice Poplawski, CFO, reported that Q3 pricing was down 1.3% year-over-year, while costs were up 4.6%, resulting in a -5.9% impact, largely due to tariffs. Preston Feight, CEO, added that sequentially, pricing was up 1.6% and expects favorability moving forward. Mr. Feight confirmed that utilization is a key factor for market recovery and is currently healthy for PACCAR Leasing, which they are closely monitoring.

Tim Thein asked about the pricing realized in PACCAR's truck business during Q3 and expectations for Q4. He also inquired about early indicators of a market bottom, specifically lease and rental customer behavior and utilization rates, as observed through PACCAR Leasing.

Answer

CFO Brice Poplawski stated that Q3 pricing was down 1.3% year-over-year, while costs were up 4.6%, resulting in a negative 5.9% impact, largely due to tariffs. CEO R. Preston Feight added that sequentially, pricing was 1.6% and favorability should improve moving forward. Feight confirmed that utilization for PACCAR Leasing is currently healthy, and while it's a key factor, many elements contribute to the truck market's dynamics.

Tim Thein of Raymond James Financial questioned whether margin pressures are causing restaurant customers to shift product mix to lower-spec equipment and asked about the underlying growth assumptions for the commercial business that support the long-term EPS growth target.

Answer

CCO Steve Spittle responded that customers are not trading down; instead, they are focusing on adding new dayparts like beverage and adopting higher-technology products to improve efficiency. CEO Timothy FitzGerald stated the commercial business is viewed as GDP-plus, driven by innovation and new market penetration. CFO Bryan Mittelman added that this revenue growth, combined with operational leverage and share buybacks, supports the high single to low double-digit EPS growth target.

Tim Thein of Raymond James Financial asked if restaurant customer margin pressures are causing a shift to lower-spec equipment and inquired about the underlying growth assumptions for the commercial business that support the long-term EPS target.

Answer

CCO Steve Spittle stated customers are not trading down but are instead investing in technology and new categories like beverage to drive traffic, which benefits Middleby. CEO Timothy FitzGerald added that the commercial business is seen as a "GDP-plus" grower. CFO Bryan Mittelman explained that EPS growth is amplified beyond revenue growth by operating leverage and capital allocation, specifically share repurchases.

Tim Thein of Raymond James Financial asked about the long-term potential for a domestic manufacturing recovery to benefit the AMC business and how the expected pickup in IPS activity aligns with feedback from distribution channel partners.

Answer

CEO Louis Pinkham responded that any rebound in industrial production, with the ISM index below 50 for two years, would benefit both IPS and AMC. However, he noted that the company is not yet seeing or hearing significant customer activity related to reshoring. Regarding the distribution channel, Pinkham acknowledged that feedback indicates slower activity, which aligns with the prolonged industrial downturn. He clarified that Regal Rexnord's second-half growth expectation is primarily driven by longer-cycle projects, not an anticipated step-up in distribution sales.

Tim Thein from Raymond James Financial, Inc. asked how Allison can maintain a mid-30s decremental margin when the high-margin North American vocational market is weakening, probing for offsetting positive factors.

Answer

CFO Scott Mell explained that strength in the Defense business and stability in the Outside North America On-Highway segment are helping to mitigate the impact. COO G. Frederick Bohley clarified that while Class 8 straight trucks are soft, the municipal business remains strong, and the most significant weakness is in medium-duty, which affects the mix.

Tim Thein from Raymond James questioned why the presentation chart on tractor production versus retail sales didn't show a larger gap, given the company's stated focus on under-producing to clear channel inventory.

Answer

CEO Gerrit Marx clarified that the chart is based on units, not value, which masks the true dynamics. He explained that high-value, high-horsepower tractors are being significantly under-produced, but each machine counts as a single unit. He stated that a value-based chart would show a much more pronounced divergence between production and retail, reflecting the company's destocking progress in key product lines.

Tim Thein of Raymond James Financial, Inc. asked about the expected cadence of the new $1 billion share repurchase program and whether early order patterns in North America are influencing Q4 production plans.

Answer

Chairman, President & CEO Eric Hansotia stated that share buybacks are now a preferred method for capital return after operational needs are met, but specific timing is contingent on cash flow availability. He noted that early order programs begin in August, and current sentiment among farmers and dealers is one of 'cautious optimism' pending greater clarity on trade policies.

Tim Thein sought clarification on why MP margins were a key driver for higher expected EPS in Q4 versus Q3 and asked if the new, lower 17.5% tax rate is a sustainable run rate for 2026.

Answer

SVP & CFO Jennifer Kong-Picarello explained the Q4 EPS lift is due to the timing of tariff mitigation, lower tariff cost impact in Q4, and sequential margin improvement in MP. Regarding the tax rate, she stated the 17.5% rate in 2025 is driven by discrete items and expects the rate to normalize back to the ~19% range in the future.

Tim Thein of Raymond James Financial inquired about the specific drivers for the Environmental Solutions Group's (ESG) strong margin performance and the potential effects of recent tax reform on customer demand and the M&A landscape.

Answer

SVP & CFO Ian Hudson attributed the ESG margin expansion primarily to increased production leverage, followed by aftermarket growth and favorable price-cost dynamics. President & CEO Jennifer Sherman added that bonus depreciation from the new tax bill could incentivize equipment purchases by industrial customers. She described the M&A environment as very active but did not expect the tax bill to have a significant impact this year.