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TT Trane Technologies

Participants
Zac Nagle Vice President-Investor Relations
Mike Lamach Chairman and Chief Executive Officer
Sue Carter Senior Vice President and Chief Financial Officer
Steve Tusa JPMorgan
Julian Mitchell Barclays
Scott Davis Melius Research
John Walsh Credit Suisse
Nigel Coe Wolfe Research
Jeff Sprague Vertical Research
Gautam Khanna Cowen and Company
Andrew Obin Bank of America
Joe Ritchie Goldman Sachs
Andy Kaplowitz Citi
Call transcript
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Operator

Good morning. Welcome to the Ingersoll Rand's 2019 Q2 Earnings Conference Call. My name is Chris, and I will be your operator for the call. The call will begin in a few moments with the speaker remarks and then a Q&A session. All callers are on mute. you. Thank Instructions] [Operator

President Relations, Vice your may conference. of Nagle, you Investor begin Zac

Zac Nagle

morning for This thank Ingersoll operator. accompanying at and Thanks, Good find you'll you webcast our quarter the earnings ingersollrand.com, where being Rand's XXXX joining conference is call. call presentation. on website second for us

pursuant historical this and We Statements call today's made archiving our the facts considered Please statements call to not forward-looking are also made provisions are securities and go Harbor website. are in that on law. recording of to X. Safe are Slide federal

description Please cause see attached to our in of differ results. SEC some release. results non-GAAP news actual our also the filings materially may explained for measures, that presentation financial our are anticipated a This the factors tables to from of our includes which

Joining to are me and that, Mike? Sue Carter, Lamach, CFO. X Vice call CEO; to Slide please the and and Chairman With on President turn over and call Senior go Mike today's Mike. I'll

Mike Lamach

team Thanks, a with businesses Once Systems and Flow I'm Precision backdrop, quarter. get and proud that We and our Zac, team's growth. two on let's Industrial today’s strong second our underway the and for call. towards started. everyone, Gardner Ingersoll-Rand new segment well separation our EPS performance we’re our proposed into in combination standalone into strategic we growth, and margin Denver. of With delivered welcomed revenue expansion us again, joining thanks,

our business. our impact, strong a is overview strategy we're consistently of tailwinds that which Please nexus results strong deliver world go I'd business and shareholders. for global secular reducing sustainability our to We to urbanize technology. emissions, strategy to for of executing the at generate excel the start reducing Fundamentally, Slide in our our are reducing the customers, to and for other excel intensity brief The X. at environmental like passes. constrained by to and continuing with time all ability greenhouse of resource of gas perishable while goods, waste foods we enabled buildings, energy is as and more warmer becoming financial productivity

the for think as resource vision. you purpose opportunity strong time continue provide shareholders cooler, populated, less Unless less our secular and is tailwinds passes, to for constrained world will these getting

only As transformation the integration and the climate segment combination our planning play and towards impact XXXX, separation, we related premier move with trends excellence secular to pure to creating continue our our activities Denver business in mitigate of and of intensifies. business solutions strategy delivering pursuit Gardner of aggressive in industrial these

of these company the global create services nexus Our the trends portfolio business where to average squarely reduce impact economic our above grow sustainability the conditions. mega XXX% our of at global and a platform and and focuses climate environmental of impact can products for

minutes through a growth ability XXXX. and our we're guidance XXXX. see expecting X, of I'll bullish remain Moving for execute XXXX first key system year takeaway to of the fiscal revenue has against our the few to business and The spend end we is through balance deliver operating our progressed adjusted to our to fiscal broadly on Slide half how that strategy, discussing using organic markets our and EPS ranges what the

we're $X.XX approximately guidance today to $X.XX. EPS fact, In raising by

performance financial We expect to deliver XXXX. top-tier again in

sales this XXXX. confidence second our to rates North very and be pipeline Commercial continued us give business backlog, HVAC will to continue of strong results and has order in for half globally and incoming particularly Europe in and strong deliver America the us

solid year performance market. by for had the supported strong growth HVAC in deliver a residential residential we and quarter the business to mid continue to single-digit second expect business full replacement Our this strong

a the growth single-digits. softened favorable down Compression second the impacting In our cycle in market and second projects the in Technologies Technologies Conversely, in we core quarter continued short revenue primarily our of cycle both half in for which in business low are second the long growth order outlook the and cycle Compression year. Tools businesses, have healthy long segment, our Industrial quarter we growth saw and

be and We setup XXXX. cycle to we projects. these short The presents markets XXXX associated long with lead into given orders of move expect markets income the convert these healthy continue impact a challenging into to throughout cycle positive times long positive as when revenue operating

all costs in quarter. managing Price second basis realization with businesses XX across we're has outstanding tariff-related the an and points been our inflation spread effectively and

lap to begin increase of third the in imports tariffs and XXXX a full to we quarters when we the to realization on As XX we've XX of the and maintain our continue when year points half and fourth XX% and the expect to the the target before, of highlighted managing strong to in XX%. inflation range in from in basis we spread to effective of points X positive Chinese we have began see price been second List basis moving impact

dividends, will to strong Lastly, continue expect We've to significant capital over acquisitions deployed continue net the cash the to and our of our priorities of and optionality. XXX% maintain deploy allocation we or free good follow years expect time. balanced XXX% income, and we flows excess again in share first We'll strengthen of of balance and to cash further which than and half sheet XXXX the capital greater equal over to on repurchases enable in dynamic us year.

