Trane Technologies
Designs, manufactures, sells and services climate-control systems and services across three segments (Americas, EMEA, Asia Pacific). Two commercial engines: commercial/residential HVAC (Trane, American Standard) and transport refrigeration (Thermo King). Growing high-margin recurring aftermarket-services and controls/connected-building attach on a large installed base.
Sources — 11 figures with citations
- Q2 2026 net revenuesfiled2026-06-30$6,353.5M (+11% reported, +9% organic); H1 2026 $11,322.9M vs $10,434.9Msec.gov — Table 1, Condensed Consolidated Income Statement, Form 8-K Ex-99.1 filed 2026-07-30
- Q2 2026 gross marginderived2026-06-3035.6% (vs 37.6% Q2 2025; ~-200 bps)sec.gov — (6,353.5 - 4,093.8) / 6,353.5 = 35.57%. Prior year: (5,746.4 - 3,585.8) / 5,746.4 = 37.60%. Gross margin is not separately presented by the company; computed from the filed income statement
- Q2 2026 operating margin (GAAP and adjusted) and adjusted EBITDA marginfiled2026-06-30GAAP operating income $1,224.3M / 19.3% (-100 bps); adjusted operating income $1,253M / 19.7% (-60 bps); adjusted EBITDA $1,340M / 21.1% (-70 bps)sec.gov — Financial Comparisons table, Q2 2026 vs Q2 2025; adjusted measures are company-defined non-GAAP
- Q2 2026 bookings and backlogfiled2026-06-30Bookings $7,818M vs $5,626M (+39% reported, +37% organic); record backlog $12.1B, +70% YoY, ~$6B scheduled 2027+; book-to-bill 123%sec.gov — Highlights and Financial Comparisons tables. Americas Commercial HVAC bookings +50%, applied equipment +130%
- Segment revenue and margin (Q2 2026)filed2026-06-30Americas $5,271.3M +12% (adj op margin 22.1%, -30 bps); EMEA $697.6M -1% reported / -4% organic (adj op margin 13.1%, -420 bps); Asia Pacific $384.6M +11% (adj op margin 21.0%, -60 bps)sec.gov — Second-Quarter Business Review, per-segment tables
- H1 2026 cash flow, capex and free cash flowfiled2026-06-30Continuing operating cash flow $1,734.6M (vs $1,043.5M); capital expenditures $156.1M (vs $208.8M); free cash flow $1,602.7M (vs $841.4M)sec.gov — Table 7 (cash flows) and Table 8 (free cash flow reconciliation). FCF is company-defined: operating cash flow less capex, adjusted for restructuring and M&A transaction cash costs
- Balance sheet — cash, debt, net debtderived2026-06-30Cash $1,318M; total debt $4,617M; net debt ~$3,299M = ~0.6x annualized Q2 adjusted EBITDA of $5.36Bsec.gov — Cash and debt balances filed in the Balance Sheet and Cash Flow table. Net debt = 4,617 - 1,318 = 3,299. Leverage = 3,299 / (1,340 x 4) = 0.62x
- FY2026 guidance (raised)filed2026-07-30Reported revenue growth ~11.5%, organic ~9%; GAAP continuing EPS ~$15.00-$15.10; adjusted continuing EPS $15.20-$15.30sec.gov — 'Company Raises Full-Year 2026 Guidance' section. Prior guidance (set at Q1 2026) was $14.75-$14.95 adjusted continuing EPS
- Price and market capitalizationmarket2026-08-03$461.21 close; market cap ~$101.5B on 220.02M shares outstanding; 52-wk range $348.06-$505.87stockanalysis.com — Aug 3, 2026 regular-session CLOSE (4:00 PM EDT), not an intraday level. Implied EV ~$104.8B including ~$3.30B net debt; ~30.2x the $15.25 FY2026 adjusted-EPS guidance midpoint; ~19.5x annualized Q2 adjusted EBITDA
- FY2025 revenue (base for the TTM calculation)filed2025-12-31$21,321.9Mdata.sec.gov — SEC XBRL company-concept fact tagged from the FY2025 Form 10-K (accession 0001628280-26-005731). Trailing-twelve-month revenue = 21,321.9 + 11,322.9 - 10,434.9 = $22,209.9M
- Q2 2026 result vs consensusmarket2026-07-30Revenue $6.35B vs ~$6.21B consensus (+2.3%); adjusted EPS $4.31 vs ~$4.26 consensus (+1.1%)stockstory.org — Sell-side consensus is a third-party aggregate, not a filed figure; the reported values themselves are from the 8-K
Earnings, margins, COGS & capex
FY2025 revenue $21.32B (+7% reported, +6% organic) with adjusted continuing EPS $13.06 (+16%) and 90 bps of adjusted operating-margin expansion to 18.5%. Growth is led by Americas Commercial HVAC (data centers, decarbonization retrofits), which dominates the ~$17.2B Americas segment; EMEA and Asia Pacific are far smaller and slower. Balance sheet is strong (net debt ~$2.85B, FCF $2.89B), funding a ~$3.2B capital-deployment program (dividends, buybacks, bolt-on M&A). Momentum accelerated into 2026: Q1 organic bookings +24% drove a record $10.7B backlog, and management raised FY2026 guidance at Q1 (adj EPS to $14.75-$14.95 from the initial $14.65-$14.85).
