Why Is Trane Technologies (TT) Down 9% Since Last Earnings Report?

A month has gone by since the last earnings report for Trane Technologies (TT). Shares have lost about 9% in that time frame, underperforming the S&P 500.

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

Trane Technologies Q4 Earnings & Revenues Top Estimates

Trane Technologies reported better-than-expected fourth-quarter 2021 results.

Adjusted EPS of $1.36 surpassed the Zacks Consensus Estimate by 3.8% and increased 32% year over year. Revenues of $3.6 billion topped the consensus mark by 1.1% and increased 12% year over year on a reported basis and 11% organically. Bookings were up 28% year over year on a reported basis and 27% organically, to $4.1 billion.

Revenues and Bookings Up in all Segments

The Americas segment’s revenues of $2.7 billion increased 15% year over year on a reported basis and 14% on an organic basis. Bookings grew 33% on a reported basis and 31% organically, to $3.2 billion.

Europe, Middle East and Africa (EMEA) segment’s revenues came in at $482.8 million, up 4% year over year on a reported basis and 5% organically. Bookings were up 12% on a reported basis and 13% organically, to $510.3 million.

Revenues from the Asia Pacific segment were up 3% year over year on a reported basis and 4% on an organic basis, to $337 million. Bookings of $377.1 million increased 18% on a reported basis as well as organically.

Strong Margin Performance

Adjusted EBITDA came in at $525 million, up 14% year over year. Adjusted EBITDA margin improved 30 basis points (bps) to 14.7%. Adjusted operating income of $447 million increased 13% year over year with adjusted operating margin improving10 bps to 12.5%.

Key Balance Sheet and Cash Flow Figures

Trane ended the quarter with cash balance of $2.2 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 figure.

The company generated $1.6 billion of cash from operating activities in 2021 while capital expenditures were $163 million. Free cash flow was $1.4 billion.

2022 Guidance

Adjusted EPS is expected to be between $6.95 to $7.15, up 14% to 17% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -18.93% due to these changes.

VGM Scores

Currently, Trane Technologies has an average Growth Score of C, however its Momentum Score is doing a bit 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Trane Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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