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Why Is Trane Technologies (TT) Up 2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Trane Technologies (TT). Shares have added about 2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Trane Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Trane Technologies Q1 Earnings & Revenues Top Estimates

Trane Technologies reported better-than-expected first-quarter 2022 results.

Adjusted EPS of $1.12 surpassed the Zacks Consensus Estimate by 12% and increased 10.9% year over year. Revenues of $3.4 billion beat the consensus mark by 6.2% and increased 11.2% year over year on a reported basis and 12% organically.

Strong results in the quarter were driven by robust demand. Bookings were up 5% year over year on a reported basis and 6% organically, to $4.3 billion.

Revenues and Bookings

The Americas segment’s revenues of $2.6 billion increased 13% year over year on a reported as well as an organic basis. Bookings increased 6% on a reported basis as well as organically, to $3.4 billion.

Europe, Middle East and Africa (EMEA) segment’s revenues came in at $441 million, down 1% year over year on a reported basis but up 6% organically. Bookings were down 6% year over year on a reported basis and stayed flat organically at $536.3 million.

Revenues from the Asia Pacific segment were up 13% year over year on a reported basis and 14% on an organic basis, to $281 million. Bookings of $350.4 million increased 13% on a reported basis and 14% organically.

Margin Performance

Adjusted EBITDA came in at $462 million, up 6% year over year. Adjusted EBITDA margin declined 70 basis points (bps) to 13.8%. Adjusted operating income of $385 million increased 5% year over year while adjusted operating margin declined 70 bps to 11.5%.

Key Balance Sheet and Cash Flow Figures

Trane ended the quarter with cash balance of $1.3 billion compared with $2.7 billion at the end of the previous quarter. Debt balance was $4.8 billion, flat with the previous quarter’s tally.

The company used $184.3 million of cash in operating activities while capital expenditures were $74.8 million. Free cash flow was $27.3 million.

2022 Guidance

Trane expects revenues to increase 9% on a reported basis and 10% on an organic basis. Adjusted EPS is expected to be between $6.95 to $7.15, the midpoint ($7.05) of which is above the current Zacks Consensus Estimate of $7.04.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Trane Technologies has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Trane Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Trane Technologies is part of the Zacks Technology Services industry. Over the past month, Seagate (STX), a stock from the same industry, has gained 2.3%. The company reported its results for the quarter ended March 2022 more than a month ago.

Seagate reported revenues of $2.8 billion in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $1.81 for the same period compares with $1.48 a year ago.

For the current quarter, Seagate is expected to post earnings of $1.92 per share, indicating a change of -4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Seagate. Also, the stock has a VGM Score of A.


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