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~64¢ is cost of goods and ~16¢ operating expense, leaving ~19¢ of operating profit.
Revenue trend
Margins
up ~100 bps YoY
up ~90 bps YoY
up ~70 bps YoY
+16% YoY; $2.63 in Q1 2026 (+7%)
consistently high
COGS structure
Bill-of-materials is metals-heavy (copper, steel, aluminum) plus compressors, electronic controls/semiconductors, motors and refrigerants. Price/cost and productivity (the company's operating-system playbook) have been net-positive, driving the multi-year margin expansion; commodity and tariff inflation are the main COGS swing factors.
Capex
Light: ~$383M FY2025 (~1.8% of revenue). Capital deployment is dominated by shareholder returns and M&A, not plant capex — ~$840M dividends, $1.5B buybacks, ~$720M bolt-on M&A, $150M debt retirement in FY2025.
Latest earnings
Beat — revenue $6.35B vs ~$6.21B consensus (+2.3%) and adjusted continuing EPS $4.31 vs ~$4.26 consensus (+1.1%); adjusted EPS +11% YoY, GAAP continuing EPS $4.20 (+9%). Quality of the beat was in orders, not margin: gross margin fell ~200 bps and adjusted operating margin 60 bps
RAISED FY2026 (second raise of the year): reported revenue growth ~11.5% and organic ~9%; GAAP continuing EPS ~$15.00-$15.10 (incl. $0.20 of non-GAAP adjustments); adjusted continuing EPS $15.20-$15.30, up from the $14.75-$14.95 set at Q1 2026
- Q2 2026 bookings
- $7,818M, +39% reported / +37% organic (record); book-to-bill 123%, >100% in all segments
- Backlog
- $12.1B record, +70% YoY; ~$6B scheduled for 2027 and beyond
- Americas Commercial HVAC bookings
- +50%; applied-equipment bookings +130%
- Americas segment (Q2 2026)
- Revenue $5,271.3M +12% reported / +11% organic; bookings $6,561.8M +44%; adjusted operating margin 22.1% (-30 bps)
- EMEA segment (Q2 2026)
- Revenue $697.6M -1% reported / -4% organic; adjusted operating margin 13.1%, down 420 bps; GAAP margin down 550 bps
- Asia Pacific segment (Q2 2026)
- Revenue $384.6M +11% reported / +10% organic; bookings +33%; adjusted operating margin 21.0% (-60 bps)
- Q2 2026 adjusted EPS
- $4.31 (+11%); GAAP continuing EPS $4.20
- H1 2026 capital deployment
- ~$1.9B deployed/committed YTD through July: ~$690M dividends, ~$840M buybacks, ~$340M M&A
Growth drivers
- Data-center thermal management / liquid + air cooling — the standout demand vector; Americas Commercial HVAC bookings up ~40%
- Decarbonization and electrification of buildings (heat pumps, high-efficiency systems, energy-services retrofits)
- Tightening energy-efficiency codes and the HFC refrigerant phasedown (AIM Act) forcing equipment replacement
- High-margin recurring aftermarket services, controls and connected-building software attach on a large installed base
- Reshoring / nonresidential construction and infrastructure spend in the Americas
- Bolt-on M&A extending services, controls and adjacencies
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2026-02-05. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
The order book inflected violently in Q2 2026 — bookings +39% and a record $12.1B backlog up 70% — which converts the data-center/decarbonization demand story from a narrative into contracted revenue visibility through 2027, and management raised FY2026 guidance for the second time this year.
