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Trane Technologies plc (TT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong growth: revenue $4.69B (+11% y/y) and adjusted EPS $2.45 (+26% y/y), with adjusted EBITDA margin expanding 130 bps; GAAP continuing EPS was $2.71 .
  • Results exceeded Wall Street consensus: revenue $4.69B vs $4.46B* and EPS $2.45 vs $2.20*; EBITDA $0.85B vs $0.78B* (beats across all three) .
  • Bookings were $5.28B (book-to-bill 113%), enterprise backlog reached $7.3B (+~$0.5B vs year‑end 2024), supported by record Americas Commercial HVAC bookings .
  • Guidance reaffirmed toward the high end: FY25 reported revenue growth 7.5–8.5%, adjusted EPS $12.70–$12.90; Q2 guide ~8% organic revenue growth and ~$3.75 adj EPS; management expects to offset 2025 tariff costs ($250–$275mm) dollar‑for‑dollar via surgical pricing and cost actions .

Values retrieved from S&P Global for consensus estimates.

What Went Well and What Went Wrong

What Went Well

  • Record Americas Commercial HVAC bookings; enterprise bookings up 4% to $5.28B with book-to-bill 113%, adding ~$400mm to Americas backlog and ~$500mm to enterprise backlog .
  • Broad-based strength: Americas revenue +14% (organic +13%), with adjusted EBITDA margin up 170 bps; strong volume, price, and productivity more than offset inflation .
  • Management confidence and execution: “we are confident in our full-year guidance and expect to perform towards the high‑end of the range” — Dave Regnery, CEO .

What Went Wrong

  • EMEA margin compression despite revenue growth: GAAP operating margin down 260 bps; adjusted operating margin down 280 bps, tied to elevated reinvestment and inflation during shoulder season .
  • Asia Pacific bookings −14% and revenue −4% (organic −3%); China remains challenging, with tightened credit policies affecting shipments, though margins improved by 90 bps .
  • Emerging tariff headwinds: estimated 2025 cost $250–$275mm; company plans surgical pricing/surcharge to offset dollar‑for‑dollar, implying potential margin pressure even if EPS remains intact .

Financial Results

Quarterly Performance

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$5.44 $4.87 $4.69
GAAP Continuing EPS ($)$3.43 $2.67 $2.71
Adjusted Continuing EPS ($)$3.37 $2.61 $2.45
Adjusted EBITDA Margin %20.7% 18.3% 18.1%

Actual vs Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue Actual ($USD Billions)$5.44 $4.87 $4.69
Revenue Consensus Mean ($USD Billions)*$5.32*$4.78*$4.46*
EPS Actual ($)$3.37 (adj) $2.61 (adj) $2.45 (adj)
Primary EPS Consensus Mean ($)*$3.24*$2.54*$2.20*
EBITDA Actual ($USD Billions)$1.13 $0.89 $0.85
EBITDA Consensus Mean ($USD Billions)*$1.08*$0.86*$0.78*

Values retrieved from S&P Global for consensus estimates.

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentNet Revenues ($USD Billions) Q1 2024Net Revenues ($USD Billions) Q1 2025Adjusted Op Margin % Q1 2024Adjusted Op Margin % Q1 2025
Americas$3.33 $3.80 16.4% 17.8%
EMEA$0.55 $0.57 17.3% 14.5%
Asia Pacific$0.33 $0.31 20.3% 21.2%

KPIs

KPIQ1 2024Q1 2025
Bookings ($USD Billions)$5.07 $5.28
Book-to-Bill (%)—113%
Free Cash Flow YTD ($USD Millions)$175 $230
Cash From Ops YTD ($USD Millions)$254 $346
Working Capital / Revenue (%)5.4% 3.8%
Cash Balance ($USD Millions)$850 $861
Debt Balance ($USD Millions)$4,881 $4,771
KPIQ4 2024Q1 2025
Enterprise Backlog ($USD Billions)$6.75 $7.30

