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Trane Technologies plc (TT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record bookings ($5.63B, +5% YoY), revenue ($5.75B, +8% YoY), margin expansion, and adjusted EPS of $3.88 (+18% YoY); Americas Commercial HVAC outperformed with applied solutions orders up over 60% .
  • Results beat consensus on EPS and EBITDA, with a modest revenue miss; management raised FY 2025 guidance to ~8% organic growth and ~$13.05 adjusted EPS, citing stronger Americas Commercial HVAC and tariff cost moderation to ~$140M from $250–$275M prior .
  • Residential HVAC faced near-term headwinds from industry R454B cylinder shortages; impacts are largely resolved and revenue is expected to be flattish for FY25, offset by Americas Commercial HVAC strength .
  • Backlog remained elevated at $7.1B (up 6% vs year-end 2024), supporting visibility; services grew low-teens and remain accretive to margins, aided by connected solutions and BrainBox AI capabilities .

What Went Well and What Went Wrong

What Went Well

  • Americas Commercial HVAC bookings grew over 20%, with applied solutions orders up over 60%; CEO: “orders for our bespoke applied solutions were up over 60 percent” .
  • Enterprise margins expanded: adjusted operating margin +90 bps to 20.3%, adjusted EBITDA margin +70 bps to 21.8% on volume, price, productivity; CFO highlighted record Americas EBITDA margin at 24% (+120 bps) .
  • Guidance raised as tariff cost risk moderated to ~$140M and FX turned neutral; CFO guided Q3 organic +6% and ~$3.80 adjusted EPS .

What Went Wrong

  • Residential HVAC revenues down mid-single digits due to R454B cylinder shortages; management removed ~$150M revenue from 2H outlook and now expects FY residential to be flat .
  • EMEA margins pressured (-200 bps adjusted EBITDA margin YoY) due to channel investments and M&A integrations, consistent with plan but a near-term drag .
  • Asia Pacific revenue declined high-single digits with margin contraction, primarily from lower volumes in China; management expects improvement as comps ease with tightened credit policy anniversary .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Bookings ($USD Millions)$5,340 $5,283 $5,626
Net Revenues ($USD Millions)$5,307.4 $4,688.5 $5,746.4
GAAP Operating Margin (%)19.5% 17.5% 20.3%
Adjusted Operating Margin (%)19.4% 16.2% 20.3%
Adjusted EBITDA ($USD Millions)$1,119.2 $850.9 $1,250.2
Adjusted EBITDA Margin (%)21.1% 18.1% 21.8%
GAAP Continuing EPS ($)$3.33 $2.71 $3.87
Adjusted Continuing EPS ($)$3.30 $2.45 $3.88
YoY Revenue Change (%)——+8%
YoY Adjusted EPS Change (%)——+18%

Actual vs S&P Global Consensus (Q2 2025 and Forward)

MetricQ2 2025 ActualQ2 2025 ConsensusQ3 2025 ConsensusQ4 2025 Consensus
Revenue ($USD Millions)$5,746.4 $5,773.9*$5,780.98*$5,097.4*
Primary EPS ($)$3.88 $3.7933*$3.7782*$2.8196*
EBITDA ($USD Millions)$1,250.2 $1,240.17*$1,230.73*$954.33*

Values retrieved from S&P Global.*

Interpretation: TT beat EPS and EBITDA, and modestly missed revenue vs consensus. Management guided Q3 to ~$3.80 adjusted EPS with ~6% organic revenue growth .

Segment Performance

Segment MetricQ2 2024Q1 2025Q2 2025
Americas Net Revenues ($USD Millions)$4,290.9 $3,800.7 $4,692.3
Americas Adjusted Operating Margin (%)21.1% 17.8% 22.4%
EMEA Net Revenues ($USD Millions)$645.3 $573.5 $707.9
EMEA Adjusted Operating Margin (%)18.8% 14.5% 17.3%
Asia Pacific Net Revenues ($USD Millions)$371.2 $314.3 $346.2
Asia Pacific Adjusted Operating Margin (%)24.1% 21.2% 21.6%

KPIs and Balance Sheet

KPIQ2 2024Q1 2025Q2 2025
Enterprise Backlog ($USD Billions)—$7.3 $7.1
Working Capital / Revenue (%)4.2% 3.8% 3.7%
Free Cash Flow YTD ($USD Millions)$810.1 $230.2 $841.4
Cash Balance ($USD Millions)$1,326 (Jun 30) $860.5 (Mar 31) $774.2 (Jun 30)
Debt Balance ($USD Millions)$5,268 (Jun 30) $4,771 (Mar 31) $4,615 (Jun 30)
Capital Deployment YTD ($USD Millions)—$1,135 committed incl. $210 divs, $275 M&A, $650 buybacks ~$1.8B YTD through July: ~$420 divs, ~$275 M&A, ~$1,000 buybacks, ~$150 debt retirement