- Record bookings of $7,818M (+39% reported, +37% organic) with book-to-bill of 123% and above 100% in every segment — demand is broadening, not just Americas
- Backlog $12.1B, up 70% YoY, with ~$6B scheduled for 2027 and beyond: unusually long revenue visibility for an HVAC cyclical, and it de-risks 2027 estimates
- Americas Commercial HVAC bookings +50% with applied-equipment bookings +130% — the applied mix is the highest-value, most services-attached part of the franchise
- FY2026 guidance raised to $15.20-$15.30 adjusted EPS (from $14.75-$14.95 at Q1) on ~9% organic revenue growth; second raise of the year
- Cash generation improved sharply: H1 2026 free cash flow $1,602.7M vs $841.4M, on working-capital/revenue of 0.9% (down 280 bps), funding ~$1.9B of dividends, buybacks and M&A with only ~$156M of H1 capex
- Balance sheet stays light — net debt ~$3.30B, ~0.6x annualized Q2 adjusted EBITDA — so the capital-return program does not compete with growth investment
The quarter's growth came with visible margin erosion — gross margin down ~200 bps and adjusted operating margin down 60 bps on +9% organic revenue — and EMEA is now shrinking with a 420 bps adjusted-margin collapse, while the stock still carries ~30x forward earnings.
- Margin expansion, the core of the premium-compounder thesis, reversed: Q2 gross margin 35.6% vs 37.6% (~-200 bps) and adjusted operating margin 19.7% vs 20.3% (-60 bps) despite 9% organic growth — negative operating leverage in the quarter
- EMEA deteriorated materially: revenue -1% reported / -4% organic with adjusted operating margin down 420 bps to 13.1% and GAAP margin down 550 bps — international diversification is a drag, not a cushion
- ~$6B of the record $12.1B backlog is scheduled for 2027 and beyond, i.e. long-lead (largely data-center) projects that can be repriced, delayed or cancelled before they convert
- Valuation still demands flawless execution: ~30x the $15.25 FY2026 adjusted-EPS midpoint and ~19.5x annualized Q2 adjusted EBITDA against a high-single-digit organic grower whose margins just compressed
- Americas is ~83% of Q2 revenue ($5,271.3M of $6,353.5M) — a US nonresidential-construction or hyperscaler-capex air pocket hits disproportionately, and the bookings surge raises the bar for the 2027 comparison
- Reported growth is being flattered by acquisitions and FX (Americas reported +12% vs +11% organic; ~$742M spent on acquisitions in H1) — organic is the ~9% number
What it is worth
Forward P/E and EV/EBITDA vs premium industrial-compounder peers, cross-checked against growth + backlog visibility
~$400-$440 (below the current Street target range) — a multiple-compression scenario if bookings/data-center demand decelerate or construction softens; forward P/E compresses toward the high-20s on trimmed estimates.
~$510-$532 (consensus average target range) — beat-and-raise continues at a moderating pace; ~32-33x forward on FY2026-27 EPS.
~$585 (Street high
Barclays) — sustained data-center + decarbonization demand keeps organic growth high-single/low-double-digit with further margin expansion; multiple holds ~33-35x on rising EPS.
At ~$478.13 (~$105.7B market cap; EV ~$108.5B incl. ~$2.85B net debt), TT trades at ~32x FY2026 adjusted EPS (midpoint ~$14.85), ~37x trailing FY2025 adj EPS ($13.06), and ~25x FY2025 adj EBITDA (~$4.29B). That is a clear premium to the broad industrials group — priced as a secular-growth, high-cash-conversion compounder. The multiple is defensible given the record backlog, +24% organic bookings, the Q1 guidance raise and consistent margin expansion, but it discounts continued beat-and-raise execution and offers little cushion if data-center demand normalizes or nonresidential construction rolls over. Analyst 12-month targets cluster ~$509-$532 average, high ~$585 (Barclays). Not financial advice.
SWOT
Strengths
- Category-leading brands (Trane, American Standard, Thermo King) with large, sticky installed base
- Multi-year margin expansion via a disciplined operating system; 98% FCF conversion
- Direct commercial sales + service network creating recurring, high-margin aftermarket revenue
- Strong, lightly-levered balance sheet (~0.7x net debt/EBITDA) funding buybacks + bolt-on M&A
- Record $10.7B backlog gives unusual revenue visibility into 2026-27
Weaknesses
- Premium valuation (~32x forward EPS, ~25x EV/EBITDA) leaves little room for a miss
- Heavy Americas concentration (~81% of revenue); EMEA/APAC small and slower-growing
- Cyclical exposure to nonresidential construction and interest-rate-sensitive project financing
- Commodity (copper/steel/aluminum) and tariff input-cost sensitivity
- Residential HVAC softer and lower-margin than the commercial engine
Opportunities
- Data-center cooling supercycle (air + liquid) as AI compute scales — a multi-year demand vector
- Refrigerant transition (HFC phasedown) and efficiency codes accelerating equipment replacement cycles
- Building decarbonization / electrification (heat pumps) and energy-services retrofits
- Expanding controls, connected-building software and services attach for recurring revenue
- Continued programmatic bolt-on M&A into services and adjacencies
Threats
- Well-capitalized competitors (Carrier, Johnson Controls, Daikin, Lennox) targeting the same HVAC + data-center demand
- Nonresidential construction downturn or higher-for-longer rates cutting project starts
- Data-center capex is hyperscaler-driven and could normalize sharply, deflating a key growth narrative
- Refrigerant-regulation execution/reformulation risk and potential warranty/transition costs
- Tariff and supply-chain disruption on metals, compressors and electronic controls
Moats, dependencies & bottlenecks
Moats
Trane / American Standard / Thermo King are default specs in commercial HVAC and transport refrigeration; large installed base anchors decades of replacement and service demand.
