Trane Technologies Q1 Earnings Call Highlights

Key Points

• Enterprise bookings rose 24% and backlog hit a record $10.7 billion (up >30% vs. year-end 2025), driving 3% organic revenue growth and 7% adjusted EPS growth, led by strong Americas commercial HVAC and double‑digit services growth.
• Data centers and the Stellar Energy acquisition are key growth drivers — Stellar contributed roughly $1 billion to backlog, Trane expects about $500 million of Stellar revenue in 2026 and sees the business reaching ~ $1 billion with mid‑teens EBITDA in 2–3 years.
• Guidance and capital allocation were raised: 2026 organic revenue guidance ~7% (≈9.5% reported) and adjusted EPS of $14.75–$14.95, while management plans $2.8–$3.3 billion of capital deployment (including a 12% higher $900M dividend) and continued share repurchases.

Trane Technologies NYSE: TT reported what Chair and CEO Dave Regnery called “another strong quarter,” highlighted by a surge in bookings and a record backlog that management said provides visibility into faster growth later in 2026. On the company’s Q1 2026 earnings call, executives also raised full-year revenue and earnings guidance, while addressing tariffs and inflation, regional market conditions, and the company’s expanding position in data centers following recent acquisitions.

Bookings jump 24% as backlog hits a record

Regnery said first-quarter enterprise organic bookings increased 24%, driving backlog to a record $10.7 billion, up more than 30% versus year-end 2025. Organic revenue grew 3% in the quarter, led by the Americas commercial HVAC business and double-digit growth in global services, which Regnery noted represents about one-third of enterprise revenue and has delivered a “low teens compound annual growth rate since 2020.”

The performance translated to adjusted earnings per share growth of 7%, according to Executive Vice President and CFO Chris Kuehn. Kuehn added that “enterprise organic leverage was in the high teens,” attributing the results to the company’s business operating system and operational execution.

Commercial HVAC in the Americas stood out, with Regnery saying bookings were up about 40% year-over-year and reached an all-time high. He also pointed to Applied Solutions bookings growth of more than 160% and said the company has now logged its third consecutive quarter of Applied bookings growth above 100%.

Data centers remain a major driver; Stellar Energy adds scale

Management repeatedly highlighted data centers as a key demand driver, while also stressing that growth is broad-based across other verticals. Regnery said Trane’s commercial HVAC pipeline includes long-term capacity and master purchase agreements in data centers, and that the company’s direct sales force and engineered solutions position it well in high-growth verticals.

During Q&A, Regnery told analysts that data centers are “strong globally,” though “once you get outside of the U.S., they tend to get smaller in size.” He also emphasized that Trane has not “lost focus on the core,” noting that “95% plus of our account managers or sales force do not call on data centers” and instead have deep expertise in other end markets.

A major contributor to backlog growth was the acquisition of Stellar Energy, which Regnery described as “a leader in modular data center cooling solutions.” He said backlog includes roughly $1 billion from Stellar, and that the acquisition helped lift combined Americas and EMEA backlog by about $2.7 billion versus year-end 2025. Kuehn provided additional breakdown, saying backlog growth in the quarter was about $3 billion, including about $1.2 billion from acquisitions—“around $1 billion for Stellar Energy”—and about $1.7 to $1.8 billion from organic growth.

Regnery said Stellar currently specializes in modular chiller plants for data centers, and outlined longer-term expectations: “think of this as a business that in two to three years is a $1 billion business,” with “mid-teens plus EBITDA,” serving multiple verticals beyond data centers. He added that roughly half of Stellar’s $1 billion backlog is expected to ship in 2026 and that the deal should be “modest accretion in 2026” as Trane invests in expansion and applies its operating system.

Kuehn said Trane expects about $500 million of revenue in 2026 from Stellar. He also described incremental revenue assumptions embedded in guidance updates since January.

Tariffs and inflation: more pressure expected, mitigation planned

Executives said the tariff and inflation backdrop has shifted since the prior earnings call. Kuehn said that “on a net basis, we are expecting more inflation, including from raw materials and tariffs in the year than was estimated…90 days ago,” and acknowledged near-term pressure on price-cost. However, he said the company expects to manage the impact for the full year and that it is “baked into our guide.”