growth virtually second Slide to solid bookings X. delivered and the in regions quarter. We've businesses in go and revenue all Please

with and the with low XXs healthy in side, the businesses up digits China strong tough very HVAC America way of the comp largest XXXX. single quarter in the high against quarter. was the On second single-digit growth lead also second our booking continue low HVAC growth Europe of growth to delivers and North

by by partially X% the growth and comp also driven tough by by in year XXXX for Electric driven was reasons strong our vehicle calls. Compression was Industrial Small our long very of X% significant in Vehicles. Transport in Technologies We consumer growth strong cycle cycle in Small of led comps decline versus Compression short against successful prior Segment growth bookings had drove growth Vehicles of we've strategy. bookings refrigeration discussed prior in a in Technologies tough detail Electric the offset on a execution in softness markets.

declines transport but said growth as or our However, is other in before, negate historically with bookings XXXX. with times impact impact XXXX a levels the we've we're seeing returning in to transport XXXX backlog bookings strong that don't strong solid more these levels of strong to backlog than in in The and is bookings or and XXXX, extremely historical two in revenues normal grow a ability had and their XXXX. refrigeration business businesses

this heading to XXXX into We business continue and promising. growth solid to expect in revenue deliver the XXXX prospects look

very Transport to delivered continued revenue and On side, our the refrigeration quarter residential America, up strong to mid in Europe largest strong North growth. HVAC with also growth digits revenue two. high all businesses deliver single

pieces and the our organic we're pleased half. through all Bringing performance revenue together, with growth first bookings the

the rates takeaways X. We into slides. revenue full expect healthy We've rates two organic on target incoming number outlined to growth based of to for second the year. Slide backlog, for Please enterprise at to order growth and on increase half next heading turn X% and deliveries the our major confident organic business revenue each a X% remain

very HVAC to North continues America be particularly and in Commercial strong, Europe.

solid which be to order Residential of that of up continues at XXXX good XXXX. healthy North continue the another two another to expecting market. year at second had shape are Our deliver record will year by confident America driving be confidence growth transport head to will single-digit led in projects by in incoming that we in on talked our led half quarter solid we year. APUs trailer, remain rates aftermarket. the transport I've growth truck, we'll pipeline about and year of solid rates, backlog, healthy the see second a incoming order our the half and refrigeration, mid HVAC and end of replacement backlog length business and Based

successful and XXXX revenue. these in to turn strategy. XXXX convert cycle a Vehicles healthy business, into Technologies The late in vehicle In Compression by markets X. positions and as us Electric well long growth of consumer business is cycle in growth Please driven orders execution in Slide cycle softness good seeing we're long having great short year for Small strength markets. our a our

like over on to details it quarter. more to And turn the now, provide Sue to Sue? I'd

Sue Carter

Thank main points few you, of Mike. take Please to go to summary Slide #X. call. from a I'll with begin today's away a

period. with As we quarter Mike of ago discussed, drove versus share results strong increase the adjusted XX% earnings in $X.XX, year the an of second financial per

to us in gives our guidance performance full the year QX confidence in of ability we in the provided margin against execute targets growth in beginning Our our year. the

up guidance from raising our full are adjusted we last approximately quarter. communicated result, that a to $X.XX we $X.XX approximately continuing As EPS year

was in growth revenue strong, organic Second quarter segment. climate our particularly

organic major our saw saw order digits also the mid were of enterprise Transport business across for We segment. in single bookings excluding most organic climate our XXXX, up both When bookings that approximately our strong and outsized businesses. growth

cautious were Industrial and Segment, industrial the services tough bookings continued negotiations, in bookings electric mentioned revenues and offset organic in small strong, forward. the going our optimism ongoing cycle organic up growth were short in of Mike the technologies X% in compounding previously. Industrial vehicles X% to long vehicle market Strong on and QX prior year. QX a Despite cycle growth up fueled demand. XXXX tariff organic growth rate comp small providing compounding In X% growth weakness X% CTS on an strengthen revenue China electric and by compression growth trade in CTS

year we which XX% expanded During adjusted points full and XX our leverage, operating basis operating margins expectations. delivered is of ahead QX,

business enterprise headwinds. leverage inflationary related material, the other our system We manage to tariff continue and direct operating across to

manage As should increase continue half the price to the XX%, as we List but lap Chinese spread will we increases. this XXXX the X XX% material mid-year in of tariffs including realize we look inflation back recent on anticipate and imports to we price the year, from effectively to to narrow tariffs

flows with expect season and we ongoing the exit capital approach Mike requirements working capital XXXX of the greater mentioned, we cash than approximately in We equal end to our revenues to quarter sufficient income. net second of continue or of X% strong to working to of long-term free the year. the by XXX% As expect target cooling of demands support

dynamic to strategy. allocation continue on deliver we our capital Importantly,

in dividends we year, $X.XX of the approximately this Precision and million approximately buybacks. Flow $XXX on deployed strategic million far So for Systems approximately $XXX completed share billion, acquisition have

deploy Looking time. of forward, we to excess consistently over cash XXX% expect

points revenue of improvement X%, segment. Please across growth delivered basis was Slide by broad XX%. per of XX margin revenue led adjusted share strong go Climate We operating to our growth Organic X. and of adjusted earnings organic based growth growth

us productivity focus manage to across drive margin and headwinds pricing related the effectively disciplined tariff and Continued actions and on expansion enabled inflation enterprise.

Please XX. go to Slide

year-over-year solid quarter. drive delivered quarter enabling strong operating Climate Our another to growth segment in income EPS the of growth, us

Our Industrial segment delivered solid results.