Direct commercial sales-and-service model creates recurring, high-margin service revenue and deep customer lock-in; hard to replicate at scale.
Moderate-Strong Manufacturing scale, channel breadth and a productivity operating system underpin cost leadership and steady margin gains.
Leadership in high-efficiency, low-GWP-refrigerant and connected systems turns tightening codes into a share-and-replacement tailwind — but competitors innovate too.
Dependencies
End-market demand Commercial HVAC volume tracks project starts, which are interest-rate and capex-cycle sensitive.
Demand concentration A major current growth driver; powerful but lumpy and concentrated in a few hyperscaler buyers.
Net tailwind (forces replacement) but carries reformulation, transition and warranty-execution risk.
steel, aluminum, compressors, semiconductors/controls) COGS and margin swing factor; tariffs and supply disruption amplify it.
Higher-for-longer rates dampen project financing and construction demand.
Advantages
- Pure-play climate-control focus (post-2020 Ingersoll-Rand industrial spin) sharpens capital allocation on the decarbonization theme
- Highest exposure among peers to the fastest-growing Americas Commercial HVAC franchise
- Consistent margin expansion + ~98% FCF conversion = high-quality compounding
- Record backlog delivering multi-quarter revenue visibility
- Balance-sheet flexibility for buybacks + programmatic M&A
Weaknesses
- Rich valuation prices in continued beat-and-raise; low margin for error
- Geographic concentration in the Americas; sub-scale EMEA/APAC
- Cyclical, rate-sensitive core end-markets
- Input-cost and tariff sensitivity on a metals-heavy BOM
- Residential segment lower-margin and softer than commercial
Bottlenecks
- Cyclicality of nonresidential construction gating commercial-HVAC volume
- Concentration of incremental growth in US data-center capex
- Skilled-labor and installer-capacity constraints for large commercial projects
- Metals/tariff cost inflation and component (compressor/controls/semiconductor) supply
- Refrigerant-transition engineering and channel-conversion execution
Top signals & trends
Top signals
Strong forward-revenue visibility, led by Americas Commercial HVAC.
Demand accelerating, not just holding.
Management confidence after a Q1 beat; second-half acceleration implied by backlog.
Premium multiple; sentiment already very positive though off the highs.
Diversification and international growth remain the soft spot.
Trends
Structural, multi-year demand pull for high-capacity commercial HVAC and thermal management.
Policy + corporate ESG accelerate replacement of fossil heating and low-efficiency systems.
Regulation forces equipment replacement cycles favoring efficient, low-GWP systems.
Could slow nonresidential project starts, the volume base for commercial HVAC.
Pressures COGS; historically offset by price/productivity but a persistent watch item.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
carve-out of former Emerson Climate, majority-owned by Blackstone) Compressors — core HVAC/refrigeration component supplier.
Low-GWP refrigerants (Solstice) and controls/sensing — key to the refrigerant transition.
Refrigerants (Opteon) and fluorochemicals feedstock.
Representative steel and copper suppliers into the metals-heavy, chip-touched BOM (copper, steel, aluminum, electronic controls).
Hyperscale data-center operator driving the cooling-demand surge behind the record backlog.
Hyperscale data-center buildout — a key data-center thermal-management demand source.
Hyperscale data-center operator; part of the data-center cooling demand cohort.
Largest US HVAC/R distributor — a major channel to residential/light-commercial contractors.
Mechanical contractor/installer that deploys commercial HVAC equipment on projects.
Closest US HVAC pure-play peer post-portfolio-reshaping; competes across commercial and residential HVAC and (via Carrier Transicold) transport refrigeration vs Thermo King.
Large commercial HVAC + building controls/services rival; overlaps heavily in commercial buildings and data-center cooling.
World's largest HVAC maker (Japan); dominant in heat pumps/VRF and strong globally — a foreign-listed competitor, context only, not a buy/own call.
US-focused HVAC (commercial + residential) competitor; more residential-weighted.
Specialized/semi-custom commercial rooftop and data-center cooling units; nimble niche competitor gaining data-center share.
Competes/overlaps via climate controls and (through Copeland) compression technology central to HVAC/refrigeration.
Major Asian HVAC/VRF and heat-pump player (Japan, foreign-listed); competitive globally — context only, not a buy/own call.