Trane Technologies PLC (TT) Q3 2025 Earnings Call Highlights: Record Bookings and Robust Growth ...

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Record Quarterly Bookings: $6 billion, representing organic growth of 13% year over year. Adjusted Operating Margin Expansion: 170 basis points. Adjusted EPS Growth: 15% increase. Free Cash Flow: Robust performance noted. Commercial HVAC Bookings (Americas): All-time high, surging 30% year over year. Commercial HVAC Backlog: $7.2 billion, with a substantial increase of over $800 million or approximately 15% compared to year-end 2024. Revenue Growth (Excluding Residential): Approximately 10% in the third quarter. Residential Bookings and Revenues: Declined approximately 30% and 20%, respectively. EMEA Commercial HVAC Bookings: Increased by high teens, with revenues growing by mid-single digits. Asia Pacific Commercial HVAC Bookings: Up mid-30%, with revenues growing low teens. Organic Revenue Growth: 4% for the quarter. Adjusted EBITDA Margins (Americas): Increased by 90 basis points to over 23%. Adjusted EBITDA Margins (Asia Pacific): Improved by 230 basis points. 2025 Adjusted EPS Guidance: $12.95 to $13.05, up 15% to 16% year over year. Free Cash Flow Conversion: Expected to be 100% or greater for the year. Capital Deployment: Approximately $2.4 billion year to date, including $840 million to dividends, $160 million to M&A, $1.25 billion to share repurchases, and $150 million to debt retirement.

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Release Date: October 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Trane Technologies PLC (NYSE:TT) reported record quarterly bookings of $6 billion, representing organic growth of 13% year over year. The company achieved 170 basis points of adjusted operating margin expansion and 15% adjusted EPS growth. Commercial HVAC bookings in the Americas reached an all-time high, surging 30% year over year, with applied bookings more than doubling. The services business, which constitutes approximately one-third of total enterprise revenues, remains a durable growth driver, up low double digits year to date. Trane Technologies PLC (NYSE:TT) has a strong backlog, with the commercial HVAC backlog growing by over $800 million from year-end 2024, positioning the company well for continued growth in 2026.

Negative Points

Residential bookings and revenues declined approximately 30% and 20%, respectively, consistent with previous updates. The Americas transport refrigeration market forecast for 2025 has softened, with the fourth quarter expected to be down more than 30%. EMEA transport revenues declined by low-single digits, despite bookings rising by high-single digits. The company anticipates a $100 million revenue shortfall from its July guidance due to softer residential markets. Adjusted EBITDA margins in EMEA declined by 60 basis points, mainly due to M&A-related integration costs.

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Q & A Highlights

Q: Can you provide insights into the Americas margins, particularly regarding service margins and their potential for improvement? A: Christopher Kuehn, CFO, explained that the Americas margin performance was strong, with operating income margins nearly 22%, up 120 basis points year-over-year. Service margins are higher than equipment margins, and there is potential for further expansion. David Regnery, CEO, added that investments in training and connected solutions are enhancing technician productivity, contributing to service business growth.

Q: What drove the significant growth in applied bookings, and is there anything noteworthy about the timing of these orders? A: David Regnery, CEO, noted strong performance across verticals, particularly data centers, with several large orders over $100 million. While data center orders can be uneven, the pipeline remains robust, and Trane Technologies is capturing a significant share of the momentum.

Q: How do you view the growth prospects for Americas Commercial HVAC, given recent booking trends? A: Christopher Kuehn, CFO, stated that the Commercial HVAC Americas business is expected to continue strong growth, with revenues up low double digits this year and consistent three-year stack revenue growth of 50%. The backlog and order rates support confidence in future growth, with services underpinning the business.

Q: Can you provide more color on the residential HVAC market and inventory levels? A: David Regnery, CEO, explained that 2025 was an unusual year for residential HVAC due to prebuys, refrigerant changes, and a short summer, leading to inventory buildup. The plan is to normalize inventory by year-end or early next year, with updates to be provided in the fourth-quarter earnings call.

Q: What factors are contributing to the improved operating leverage guidance, despite revenue headwinds? A: Christopher Kuehn, CFO, attributed the improved operating leverage to strong volume growth in commercial HVAC, cost management, and preserving investments. The company is leveraging scenario plans and its business operating system to manage costs while maintaining investments for future growth.

Q: How is the company managing pricing in the current environment, particularly in residential markets? A: Christopher Kuehn, CFO, reported a price contribution of over 3% to firm-wide revenues in Q3, with a full-year guide of 3% price and 3% volume growth. In residential, the focus is on managing cost inputs and maintaining price discipline, with the industry remaining disciplined.

Q: What is the outlook for EMEA margins, given recent investments? A: Christopher Kuehn, CFO, noted that EMEA margins are expected to improve sequentially, with stronger revenue growth in Q4. Recent M&A activities have impacted margins, but these investments are crucial for future growth opportunities. Margin improvement is anticipated into 2026.

Q: How is the data center opportunity evolving, and what are the implications for Trane Technologies? A: David Regnery, CEO, highlighted the strong demand for data centers, with significant growth in the pipeline. The company has expanded chiller capacity and is ready to meet demand. The innovation in data centers is fast-paced, and Trane Technologies is well-positioned to capitalize on these opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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