Our industrial outlook margin remains full intact. year

timing primarily good is of In addition of in second guidance cost by results segment functional The of approximately year corporate is $XXX the linear impacting corporate stock-based compensation were well full The quarter of lumpy that the as a corporate performance, XXXX timing expenses unchanged. spending driven to by number prior remains items. costs of lower cadence year other than approximately $X.XX. million as not

basis reflecting Please tempered XX of material and the was drove points other higher consecutive We deliver in quarter. with expectations from we go solid from incremental quarter. for the industrial in Slide margins. softness inflation. XX growth full-year in in to price Consistent tend inflation versus improvement, expanded by actions operating of margins of basis short XX. net to which carry productivity positive excess price In Pricing XXXX. pricing was have material adjusted margin XXXX inflation over margin delivered strong Margin fifth cycle execution QX, our strong by to expansion expansion revenues, continued points volume

operating invest heavily between in points approximately weighted to reduction were basis Incremental business. investments and projects. fairly QX expense continue We XX evenly of our growth

Please Slide XX. go to

segment strong and strong XX realization with X% productivity. expansion delivered growth margin expectations Climate delivered price adjusted Our volume organic basis our and another growth, of we quarter points. operating revenue with Consistent

Slide to go XX. Please

ownership. XXXX. margin X% growth Our PFS year organic income against Industrial quarter. of inclusion QX X% of tough gross delivered PFS our revenues Industrial acquisition by through of growth the instead primarily in operating for the under solid leverage first a the midway was impacted margin of business of rates revenue acquisition rates lever comparison the at

Additionally, margin as industrial in tend expansion tempered have softness cycle short I which margins. to revenues, was by higher previously, mentioned

in Excluding the industrial these factors the XX% leveraging of north was quarter.

Looking in was contributor PFS XX at our margin expansion of acquisition to the EBITDA EBITDA the basis margins, immediate an quarter. points

highest excess are capital go to level We innovation with investments product consistently continued Please vital to and to returns a our strategy the healthy excellence of committed operational the high-ROI margin deploys technology, opportunities that XX. projects, expansion. in and a which shareholders. growth, business for Slide cash maintain remain dynamic leadership to allocation We

to and earnings have rate growth reliable, We increases have the over commitment of above that strong a or time. a long-standing growing at dividend

returns We the make investments in continue shareholder acquisitions PFS quarter. like strategic during long-term the to further acquisition improve completed that

this interest that maintaining secured an rate billion committed taking Earlier with favorable a advantage strong provides us senior additional current year, balance remain in optionality our as the to of we evolve. $X.X sheet environment. We continuing markets notes

their share We over time. XXX% to to intrinsic in repurchases below continue value and expect see cash consistently shares we value deploy of when trade excess

ARO The is integration Slide to underway to XX. business Precision go Please our number is with progressing according of existing plan. and Systems Flow

rate. equates in $XXX approximately in delivered with XXXX in approximately contribute revenue approximately to We $XX revenue on That QX. incremental of expect an annualized million run to already PFS million $XXX million

EBITDA margins to and unchanged mid-teens XXXX. EBITDA in with margin the with high-XXs creative consistent is in attribution cash adjusted expected percentages PFS for to the the are be flow remain XXXX. for in PFS expectations be operating expected

year. included have for also non-GAAP related PFS the your adjustments estimated reference, For we to

interest in Additionally, basis, which $XX rate million approximately senior anticipate XXXX. in we add to run incremental will March, notes we an completed offering $XX annual million a on

income expect we offering. from adjusted the of operating incremental to essentially XXXX, offset the For notes senior PFS interest

on number XXXX go moment XX. clarify full-year to Please of impact the to want to further Slide guidance. a take I revenue PFS our

There growth other million on change adding the for our range of and approximately points revenue by prior increases can our growth revenues X.X PFS our by rates to to $XXX chart, points. reported guidance revenue see our approximately is XXXX. revenue revenue rates you enterprise X.X industrial guidance no As approximately ranges

often we Slide Please announcement segment Gardner of the get we about with we're go number of made the the When XX. at April to the Denver. road, end industrial status to questions on our strategic combine

about a HVAC solutions excited and on be Climate as to refrigeration. company continue give a industrial of well as We you brief today. premier focused pure-play update creating the a leading transport prospects company I’ll

Act recently closing the One was of The satisfied. period transaction waiting expired. conditions HSR

regulatory million entities. other separating the closing transaction We $XXX the We continue working separation and through million will costs, $XXX remaining estimated including related and legal conditions. to anticipate in approximately of cost

what end is million this expect costs also by quarter. to in we mitigate $XXX last communicated the We stranded XXXX, approximately the of unchanged from

begun three separate preparation streams. work In we for have closing,

done of taxed all roadmap operating with be business work financial chain team we The Industrial separation leveraging is functions. services, of This and this processes, first Industrial on work includes filings. focused operations solely manufacturing regulatory work business Industrial systems stream to separating separation real processes, our out. team Climate is the supply across and systems, methodical our including estate, a of the along a tasked lot and and There segments segment. has the and technical After with and have segment years to

work the be two clear Gardner and integration given center as separate with transaction. the companies and the marketplace is second of stream close Denver, compete continue managed we to The that protocols. planning rules in operate anti-trust The work planning on must until under integration

integration expected is over the much with the two months the in and close. underway While place continue take to these will preparation will integrate after companies work rules the coming compliance of

transformation segment. efforts of the is on The final stream work focused our Climate

we values. and winning on have strong and an we the transformation people a with advantage great businesses, execute culture As talented within and and foundation work incredibly building plan the engaged core stream, of distinctive

remains world's Our emissions energy and the greenhouse on strategy intensity focus reducing unchanged. gas

this structure for At focused shareholders. on this and early our later point, on customers is allows that and All new well better will are early transaction work at value climate to we're XXXX. us this closing and on track we are believe updates in We we unlock more serve a give we developing on date. a in for strategic underway

over the to I'll turn that back And with call Mike.