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Revenue GrowthFY 20256.5%–7.5% 7.5%–8.5% Raised
Organic Revenue GrowthFY 20257%–8% 7%–8% Maintained
GAAP Continuing EPSFY 2025$12.70–$12.90 $12.95–$13.15 (incl. $0.25 non‑GAAP adjustments) Raised and clarified
Adjusted Continuing EPSFY 2025$12.70–$12.90 $12.70–$12.90 Maintained (expect high end)
FX impact to revenueFY 2025−100 bps (prior) −50 bps (updated) Improved
M&A contribution to revenueFY 2025~+50 bps (prior) ~+100 bps (updated) Raised
Net EPS impact (FX + M&A)FY 2025−$0.20 −$0.20 Maintained
Tariffs: net cost & pricingFY 2025n/aCost est. $250–$275mm; plan dollar‑for‑dollar offset via surgical pricing; zero net EPS impact embedded New item; managed headwind
Quarterly Dividend2025n/aBoard approved 12% dividend raise effective Q1 payment Raised
Q2 2025 GuideQ2 2025n/a~8% organic revenue growth; ~$3.75 adjusted EPS Provided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Tariffs & PricingNot a focusNot detailed in 8‑K$250–$275mm cost; surgical pricing/surcharges; aim for dollar‑for‑dollar offset; zero EPS impact Emerging headwind, managed
Data centers / AI coolingStrong bookings; long history; vertical growing mid‑teens Continued strength impliedOngoing strength; applied systems payback led sales; broad vertical strength Strengthening
EMEA marginsQ3 margin expansion Positive margins in Q4 Q1 margins compress due to reinvestment/shoulder season; confidence in 2025 margins Near‑term weakening, expected recovery
Residential A2L (R‑454B) transitionPrebuy expected to impact Q1 2025 Upgraded 2024 resi outlook ~80% of shipments 454B; channel inventories elevated $75–$100mm; expect burn‑down; resi mid‑single‑digit FY growth Transition executed; pricing tailwind
Transport Refrigeration (TK)2025 modest rebound; stronger 2026–2027 In line with guidance 2025 weighted avg market ~−20%; outperformance expected; strong rebound in 2026–2027 Tough near‑term; positive medium‑term
China/APACQ3 deterioration; tightened credit policies —Balanced APAC; China down; margins up 90 bps; sequential improvement expected Cautious, improving sequentially
ServicesUp low teens in Q3; strategic investment focus —~1/3 of revenue; high single‑digit CAGR since 2019; connected solutions drive growth Durable growth tailwind
Backlog/PipelineBacklog $7.2B; elevated into year‑end Year‑end backlog $6.75B Backlog $7.3B; Americas commercial backlog +$400mm; strong pipeline Improving

Management Commentary

  • “Our strong order growth in the first quarter included another all‑time high in bookings for our Americas commercial HVAC business… we are confident in our full‑year guidance and expect to perform towards the high‑end of the range.” — Dave Regnery, CEO .
  • “We are maintaining our prior guidance ranges… and expect to perform towards the high end… we anticipate negative 50 bps FX… M&A ~100 bps to revenue; net EPS impact of FX and M&A remains −$0.20.” — Chris Kuehn, CFO .
  • “We will take surgical pricing actions to offset tariff impact dollar for dollar… net tariff costs are included in our EPS guidance and are expected to have zero impact.” — Chris Kuehn, CFO .
  • “In residential… we sold probably maybe close to 80% [A2L R‑454B]; inventories elevated $75–$100mm; expect normalization through 2025.” — Dave Regnery, CEO .
  • “Applied was stronger than unitary… we really see this year that applied markets will be stronger than unitary markets this year.” — Chris Kuehn, CFO .

Q&A Highlights

  • Americas Commercial HVAC demand: pipeline broad‑based with strength in data centers, healthcare, higher ed; record orders; payback‑led selling supports conversions despite cost uncertainty .
  • Tariffs/logistics: mix of contract protections (surcharges/escalators) and supplier/trade route actions to reduce cost impact; surgical pricing to offset dollar‑for‑dollar without using tariffs as a profit center .
  • Residential transition and pricing elasticity: A2L pricing up high single digits; majority shipments now 454B; expectation for resi mid‑single‑digit growth and channel inventory burn‑down .
  • EMEA margin outlook: near‑term reinvestment in product/channel and bolt‑on integration costs depress margins; confidence in full‑year margin recovery .
  • Backlog trajectory: elevated backlog expected throughout 2025; Q1 added ~$400mm in Americas commercial and ~$500mm enterprise; book‑to‑bill >1 across regions .

Estimates Context

  • Q1 2025 actuals exceeded consensus: revenue $4.69B vs $4.46B*, adjusted EPS $2.45 vs $2.20*, EBITDA $0.85B vs $0.78B* .
  • Management guided Q2 adjusted EPS ~$3.75 and reiterated performing toward high end of FY ranges, suggesting upward bias to FY25 estimate revisions if execution continues and tariff offsets hold .

Values retrieved from S&P Global for consensus estimates.

Key Takeaways for Investors

  • Strong beat-and-raise quarter with reaffirmed high-end FY25 posture; backlog/pipeline support sustained growth in Americas Commercial HVAC and Services .
  • Tariff headwinds are significant in dollar terms but appear manageable via surgical pricing and sourcing actions; expect neutral EPS impact though margins may be diluted on this item .
  • Residential A2L transition is tracking well (majority shipments now 454B) with pricing tailwinds; inventories elevated but expected to normalize through the year .
  • EMEA margin dip reflects reinvestment timing rather than demand issues; bookings strong (book‑to‑bill 130% in EMEA Commercial HVAC) supporting medium‑term recovery .
  • Transport refrigeration is likely a 2026/2027 recovery story; near‑term weighted average market down ~20%, but product innovation and share outperformance position TT well for rebound .
  • Capital deployment remains robust (12% dividend increase; opportunistic repurchases; active M&A pipeline) underpinned by strong free cash flow .
  • Near-term trading: positive skew given beats and Q2 guide, watch tariff/pricing execution and EMEA margin recovery signals; medium-term thesis anchored in applied solutions leadership, direct sales/service flywheel, and decarbonization tailwinds .