Trane Technologies (NYSE:TT) executives highlighted strong fourth-quarter bookings, record backlog, and an upbeat outlook for 2026 during the company’s fourth quarter 2025 earnings conference call, while also addressing margin impacts tied to residential inventory actions and acquisition-related costs.
Fourth-quarter results driven by commercial HVAC bookings and backlog
Chair and CEO Dave Regnery said 2025 was “a strong year,” noting the company exceeded adjusted EPS guidance despite softness in residential and transport refrigeration markets. He also pointed to robust free cash flow that funded M&A, a growing dividend, and share repurchases.
The standout was commercial HVAC, particularly in the Americas. Regnery said Americas Commercial HVAC posted record fourth-quarter organic bookings, up more than 35% year-over-year. Applied Solutions bookings rose more than 120% and produced a record book-to-bill of 200%, marking the second consecutive quarter with applied bookings growth above 100%.
EMEA HVAC also delivered its second straight quarter of mid-to-high teens organic bookings growth. Regnery said commercial HVAC backlog was up about 25% in the Americas and nearly 40% in EMEA versus year-end 2024, and that the backlog is “predominantly applied,” which he said carries a long, higher-margin services tail.
Segment trends: residential normalization, transport softness, and China challenges
Regnery described the company’s 2025 residential performance as “a tale of two halves,” with a significantly weaker second half. In the fourth quarter, Americas residential bookings were up mid-single digits, while revenues declined mid-teens, reflecting channel inventory normalization.
CFO Chris Kuhn said margins were impacted by proactive measures to normalize residential inventory, including reducing factory production days by one-third, resulting in “roughly 60% deleverage” in that business. In response to a question, Regnery emphasized the company was “very, very intentional” in taking production days out in the fourth quarter to “get the inventory right,” and said the company believes channel inventory is “in the position we want it to be” entering 2026.
Transport refrigeration remained pressured, though management emphasized outperformance versus weak end markets. In the Americas transport refrigeration business, bookings were down mid-single digits and revenues were down low single digits, which Regnery said outperformed transport markets that declined more than 20%. In EMEA transport, bookings and revenues were down low single digits, outperforming end markets that were down mid-single digits.
Asia Pacific results were mixed. Regnery said China remained challenging, with double-digit declines in bookings and revenue, while the rest of Asia delivered low double-digit booking growth with revenues down low single digits.
2026 outlook: 6%–7% organic growth and EPS up 12%–14%
Kuhn initiated 2026 guidance for 6%–7% organic revenue growth and adjusted EPS of $14.65–$14.85, up 12%–14%. He said the outlook assumes about 50 basis points of growth from FX and roughly 200 basis points from M&A (either closed or committed for early 2026), implying 8.5%–9.5% reported revenue growth.
The company is targeting organic leverage of 25% or higher and free cash flow conversion of 100% or greater. For the first quarter, Kuhn said the company expects “flattish organic revenue growth” and adjusted EPS of approximately $2.50, citing continued strength in commercial HVAC offset by tough residential comparisons and market-driven declines in transport.
On the call, Kuhn also provided more detail on how commercial HVAC conversion is expected to unfold. In response to a question about Americas Commercial HVAC revenues, he said the company expects first-quarter growth around 7%–8%, second-quarter growth around 10%, and low-teens growth in the second half, reflecting strong bookings in the second half of 2025 and typical applied lead times of about nine months from order to shipment.
Capital deployment and the Stellar Energy acquisition
Management reiterated its “balanced capital allocation strategy,” prioritizing reinvestment, maintaining a strong balance sheet, and deploying excess cash over time through M&A and share repurchases when shares trade below intrinsic value estimates.
In 2025, the company deployed or committed about $3.2 billion, including approximately $840 million to dividends, $720 million to M&A, and roughly $1.5 billion to share repurchases, Kuhn said.
The company’s largest announced acquisition in 2025 was Stellar Energy, described as a provider of turnkey data center cooling solutions with modular design and build capabilities. Kuhn said Trane expects the acquisition to close in the first quarter and anticipates modest EPS accretion in 2026, even after year-one acquisition and integration costs. For 2026, Trane expects to deploy $2.8 billion to $3.3 billion and said it has $4.7 billion remaining under its share repurchase authorization.
Data center demand, services attachment, and pricing and tariff commentary
Data centers were a recurring topic. Regnery said data center demand is “very strong” but emphasized that fourth-quarter commercial HVAC bookings strength was broad-based across tracked verticals in the Americas, with 12 of 14 verticals up. Executives also said they are working with hyperscalers and chipmakers on “reference design” data centers and expect chillers to remain part of data centers “well into the future.”
On services, Regnery said attachment rates in data centers have improved compared to roughly a decade ago, and he said he would be “hard-pressed” to find a major chiller farm where the company has not had service agreements. However, he suggested the long-term service tail in data centers could be “a bit lower” than the company’s typical applied-system view, which he referenced as “8–10,” while noting the company is still modeling how future innovations and runtime patterns could affect servicing needs.
On pricing, Kuhn said the company has “not seen pricing fade” in residential, while also emphasizing that fourth-quarter residential dynamics were “more due to volume being lower than anything else.” Later, Kuhn noted the company’s residential team had not yet announced a 2026 price increase and said the company would remain “dynamic” in response to conditions.
Regarding tariffs and commodities, Kuhn said the company previously described tariff costs in 2025 as “a bit higher than $140 million” and expects an additional inflationary impact in 2026 as the company moves from three quarters of tariff costs in 2025 to four quarters in 2026. He characterized the incremental impact as “maybe in that $50-ish million range,” and said the company focuses first on mitigation rather than treating tariffs as a profit center. On commodities, Kuhn said roughly half of the company’s copper and aluminum needs for 2026 are hedged, and steel pricing is locked for about six months.
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.