Mike Lamach

Sue. performance first deliver and our in expect XX. we're half flow EPS Thanks, In to and Slide to we strong go and cash XXXX. free with revenue summary, pleased Please growth

company to well to extremely continue that is we years. believe shareholder next positioned over deliver forward, strong several the returns Looking

of of and remains buildings come refrigeration emissions creates sustainability through emissions carbon strategy impact. world's at the million and XX over of from transport the which our COX Fundamentally, time. cooling XX% heating annually, nexus environmental metric and Today another can eliminated be tons electrification

are moves refrigerated the We by global bending cools buildings and heats the curve warming way and changing the world cargo.

of doesn't can that substantial heating efficiency requirements. storage environmental both to at reduce system energy And we've up come and building. benefit from the reduce XX% and emissions the to this power of of developed cooling source generations include technology commercial increasing the New

commitments continually energy engines goods cool used to commercial this electrify the XXXX working our to where the access and and life foods to communities of way trucks medicines, while change, air greenhouse for challenge improving trailers perishable to and ESG we We're increasing reduce and gas people and heating, innovate quality in serve. of announced perishable and intensity emissions meet in We recently electrify transport climate that conditioning, diesel and to the residential operate and buildings.

equate and We combined. Italy, that’s refrigerant our carbon reduce of We annual gigaton scale our company, math world's equivalent BXB customer UK and made climate believe by emissions. X% by size of could of commitment this our COX is and footprint emissions customer the products this through and the to committing largest to are shows that France, reduction transport The HVAC services. X and the any the to

use we in areas. have supply transform neutral to continue water back restorative and operations environment impact the including water and carbon operations achieving on than chain to our more We giving stressed

and to community our populations, of life our and of of maintaining all roles, to workforce increasing and and This reflective comfort parity quality livable economic for the wages community We mobility strengthening a foods. includes people. market competitive gender are leadership opportunity cooling, broadening healthful access committed bolstering

build to heavily and profitable advance our enable leadership market growth. to brands investing been consistent franchise to years We've for position

have to have excellence years. deploying dynamic and returns do. deliver We tier culture operational experienced an we of top over balanced of and into management strong everything cash to excess capital record a instills committed that high-performing shareholder a track We the remain we deployment team and

complimentary the industrial synergies industrial trends two Lastly, innovation combination cost and revenue opportunity strategic diverse secular the of excited Combining offers growth proposed premier of about transaction our and supported extremely Gardner by exposure. and companies meaningful we're with the drive segment to with significant end-market and the Denver. growth

excited very and also We're our with refrigeration existing businesses. about the transport pure-play HVAC creating premier Climate company segment

have leverage a our sharpen We and structure to and investments. sustainability a opportunity our business focus with simplified tremendous model

Our have shareholders. see climate pure-play our differentiated performance clearly significant a businesses as customers, we employees, on performance for build opportunity and this and to

with And and to Sue I questions. will that Operator? your happy be take

Operator

Tusa Steve [Operator first you. Thank from question Instructions] JPMorgan. of Your comes

Your line open. is

Steve Tusa

Hello.

Mike Lamach

morning, Good Steve.

Steve Tusa

So so rest ask you of this on expect And trends unitary seeing in just of do for the that you resi the and far front, the commercial part there? quarter on wanted What to are how July? business in what HVAC? in the are also year

Mike Lamach

and Resi was quarter, bookings in strong the revenue.

anything us. new for While We Again, with year for year. be balance construction is the the of we indexed incrementally market as it’s there low-single-digit, know the Steve, actually that’s might we think heavily so We're we it growth an progressing. you add. be replacement. That’s there, and do mid-single-digit. we'll for XX% think continues the think mid-single-digit

a we're like position. feel great in we So

With regard we we’re and applied America, and North seeing commercial seeing unitary, services. strengths strength to in

growing seeing Labs centers and are KXX data particular verticals that like are nicely. We

up there globe let think today just backlog HVAC the you may I perspective, then about and year-over-year our up even quarter ask, people think to we're XX% that some to two. and up if questions, from from sequentially anticipate quarter one an So they'll across

I is, pipeline just that think a forward. So and markets of going indicative continued strong solid

Steve Tusa

put are Okay, sounds great. guys of not And numbers obviously that? that then taking you are as the like you it up that so guys think good as some other share,

Mike Lamach

get yes. good markets absolutely, that’s really is Well a which in to fact, at we that easiest third data, look the the party

Steve Tusa

orders You were there's down expect I guys third the of things type lastly, you quarter, you maybe normal playing economy take here that economy. And Do to are seasonality you in in just a moving out so that, the that in going the low-single-digit quarter. you Can global just more another I orders. see third know then look lot how the to but or climate? compares moving was step think curious number that to here like don't about stable just guide talk in do are around as seasonality? and know out? obviously around for I how also

Mike Lamach

don’t any globally. Well, see changes in of I sort HVAC

Most that has we've for markets on of think read GDP. markets market the global pretty I surprises be strong for negative pretty and Example a there's us. landscape. are pockets gone It's weakness, good of quarters where would got but through couple a are a this strong. Mexico big

newer that's an cone America. So a strong Latin information equivalent in but of southern we’re the in market relatively

it’s it to smooth There's capability. pull of the really and sort customers think we're actual pretty that tab edges tractors of remained down trailers. that to refrigerated King translated the runs market's in focus all course supply very time growth explaining lot lined-up a customers of translated consistent. that constraints of that or that revenue at, and that's just Class we heartbeat trailers at trailers on tractors mid-single-digit it's on looking the X It either decent done match we've generates a those in how strong. and I how Thermo backlog or So XXXX and job been thing exist The a and trailers, on advance units the plant APUs actual that to ordering of but and

but rate Transport. healthy separate being about And at transport the just around generating seeing order have with XX think market I you still markets. that the HVAC and growth good and revenue think the solid and to constraints generally the strong from intake So customers, and just we're more backlog TK again noises bookings, our good

side drying even as there, are on input it's order the up tough comps. not just So things if

Steve Tusa

Okay, great. lot. Thanks a

Mike Lamach

Steve. Thanks,

Operator

of Mitchell Your comes Julian question from next Barclays.

open. is line Your

Julian Mitchell

Thanks, good morning.

