Trane (TT) Q2 EPS Up 18 Revenue Up 8

Key Points

• Adjusted earnings per share (non-GAAP) surpassed estimates at $3.88, compared to the expected $3.79, representing an 18% increase from Q2 2024.

• GAAP revenue climbed 8% to $5.75 billion, but missed expectations by 0.47%. Americas Commercial HVAC led growth.

• Full-year 2025 guidance was raised, with adjusted EPS targeted at $13.05 and organic revenue growth expected to reach 8%.

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Trane Technologies Plc (NYSE:TT), a leader in heating, ventilation, air conditioning (HVAC), and refrigeration solutions, delivered its second quarter 2025 results on July 30, 2025. The earnings release highlighted adjusted earnings per share (EPS) of $3.88, beating analyst estimates of $3.79 and marking an 18 % rise from the prior year. Revenue (GAAP) grew 8% to $5.75 billion, slightly under the $5.77 billion GAAP consensus estimate. Overall, the quarter reflected ongoing strength in the Americas, particularly from Commercial HVAC, while management lifted its guidance for the full fiscal year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding Trane Technologies Plc’s Business

Trane Technologies Plc designs, manufactures, and services climate-control solutions for commercial, residential, and transport applications worldwide. Its brands include Trane for HVAC systems and Thermo King for transport refrigeration units and trailer cooling. Products range from large-scale commercial HVAC equipment to advanced residential air conditioners and rental solutions.

The company is actively focused on sustainability, recurring revenue through long-term service agreements, and innovation in energy-efficient products. It’s recognized for its “Gigaton Challenge” to reduce customer greenhouse gas emissions, a goal that has become central to its brand and competitive positioning. Key business metrics are influenced by regional performance, strong service segment results, and the ability to manage global supply chains amid regulatory and tariff shifts.

Quarter Highlights: Growth in Americas Offsets Global Softness

The standout was continued momentum in the Americas, particularly in Commercial HVAC systems. Bookings for the segment reached $4.54 billion, an 8% increase from last year, and net revenue grew 9% year-over-year. Operating margin in the Americas expanded to 22.4%, reflecting both strong pricing and operational productivity. Management noted that “Bookings strength led by Americas Commercial HVAC applied solutions up over 60 percent.”

By contrast, performance outside the Americas was mixed. In the Europe, Middle East, and Africa (EMEA) segment, bookings were up just 5%, and organic bookings declined 2%. Margins in EMEA narrowed, with the adjusted operating margin falling to 17.3% due to heavy reinvestment and inflation. The Asia Pacific segment saw bookings drop 16% and revenue slip 7%, weighed down by weaker demand in China and lower volumes overall. Despite these headwinds, Trane highlighted that high-value, service-oriented business lines remain stable, offering some buffer against changes in equipment sales.

The company’s global backlog was $7.1 billion at June 30, 2025, a 6% increase from year-end, but sequentially decreased by about $125 million. This drop reflected softness in the Residential and Transport businesses, even as Commercial HVAC backlog remained elevated.

With “bespoke applied solutions” cited as a major driver for growth, operationally, positive pricing actions and productivity gains offset most inflationary pressures. Adjusted operating margin was 20.3%, up 0.9 percentage points from Q2 2024. However, management flagged tariffs as a possible risk, estimating an annual $250–275 million cost, to be covered “dollar for dollar” through pricing and cost-saving efforts.

On capital allocation, Trane spent approximately $1.8 billion year-to-date through July, covering dividend payments ($420 million), acquisitions ($275 million), share buybacks ($1 billion), and debt reduction ($150 million) year-to-date through July. Free cash flow (non-GAAP) for the six months ended June 30 was $841 million, a 3.8% improvement over the previous year. Cash and debt balances reflected this activity: cash on hand at quarter end was $774 million (down from $1,326 million a year ago), while debt was reduced to $4.62 billion.

The quarterly dividend was raised 12% earlier in the year, effective with the Q1 payment, continuing a multi-year trend of dividend increases.

Looking Ahead: Guidance and Investor Focus

For FY2025, management increased its outlook, now targeting organic revenue growth of 8% and adjusted EPS of approximately $13.05. The company attributed this confidence to record backlog, resilient pricing, and sustained demand in Commercial HVAC. Management also noted that additional price increases to offset tariffs could provide upside to revenue guidance for the full year, though these are not yet included in official targets as cost and price actions are monitored across key markets.

Going forward, areas for investors to watch include the pace at which backlog is converted to revenue, progress in international markets, and any developments in tariff rules or supply chain costs. Residential and Transport remain more volatile, with softer bookings this quarter, Service businesses are expected to provide stability. The company’s continued focus on sustainability, innovation, and service offerings is expected to remain central in its strategy as it moves through the rest of the year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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