Will Branco

Will Branco, representing Nigel Coe from Wolfe Research, asked about the first half versus second half weighting of incremental margins for 2026, given the implied 25% incremental margins in the guidance. He also inquired about the long-term outlook for incremental margins beyond 2026, considering the portfolio transformation. Additionally, he sought color on Q4 and year-to-date January order trends, especially for any orders that might have shifted from Q4 to Q1.

Answer

CFO Gary Corona stated that 2026 incremental margins would be better than 2025, progressing throughout the year, with first-half impacts from tariffs, the EPG acquisition, and growth investments, and second-half improvements as headwinds subside. He deferred comments on post-2026 incremental margins to the upcoming Investor Day. CEO Beth Wozniak noted that ex-data center orders were up low double digits in Q4 (an improvement from Q3's high single digits) and continued to look strong through January.

Will Branco inquired about the implied incremental margins for 2026, which are around 25%, and how the first half versus second half weighting on incrementals should be considered. He also asked for insights into incremental margins beyond 2026, referencing previous targets of 30%-35%. Additionally, he sought color on Q4 order growth (30%), Q-over-Q trends, year-to-date order trends in January, and any orders that might have shifted from Q4 to Q1.

Answer

Gary Corona, Chief Financial Officer, confirmed that 2026 incrementals would be better than 2025, progressing throughout the year, with the first half impacted by carryover tariffs, the EPG acquisition, and growth investments. He deferred comments on post-2026 incrementals to the upcoming Investor Day. Beth Wozniak, Chair and Chief Executive Officer, noted that non-data center orders improved to low double digits in Q4 and continued to look strong through January.