So around maybe step-up the division. maybe on My the from the Slide you're this question sticking just just XX, That would still industrial seems first to to question be year. like looks rule. X% first a two imply organic growth It assuming half.

the explain why half help just industrial growth maybe please? you second in organic reaccelerate think So should

Mike Lamach

eyes we've the Yes, growth in related on accommodated – cycle, I and open fourth in we to to got longer shift which short XXXX. cycle our wide had our think a we’ll we've small strengthen quarter that of in electric We strategy our some a shift and lot expect forecast. the excellent We've vehicles. had consumer

Julian So seven opportunities. we and the a with – update to last the month had forecasts finished ago. plus and five risks month that just not even opportunity We've

we terms climate but that. year I great, about of not markets like trending guidance the – toward would relative the back need think at we I beginning And forecast. that look I lower side end to gave. the may be feel maybe When that would of in pretty the we that, of be that are industrial that good be the where to trending of that say guidance, feel to markets we upper

Julian Mitchell

my very would division. the quick Thanks be much. Then follow-up climate around

commercial Similar bit the pick-up you're guiding growth versus aspect? slightly What on you that had sort about around then a of material. Maybe Any in I all at in drives X% growth the on second for half? color the the second resi second in from QX down guess. versus EBIT or think a quarter, something the transport better step You price with it’s margins profit that and half? question a of actually

Mike Lamach

at margins Juliana, had leverage. mean of the be and We were to Yes. when in look we XX% leverage, of half about year. above XX% really first there good had first the for right we actually leverage able the I you gross of all quarter north

in in to you're we again amount a question quarter thinking is and two, here, small The it. So and backlog half look is you sequentially service one book step can business But of being year-over-year backlog need probably the XX% as turn and do down the business. to when the revenue. be deliveries from I quarter to about remember improving relates what at actually no

segment good about feel general number again, at that on the full-year leverages So rate to think we XX% pretty I in originally. the pretty the and close guided revenue

lot not of there. So a I'm seeing weakness

Julian Mitchell

Perfect. Thank you.

Operator

Your next of question comes Melius Davis Research. from Scott

line open. is Your

Scott Davis

Good Hi. Susan. Mike, morning,

Mike Lamach

Good morning.

Scott Davis

bit a of letdown companies there to the have you be But Sometimes that. a you the and a when there's kind ahead that to you there the anything. half Is do of did to tends are the Have closing deal bit – we a a of some of prevent anything? amongst a adjust have the such they this of say compensation like little done and executing plans size, you into risk guys here? operating feel walking back need little of distraction the heads, year to

Mike Lamach

indicators Scott that. and of about We've the got over terms get, would feel the seeing the in any warning we years of a that wonderful that early operating system metrics good

and it what though things. we're The ourselves between compartmentalize, we can the of is that happen course needs organizing a about in thing interdependencies more none way think then Of today. doing important seeing we're to

to the every our and day business well run the So priority on is X execute it and commitments run as example, made. an Number we've

itself. priority second the is The separation

is there integration course, no without separation. the Of

So separation there's priority. a the separate that integration is third on team not focused team, does the which involve

to integration and priority continues. can we to engagement is GDI’s that the so support under rules lead the Third that in is of extent around effort

output customers use and the a added stream the value company to about opportunity thing core the the to think those using much can way And core that that process processes customers opportunity, sure and in fourth value map, maximum make the to of doing the is is different people, and might we've and we we're that exciting. of to course cost how sure structure market we some the from that that to in with But make can. cases, structure being our mean we speed delivered extent the and it's pretty that what the the teams, maybe tried might

and Of compartmentalizing job course using the always doing running we're pretty is activities be business. the four we've but to tax it those going a of related of that a like to all that used good group metrics run to and

Scott Davis

that helpful. quick to question then sometimes, And to answer the clear is this at that's or but of you're this, is types as you I winning I than to question gaining there a the side. think kind that you it’s is kind and of share, on just the are that's geographic be regard? stuff. a can a market hard not I But there a helpful share around answer HVAC give follow-up sometimes in to mix know – or projects there Okay, of But you're growing. due always that mean any usual why rest is no-BS better that the explanation of mean, other that

Mike Lamach

– and reducing We've efficiencies. around go market designed and our and really strategy eliminating to sustainability both emissions technology really around

this around that out leveraging of refrigerants these efficient that service the the systems the put today most the put energy together. we systems passion to world in analytics, commercial there having around the using So the sophisticated data, most responsible controls can into offerings more

and just because that's that. against commercial we've to need Not those been The distribution on belief doing cell, service, the plans, been our takes that through complexity be strategy of independent what model we of about executing against hard that to and that ourselves. side, that consistent it deliver

way there's I goal so coming – part time. deployment of operating perspective, are, that core just period has again what over long in system, think it goals expected, to to mystery what's worked, in as that the a the our Scott together measuring, another from a a we're company no what

Scott Davis

luck Thank to you. Well, Yes, you clearly. guys. good

Mike Lamach

Thank you.

Operator

of Walsh next Suisse. Your Credit from question comes John

line Your open. is

John Walsh

Good Hi. morning.

Mike Lamach

Good John. morning,

Sue Carter

Good morning.

