Unlocking Growth and Potential

0:00 Paul Sweeney: All right, here's a company for you. I had not heard about it until recently. Trane Technologies, I think I believe they're based in Ireland, but they are a global climate innovator focused on sustainable solutions for buildings, homes and transportation. Carol Eberhart from Bloomberg Intelligence, she's covers this stock and she's a grizzled veteran. She is not given to praise companies on, you know, a notably she says they had a great quarter. Again, amazing company in a very attractive sector. So when she told me that, I say we got to get these guys on Bloomberg and get her talk about see what's going on with this company.

Dave Regnery joins us. He is the CEO of Trane Technologies. The Tickers TT on your Bloomberg Terminal. Stock hit a 52 week and actually and I'm going to call it an all time high today on the back of some pretty good numbers, earnings and sales beat on consensus. Dave, thanks so much for joining us here from lovely Davidson, NC. Talk to us about your company, what's driving the performance of Train Technologies these days?

1:02 Dave Regnery: Well, first of all, thanks for having me on the show. I just got off our earnings call and we reported a very strong second quarter, much like we did in the first quarter. Our organic revenue growth was up 13%. Our order rates were up 19% and our EPS growth was up 23%. So very proud of how we've been able to perform.

As far as what’s driving our growth, I always tell people we have a system of things that makes Trane Technologies a great company. Whether it's the way we operate our facilities through our business operating system, whether it's the way we innovate our new products, or whether it's our direct salesforce, those are a system of things that make us a great company. We have a service business that's a third of our company that's performing extremely well. In the second quarter, our service business was up mid-teens from a growth perspective, and we have a culture that's, you know, we believe in challenging what's possible and innovating for a sustainable world.

2:06 Alix Steel: So based on that, it's great to chat with you. By the way, I love talking to you because you have such a great read on the residential and commercial businesses. Basically, you have a commercial HVAC unit and a near-term residential HVAC unit, and of course, that's heating, ventilation, air, and cooling. Where's the strength, where's the growth, where are the weak points?

2:29 Dave Regnery: I'll start with residential. We had a very strong quarter in the second quarter. Our revenue was up mid-teens, I'm sorry, low teens. But our residential business for the prior, I'll say, three quarters had really been struggling with a refrigerant change that wasn't clear. That's been clarified. It was really struggling with excess inventory, kind of a hangover from the COVID days that was in the channel. Those both corrected, and we're off to a very warm start to the cooling season, which should have us all concerned for a different reason as the climate continues to increase in temperature. But I would tell you that it's a very strong start of the year, so very strong in residential.

Our commercial business had really broad-based growth. Certainly, the high-growth verticals like data centers we do very, very well in, or education, or in healthcare. But we had broad-based growth in the Americas. We track 14 different verticals, and we were hard-pressed to find a vertical that we were not strong in. So it was just a very strong quarter for Trane Technologies. I'm very proud of what the team's been able to accomplish.

3:44 Paul Sweeney: Yeah, I'm reading the Bloomberg Intelligence research note on your earnings. North America's 16% organic growth was much greater than the 10% consensus. What drove that? 

3:55 Dave Regnery: Really two things. Our residential business performed better than we thought. In the beginning of the year, we thought our residential business would be low single digits. We came in low teens in the quarter, so we significantly outdrove that. And then our commercial HVAC business just continues to operate at a very high level. Like I said, services were up in the high teens actually in the Americas, and their equipment business just continues to exceed our customers' expectations. So, a very strong quarter.

I was listening to your show earlier, you were talking about sustainability. I would tell you that at Trane Technologies, our purpose is built around sustainability. What people are talking about right now is, you're hearing a lot about how much power is going to have to be generated to meet the demand that's coming and you'll hear a lot about data centers using a lot of the electricity. What nobody is talking about is the amount of power that's being generated that's being wasted. I would tell you we call it demand-side management. We know because we've done hundreds of thousands of energy audits in buildings that most buildings operate about 30% inefficiently. Just think if we could solve that problem, and if we can make buildings perform the way they were designed or assets perform the way they're designed, just think about the amount that we could save in the energy that's being produced, which obviously has a trickle effect to the carbon footprint. That's what Trane Technologies is all about. People always ask me where do you see the growth coming from. It's going to be on the demand-side management side.

5:32 Alix Steel:

Hey, Dave, we really appreciate it. Definitely come back. I know you got to run, but we appreciate your time today when you're in the city, come, come in and tell us more about it. You know, and I'm also curious as to those customers, are they willing to pay up for it? We got lots more to talk about. Trane Technologies up by about 3 1/2 percent today. That was Dave Regnery, Trane Technologies CEO and HVAC company joining us there.