2024-02-08 12:49:13 ET
Summary
- Trane Technologies is expected to sustain revenue growth in the high single digits by gaining market share and improving operational efficiency.
- The company reported strong Q4 and FY earnings with increased revenue, EPS, and free cash flow.
- Trane anticipates continued growth in 2024, supported by a record backlog and market opportunities in urbanization and climate change mitigation.
- Trane stock may be undervalued and a good long-term investment.
Investment Thesis
I am confident that Trane Technologies ( TT ) can sustain its revenue growth in the high single digits for the foreseeable future by outpacing its end markets through market share gains and increasing operational efficiency. This will enable the company to accelerate its free cash flow growth, thanks to operating leverage and improving Return on Invested Capital ((ROIC)). Trane is well-equipped to deliver market-beating returns to shareholders through price appreciation, share repurchases, and increasing dividends. The company is well-positioned to capitalize on global urbanization and stands to benefit from policies aimed at mitigating climate change and increasing energy efficiency standards.
Earnings Review
Following Q4, Trane’s management reported solid FY 2023 performance , with strong revenue of $17.7 B (up 10.5%), organic revenue growth (up 9%), Diluted EPS of $8.77 (up 17.3%), along with free cash flow (as reported by Trane) of $2.15 B (up 37%)....
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Don't Be Afraid To Hop Aboard The Trane