John Walsh

about here they're understand pushed mean, back another conservative to guess does you've like a parts the we should kind would view and I to the round I equal. of portfolio. commercial something the some there's kind here kind through the or of that your of healthy is – else further? as created I – recent that I the placeholder that of half across XX back just that decelerate of at the of just half. make price cost you spread also is tariffs, points It going I for but So, basis looking guess points price price kind talked basis all increases in back not XX realize look

Sue Carter

you a what year, in wait I when called we it. John the say with how price called – we John basically Well, about how for is would cost line think we're would right

front a some So back on price comparisons to knew And have then we great knew we basis we lap we to in year. of of that the year. in the some half comparisons were the the going year-over-year going half to last were year

a little So it's back less is – a than to of year but in at the going be year. not spread of half comparisons to to last deceleration result pricing the first price of bit all half going are a in the actually the

are to the it material But of our being what in but of we stabilization bit the terms of we expectations, actually got the going that's all the realized buy year actually more they sticking, of would the but materials, covered, thought again, we're is bit the probably are seeing exactly have and and impact. half stabilization of we prices a for that back little way covered is inflation are of expectations gone in The XXXX doing approximately the would given year, they deflation, we've little in what a through, we've expected. tariffs costs material do business a elements of which and

it to think year. difficult back about front the of more in price a the inflation XX price think part us about comparisons are that. really which half of Material good entire it mean, points is the half I the the expected but look, maybe spread it conservative, roughly cost. is basis I year looks of price when doing cost year [indiscernible] whole basis gives the the that of basket, on XX we about like thought So sort we put its than and of in the what for I would the points

John Walsh

equipment Okay. growth could the follow-up. the terms quarter? look as in we at a just in actually Thank then the versus maybe China, just you. saw Americas of down drill I into you versus maybe And service U.S. guess If or what

Mike Lamach

quickly are well China, both degree Yes, surprised in of the progressing always at that's John. service how I'm penetration there, maturing.

American say. really the around do service perspective penetration as U.S. so five is more be next quickly the it'll penetration. and continue from to over are and European much well then gold point no is years, and I level and there surprises linkage the over not standard there So North and Europe years our coming to Obviously a there, think China the same the we that at to

John Walsh

you. thank right, All

Mike Lamach

Thank you.

Operator

or comes Your Coe Nigel from next question Wolfe Research.

Your line is open.

Nigel Coe

Thank you. everyone. Good morning

Mike Lamach

Good morning, Nigel.

Nigel Coe

seeing? down want rules thinking genuine seeing And in of end road, cycle where of that CapEx call that's think or you're long sort are the the turn call cycle and, some markets reductions perhaps you kicked outs shorter strengths I it it that you weakness? market to particular? you push end to projects But mean I these back growth would to and mainly pressure the bookings switching Industrial that the the you I then bookings out. any say inventory – Would

Mike Lamach

with call what Their slow Nigel, be after and a first tariffs, it particular, Mexico I America, to there Mexican Asia be be we're cycle are was separation seemed possibility the discussions seeing another manufacturing imposing would there bookings you the probably the in between point from Yes, would that so Mexico U.S. side. seeing – U.S. border the the a U.S. the and a and With long I question, of the secure on sure, additional your flurry wouldn't It energy? North down. the U.S. if MCA here what out the there. for will was chemicals in

down. slow a saw we that after Roughly

of lower certainly around level. demand was it kind little distribution I effected bounced short obviously bit user that And there. think of through cycle it sell an but and end products that a off

get a think have impact does. I and on permanently all cycle hopefully restorative that'll and cleaned that up I short it So

up nice when that. I bounce will a there's certainty think around it be

Nigel Coe

Mike. I in we Okay. the the think and call well? American there you light replacement And then out North as out markets you Would the back on commercial digging a call within great. follow-on, see and unitary weakness to [indiscernible] quick what side America? Did the That's North as commercial impacts the there? saw peers Thanks of weaker some commercial as

Mike Lamach

know I strong exceptionally us. it for exactly No, was

say would the it I highlight no, weakness. of as a opposed a quarter be So, to would

Nigel Coe

That's Okay. great.

Mike Lamach

tell you standout you can a would the it tell be can't in was I it different, but I quarter. why

Nigel Coe

Thanks Mike.

Mike Lamach

Thank you.

Operator

comes Research. Jeff Vertical Sprague question of next from Your

open. is line Your

Jeff Sprague

Hey, Good you. morning thank everyone.

Mike Lamach

Hi Jeff.

Jeff Sprague

in Mike threw Hey, in was inventories note? that discernible Nigel mention you kind out. mean, your you from and run the overhang the would be anything anything the up of to quarter pretty early of in resi like you there third that that whether never thought set business lean, it – that I but is

Mike Lamach

think a of bit a some got was of a kind little I the in difference – big it bit there. of wasn't compare No, little it really second year they it a number, pre-buy; That's pulled last the only quarter. – was but

your really that I remain answer strong. think had fundamentals think not it's Jeff so companies that number I just happen, the of no, question,

good that and I to we're think consumer seeing any that? not still genuinely pretty healthy – changes feels pretty

Jeff Sprague

Then bigger a elaborate picture, transformation, on Mike. by mean wondering what I if little can you was more bit you right.

the you making pure-play what It'd now of of hence idea announcement, to you've of seems kind want still view get kind got like little you're of months coming crystallized a things. thinking more to it but where kind I the may of transformation? think just perspective interesting take relatively be view, be about into bit kind three a

Mike Lamach

to proud point, over of XX be starting years. something plus just is we're very clear, the Yes, all that

not it to across company. The the every obviously opportunity that way really an and services here from think all name of entities. we so to way way performed a there’s there’s brand And through something the does bad, might – legal simplification it's mean, are if look means transformation that support at I a the something mean good go

pan value to We the process any will would understand the that kind structures some questions. or when to to sure order There manufacturing likely way cash want that out in look through of work. of to and you field are we terms the evolve to that apply do metrics and We'll out our stream record make procure that in just same we pay would mapping a that those incentives the And organization process will is of answer the in be. them are report would different how field. or those

a tighter goal core a goal customer with exciting are we're of focus, on foundation. sustainability a those because And towards off I some being to building focus simplification, themes. piece company toward on inside people think strong think our things a the the of I investment All

Jeff Sprague

thanks. Great,

Mike Lamach

Thank you.

