Trane Technologies plc (TT) is a leading manufacturer of heating, ventilation, and air conditioning systems, as well as commercial and residential building services. The company is currently undergoing a business transformation to achieve cost savings and improve its earnings in the coming years.
Factors Driving Trane Technologies’ Growth
Trane Technologies is focused on improving its business operating system and innovation through business transformation initiatives and investments. The company has reduced costs by roughly $240 million in 2022 and aims to reduce an additional $60 million by 2023, for a total of $300 million under its current transformation initiatives.
The recent acquisition of MTA is expected to strengthen the company’s ability to offer industrial process cooling solutions and services to food and beverage, pharmaceutical, and automotive industries in key markets. Another acquisition, AL-KO Air Technology, expanded its Commercial HVAC product and services portfolios in Europe and Asia, adding high-performing air handling, extraction, and ventilation solutions to these portfolios.
Trane Technologies has a consistent record of rewarding its shareholders through dividend payments and share repurchases. In 2022, 2021, 2020, and 2019, the company repurchased shares worth $1.2 billion, $1.10 billion, $250 million, and $750.1 million, respectively. It paid $620 million, $561.1 million, $507.3 million, and $510.1 million in dividends in 2021, 2020, and 2019, respectively. These moves indicate its commitment to boosting shareholders’ value and underlining its confidence in its business.
Risks Associated with Trane Technologies
Trane Technologies’ current ratio at the end of the first quarter of 2023 was pegged at 1.26, lower than the current ratio of 1.32 reported at the end of the prior-year quarter. A decline in the current ratio is not desirable as it indicates that the company may have problems meeting its short-term obligations.
Zacks Rank and Better-Performing Competitors
TT currently carries a Zacks Rank #3 (Hold). Some better-performing stocks in the broader Business Services sector that investors can consider are Booz Allen Hamilton (BAH) and Omnicom (OMC).
Booz Allen has an expected long-term earnings per share (three to five years) growth rate of 8.9%. BAH has a trailing four-quarter earnings surprise of 8.7%, on average. BAH carries a Zacks Rank #2 (Buy).
Omnicom has an expected earnings growth rate of 6.5% for the current year. OMC has a trailing four-quarter earnings surprise of 9.1%, on average. OMC has a long-term earnings growth of 4.7% and carries a Zacks Rank #2.
Conclusion
Trane Technologies is focused on improving its business operating system and innovation through business transformation initiatives and investments, which will contribute to its expected earnings growth in the coming years. However, investors should be aware of the risks associated with a decline in the company’s current ratio. Overall, Trane Technologies remains a solid investment option for those looking to invest in the Business Services sector.