Kuehn also emphasized Trane’s “in-region, for-region” manufacturing strategy. He said that at the end of 2025 the company had 21 factories in the Americas, with 20 in the U.S. and one in Mexico, and that Stellar added production in Florida with an additional site planned to open in Texas later in the year. Kuehn said “over 95% of our products sold in the U.S. are manufactured and/or assembled in the U.S.”

On pricing, Kuehn said he did not want to get ahead of the businesses but noted that price assumptions were “probably a little bit higher” than previously expected, moving from about 1.5 points in January to “probably closer to two points at the enterprise level now.” He added that the company plans to mitigate costs with suppliers, consider alternative sources, and use pricing “as necessary to offset that cost.”

Segment outlook: commercial HVAC strong; transport recovery expected later

Regnery said the company expects commercial HVAC strength to continue in markets including data centers, higher education, government, and healthcare. He said Q1 book-to-bill was about 150% and that backlog is up nearly 70% year-over-year. Based on backlog and delivery timing, he expects about 10% revenue growth in Q2, followed by acceleration to low teens growth in the second half of 2026.

In residential, Regnery said Q1 bookings were up low single digits while revenues declined mid-single digits, which he said exceeded expectations. The company expects Q2 to be “flattish,” pivoting to growth in the second half due to easier comparisons, while keeping a “prudent” full-year outlook of flat revenue. In discussing channel conditions, Regnery said inventory in the independent wholesale distributor channel is “set properly,” consistent with what the company said previously.

For transport refrigeration, Regnery said market fundamentals continue to improve and support a recovery in late 2026 and healthy growth in 2027, though management expects a “more gradual slope” than ACT Research’s projection. Trane’s market forecast remains a mid-single-digit decline for full-year 2026, with Q2 expected down roughly mid-teens due to the timing of large customer deliveries. Regnery said the company outperformed transport markets in Q1 and expects to outperform for the year, attributing performance to continued investment in product innovation and efficiency.

Regionally, Regnery said EMEA results were solid but flagged the Middle East conflict as a headwind. He said Trane expects second-quarter revenue headwinds of approximately $50 million, representing an estimated $0.05 EPS impact in Q2, and added that the company has prioritized employee safety. In Asia-Pacific, Regnery said China remains challenging, and the company expects the rest of Asia to be stronger than China, with the overall regional outlook “flattish” for 2026.

Guidance raised; capital allocation plans reiterated

Kuehn said Trane increased its 2026 organic revenue growth guidance to approximately 7%, the high end of its prior 6% to 7% range. Reported revenue guidance increased to approximately 9.5%, with unchanged estimates of about two points from M&A and 50 basis points of favorable foreign exchange. The company also raised its adjusted EPS outlook to $14.75 to $14.95, up from $14.65 to $14.85 previously, representing about 13% to 15% adjusted EPS growth.

For Q2 2026, Kuehn guided to approximately 5% organic revenue growth and adjusted EPS of $4.20 to $4.25.

On capital allocation, Kuehn said the company expects to deploy $2.8 billion to $3.3 billion in 2026, including about $900 million for dividends, reflecting a 12% increase to $4.20 per share annualized. He said Trane had deployed or committed about $340 million year-to-date for M&A and strategic investments, and repurchased about $300 million of shares through April, with about $4.4 billion remaining under its current repurchase authorization.

About Trane Technologies NYSE: TT

Trane Technologies NYSE: TT is a global climate solutions company focused on heating, ventilation and air conditioning (HVAC) and transport refrigeration systems. The company develops, manufactures and sells a broad range of climate-control products under well-known brands, including commercial and residential HVAC equipment, building management systems and controls, and transport refrigeration units. Its product portfolio spans rooftop and packaged units, chillers, furnaces, air handlers, compressors, and related components designed for commercial buildings, industrial facilities, residences and transportation applications.

In addition to equipment, Trane Technologies provides lifecycle services that include installation, maintenance, parts, retrofit and aftermarket support, as well as digital and controls solutions for building performance and energy management.

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