Operator

Your Company. comes next and from question Cowen Gautam Khanna of

open. is Your line

Gautam Khanna

morning Good guys. Thanks.

Mike Lamach

Hi, Gautam.

Gautam Khanna

just a question. Sprague's follow-up maybe Hey on Jeff

– mean U.S. just being regions year, can HVAC resi maybe direct between their all? you with on swing last talked does your And so orders to the QX be can you difference about where any about channels? particularly You and call, mentioned over-indexed the of the how at the XXXX, Lennox, in but hot cold, footprint exposure. year-over-year on contrast to speaking with pull was or weather uncooperative some the that, forward and given if if it their did on kind indirect your I of speak see side

Mike Lamach

and with an There's year, indirect. earnings a planet. or to normalizes think as don't I can really in a Yes, We in can’t a weather days you, there rates warming can't so often ever all. can tell at I but anybody – guess I XX:XX a very it XX more else, I quickly calls you remember, I any in I direct as I've about we're future, not toward order used excuse. really tell contrast didn't weather difference strategy within or the degree fewer. bias see

footprint great got. and a it's like the So be, place to that we we've

on Our as growth and have focus is product every share theme company. expansion it market the we for margin is inside

two have, clear goals change. are that that and we doesn't those So

Gautam Khanna

into Thermo color in second the give expectations King given preliminary and then and next like the Any a your APU what year? running some And we're market on seeing you on just said, what year, truck view as you growth question, maybe with backlog offsets penetration, helpful. can for have next That’s that? you as the us

Mike Lamach

still coming is like know updates I rate sense Yes, the it’s update XXXX. XXXX, as we've out that. to there's burn healthy. in mean to off to to into see that's no that. the Order it on backlog stands. Class A. like we'd way early out of too around My We'd trailers coming around I is refrigerated we're know all got the see

I same view of XXXX rates. think you just normalize you of and when business time, the which is early view, over steady get cycle, we a coming a the bookings So kind growth gave the mid-single-digit revenue the really XXXX tact of was last XXXX out

I have So at reason point. that from to would no this deviate

Gautam Khanna

luck. Good guys. you, Thank

Mike Lamach

in with getting America In Gautam, unwinds, Brexit seeing European result as which just And potentially, broader in fact, through this has on of strength slower of and economy. I of that next how happening unfolds a sort what's sort the hope, markedly low Europe, really point North we're we're year, depending Europe. than been

Gautam Khanna

I Thank you. appreciate it.

Mike Lamach

Thank you.

Operator

next question of Obin America. Andrew comes from of Bank Our

open. is line Your

Andrew Obin

morning. guys. Hey, Good

Mike Lamach

Good morning, Andrew.

Andrew Obin

of a articles. There's question. lot been Just a

in you the Europeans in change Europe think how are in Street I adoption regarding HVAC wave despite climate of that are you're Wall kind of customers reluctant article sort Journal seeing the any seeing still the and even Europe. had And an to conversations you rates? HVAC? are What embrace having structural changes heat with

Mike Lamach

going I rates been would and for requirements for largely what extraordinary. that years building all we're the But said, institutional the got have XXXX, there, you've the you’re think they've I Europe, over And We've world. that we might that. think. to industrial think any in Yeah, consumers about any center, definitely got about business multiple data XXXX, the think would in talking us, building, I any say you do booking if double same by

modeling economy on that's teens, per revenue focused we're around had So that high consumer se. multiple I in at growth years. even there, it's now for bookings range and kind we've though been look of flattish, not that low-XXs there the But growth

a opposed think that from will happens, opportunity, electrification more Europe of application the Europe, product benefit in as heat. you'll that of we've an over portfolio that to heat of think conversion business in electrification boilers I I the as Europe see time. of is regulatory that and got around to extraordinary there When problems forward Although in going a do

Andrew Obin

No, in are August, if buildings HVAC if off-line. But wondering I requirements America in idea of I Europe think North certainly more, different it is versus changing. have you they visit So I was a take referring what office was can we

CapEx, spending place? chain. Another on that's and uncertainty you Are supply all guys rethinking taking question is given how where the you're

Mike Lamach

in you where? Are Uncertainty meaning uncertainty economy? the

Andrew Obin

CapEx I And moving spending chain you No, conversations trade are changing you I And globally? – about some uncertainty. sort about are are – where thinking am supply you you of thinking with am thinking your sources? are having

Mike Lamach

done. was how when generally want we that sell we five things about been that's Yes, concentration even it always than a what to we think difference And our because we a of and CapEx, our about would think little there's make things, to it we've say strategy. years where ago. stronger I been there's That's

it the it supply to an opportunity easy we'll is some there depends. chain, yes, relates As answer, Where look we there an and there. for movement made if can, we've

own there's we we're Around we supply that do to perspective. edges, the from can. from perspective, what is, to continuing the So do question to move where a chain things our your answer supply do footprint we

Andrew Obin

to company an blame weather. doesn't Thanks that Always a Great. have HVAC lot. nice

Mike Lamach

we're But as avoid Andrew, to interesting that on question. just to the looking production maybe follow here. of that line thinking I from customers a we up, going the away just I'm tariffs. Chinese know to U.S.-China Yes, well. off We're of bit you're a, it's move China have lot about Mexico some your the

Vietnam, in more some of as to what done think decided that over areas time, opposed and and think they've seeing I as example, an I Mexico. has we're changed like

with for Chris. terms changes footprint sure. how they're the our customers their working there will in I of So next take are question,

Operator

Martin question comes is line Global. from your Nathan from Nathan open. Seaport Global from Seaport next Your Martin

Mike Lamach

no queue. call the Nathan is on There

wrong person. think I got you’ve the

Operator

comes of Goldman Our next from Sachs. Joe Ritchie question

is line open. Your

Joe Ritchie

Good you. guys. morning, Thank

Mike Lamach

Good morning, Joe.