Non-GAAP adjustments in Q2: $2.0M pre-tax (restructuring $1.3M; M&A costs $0.7M), with $0.5M tax impact; adjusted EPS adds ~$0.01 vs GAAP .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Revenue GrowthFY 2025~7–8% ~8% Raised
Reported Revenue GrowthFY 2025~7.5–8.5% (incl. +100 bps M&A, -50 bps FX) ~9% (incl. +100 bps M&A; FX neutral) Raised; FX improved
Adjusted EPS ($)FY 2025$12.70–$12.90 ~$13.05 Raised
GAAP Continuing EPS ($)FY 2025$12.95–$13.15 ~$13.30 (incl. $0.25 non-GAAP adjustments) Raised
Americas Commercial HVAC RevenueFY 2025High single digits (implied) Low double digits Raised
Residential HVAC RevenueFY 2025Mid-high single-digit growth (implied) Flat (remove ~$300M full-year; ~$150M 2H) Lowered
Tariff Cost Estimate ($)FY 2025~$250–$275M ~$140M (as of Jul 28) Lowered
Price Contribution (Enterprise)FY 2025~1–1.5 pts (implied) >3 pts (incl. tariff pricing) Raised
Q3 Organic Revenue GrowthQ3 2025—~6% New
Q3 Adjusted EPS ($)Q3 2025—~$3.80 New
Dividend PolicyOngoingCompetitive & growing dividend Reaffirmed; ~$420M YTD through July Maintained
Share Repurchase AuthorizationOngoing$5.6B remaining (Q1) ~$5.3B remaining (Q2) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Applied Solutions & Services flywheel3-year stacked applied revs: Americas >120%, EMEA >90%; services double-digit growth Record Americas Commercial HVAC bookings; backlog +$500M; services low-teens CAGR since inception Applied orders +60%; services low-teens growth; accretive margins; connected solutions scaling Strengthening
AI/digital & BrainBoxAnnounced BrainBox; focus on optimization and digital twins —Connected buildings >60,000; BrainBox augments unstructured data for efficiency Accelerating (see BrainBox AI Lab announcement)
Tariffs & pricingBOS and scenario planning to neutralize margins; price actions as needed Tariff cost est. $250–$275M; surgical price/surcharges Tariff cost est. cut to ~$140M; price >3 pts FY Improving
Residential HVACNormalizing to GDP+; modest prebuy $75–$100M expected Strong Q1 (high-teens); inventories elevated; mid-single-digit FY growth target Cylinder shortage; ~$150M 2H headwind; FY flat; issue ~90–95% resolved by late July Near-term headwind; resolving
China/APACTightened credit policies; sequential improvement Flat FY APAC; stronger rest of Asia; China pressured APAC down high-single digits; expect FY flat; comps easing Stabilizing
Transport RefrigerationMarkets bottoming 1H25; rebound in 2026–27 Weighted average transport down ~20% FY; outperform Markets under pressure; 2026 rebound >20% expected Bottoming; rebound ahead

Management Commentary

  • “Record enterprise bookings and revenue and 18 percent earnings per share growth… orders for our bespoke applied solutions were up over 60 percent” — Dave Regnery, Chair & CEO .
  • “We are confident in raising our full year revenue and EPS guidance” — Dave Regnery .
  • “Adjusted EBITDA margins increased by 120 basis points to 24%, marking a record quarterly EBITDA for [Americas]” — Chris Kuehn, CFO .
  • “We are effectively managing and mitigating all enacted tariffs and inflationary impacts through our world-class Business Operating System” — Dave Regnery .
  • “For the third quarter, we expect approximately 6% organic revenue growth and around $3.80 in adjusted EPS” — Chris Kuehn .

Q&A Highlights

  • Americas Commercial HVAC acceleration: broad-based across 14 verticals; applied > unitary; strength beyond data centers .
  • Residential cylinder issue: ~90–95% resolved by July 30; inventory burn expected, greater Q3 impact than Q4; FY resi flat .
  • Backlog visibility: remains elevated; ~$2.5B already for 2026 and beyond; >90% backlog is global Commercial HVAC, majority applied .
  • Tariffs/pricing: tariff cost ~$140M; pricing to be margin-neutral dollar-for-dollar; price over inflation targeted .
  • Services trajectory: low double-digit growth; connected solutions and BrainBox AI expanding optimization; accretive margins .

Estimates Context

  • Q2 2025 beat consensus EPS ($3.88 vs $3.793*) and EBITDA ($1,250.2M vs $1,240.2M*), modestly missed revenue ($5,746.4M vs $5,773.9M*). Management guided Q3 to ~$3.80 adjusted EPS and ~6% organic growth .
  • FY 2025 adjusted EPS raised to ~$13.05; organic growth to ~8%; FX impact neutral; M&A contribution ~100 bps .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix and margin: Americas Commercial HVAC outperformance and services accretion support sustained margin expansion; EPS beats are driven by execution, price realization, and productivity .
  • Near-term resi headwinds are transitory; the cylinder shortage is largely resolved, with inventory normalization concentrated in Q3; FY resi now flattish .
  • Tariff risk has moderated materially (~$140M vs $250–$275M prior); pricing actions and BOS should keep tariffs margin-neutral on a dollar basis .
  • Elevated backlog and pipelines (including ~$2.5B for 2026+) underpin visibility; applied solutions continue to be a secular growth driver across data centers, higher ed, healthcare .
  • Digital/AI flywheel (connected buildings, BrainBox) enhances services growth and margin durability; watch for scaling benefits in FY25–26 .
  • Tactical implication: near-term strength likely persists through Q3 with low double-digit Americas Commercial HVAC growth and ~$3.80 adjusted EPS; resi drag fades by Q4 .
  • Medium-term thesis: multi-year applied/services flywheel and decarbonization tailwinds support above-market growth, margin resilience, and FCF conversion (YTD FCF $841M) .