Sue Carter

Good morning.

Joe Ritchie

All the Mike, focusing on just right, so leverage question, Climate operating first my maybe quarter. for

than And out from little mix like a Climate perspective It just is well. we there Anything the price seems of ordinary? like came just maybe so, like anything on that obviously, side? lighter through leverage a Was the impacted the cost QX bit expected.

Mike Lamach

the you Were that I've Joe, quarter? than in more got XX%. So, expecting

Joe Ritchie

be my price/cost then on and assumptions Yes, slightly different. must

Mike Lamach

on and $XXX what at. am I'm just a operating Okay, looking income of taking million that's $XX I million revenue rise,

Joe Ritchie

the to see trying the sticking copper, to if of bit was I seemed question it determine on comments Well, being right. it going second the price/cost on and it commodity I maybe guess be was, conservative component guess still are volume all year. a I you to what then depressed. And I copper your inflation commodity, earlier look price/cost half the like can kind was Okay, in in offline. thinking the it than and trying as about the XH, little But at take [indiscernible] pretty okay. out you're and lower of really sort just that's anticipated. leverage

it. You will buy typically guys of ahead

potentially, the to second were copper for I in in of so locked the the a of where what year? And you copper kind I of half are the guess, And guess the second offsets, are for what the year? tailwind – half

Sue Carter

had Well, Joe, we actually in QX if our – we basically that's for QX, and year, steel you on and having true. when gave we original both actually remember, guidance inflation planned the coming copper and perhaps less

year, really in asked down specifically So we're XX% us. if XXXX, on which the of copper is I you Where come of as for rates the have half benefit see said. you spot that about, think about you'll locked the is that really about for those typical copper back

same XXXX, advantage thing the QX. the spot don't with expect months spot the either But to on we're back are And in come paying appearing of you'll in the – highest the commodities, again, see half what know XXXX numbers. steel six So to down XXXX started We year. for advance. expectations. in that tailwind and of we for in we're that's they'll now pretty every right QX. that the our so much the in down I rates doing a huge those in QX, for were buys month prices one They that whether be and QX And to or about see of it's for steel. more

a not On is hand, last the for actually the it's headwind other is, of the good seen like news we've years. couple

buy with but and like it every the we actually with and chain the for called each it supply expected commodities, year. advantage and I is our time like our of about during So performing buying taking we say we’re processes

Joe Ritchie

you. Got you Thank both.

Mike Lamach

Thanks, Joe.

Operator

Your next from from comes Andy Citi. Kaplowitz question

Andy Kaplowitz

Hey, good morning guys.

Mike Lamach

Andy. morning, Good

Andy Kaplowitz

mentioned. Mike, just and order following Last terms this you against the comps were up basically in on flattish quarter, China of HVAC. growth, you up modestly quarter, tough

throughout were last related in demand seeing QX. China you quarter, improved As

So of steady stay industrial in quarter? at even other do did or you level companies QX that see generally as the all they improve seeing, improved in are or demand

Mike Lamach

improved Climate specifically. have I would both steadily from – And say, in the bookings China, March, markets and shifted. in forward, Industrial, but have

for that As been have be an there, and or to in some going – both have compensating there's other that example, example industries power that's XX% that a would cooling of heavier where and a but for compensated, electronics an and be steel markets. say, Industrial process would find the would market down, you're market, as something for markets those generation,

good. So that's been

still is that plus period. of sort in mid of quarter two we're of Yes, – quarter growth and so XXXX XXs of one low stacking one, kind in mid-teens of XXXX, quarter stack kinds over two two-year comps the the to against

the happy place. as having impact quite That's going of a good there's than we a the we of still certainly, more And in China the the in sales So direct we're there then we're China around put water. a past, service market. on air what do. but strong focus with that happy sustainability, but clean as force much in the positive and terms I've of linkage, around is kind what's was focus talked with we've in And on slower Europe strategy there. around pretty not as it clean that historically, had

Andy Kaplowitz

Mike, could there. Obviously, a how That’s amount helpful, PFS. entered industrial on us and portfolio? as then it and, exposure good gas Mike. the Ingersoll us give on it's more obviously, doing of And clarity But you gave oil you fair color a more

your expectations? So be that helpful initial slowdown in it's talk could have how It you in you if seen so going versus any just about business far. will

Mike Lamach

process, cultural of of goal I their a is here of that. these with they're like been by for fantastic. start saying, a from achievement in and inside have track on And fit me management let the which company. a guys deployment all, fit performance It's great mentality, from feel years, plan, first – our terms from Yes,

measures kind dealing has for a they're rest see cycle, of with So that and the in bit, you the of mix shorter the but of changes. how Ingersoll-Rand, some got changed little like they've

that? do you So on been frankly, positive. have any it's Sue, color

Sue Carter

risks and Yes, finding business it operate the a under different brands actually the news, refreshing opportunities they go in that is both balance several the is do as markets a they great to the and different when several end as business, the that which operating we management is real to, have of And excellent management operating cash type use in plan because income bought portfolio. the that at revenue, flow. are team they portfolio well between we the they and

Mike Lamach

of there, give booking in that here the the negative. about are just one the Yes, out are sort you against Andy, bookings growth think I maybe specificity peers you quarter that food if of – some think all point I to management

that. of proud are We

Andy Kaplowitz

Thanks, appreciate it. guys. I

Mike Lamach

Thank you.

Operator

Nagle the turn closing will I comments. And for to now over Zac call

Zac Nagle

available I be today's I then the day two over for questions thank joining coming the Shane we would – call. – like to for in weeks. everyone next on or will and And see everyone you and

interested the in if Thanks. you we we call, having look a seeing and call soon road. are schedule on sometime. And will So to forward a us please you give

Operator

today's concludes call. conference This

disconnect. now may You