Dive Brief:
- Trane Technologies’ commercial HVAC revenue in the Americas grew nearly 20% year over year in the third quarter of 2024, led by strength in applied solutions, according to the company’s Q3 earnings presentation.
- Bookings in the Americas, spanning commercial HVAC, residential HVAC and transport, increased 8% year over year in the third quarter, with revenue growing 15% in that time, per the presentation. Trane’s commercial HVAC revenue in the Americas grew more than 50% on a three-year stack, with commercial HVAC applied bookings and revenue both up 100% over the past four years, the company said.
- “Our commercial HVAC businesses are executing well … [and] we see another strong year ahead for commercial HVAC in the Americas,” Trane Technologies CEO David Regnery said on an earnings call Wednesday. “In particular, we expect strong performance in our commercial HVAC businesses with our large and growing installed base. With increased focus on decarbonization, we're seeing increased demand for digital performance optimization and demand side management, where our energy services business shines.”
Dive Insight:
In the third quarter, Trane Technologies’ revenue organically rose 11% year over year to $5.4 billion, while its backlog grew to $7.2 billion, up $300 million from the end of 2023, according to the company.
Trane’s commercial HVAC segment in the Americas comprises commercial heating, cooling and ventilation systems, building controls and solutions and energy services and solutions, according to its earnings release. In its earnings presentation, Trane pointed to strong, broad-based revenue growth in this segment across the Americas, with particular strength in data centers, education, healthcare, office and across Trane’s services portfolio.
Third-quarter bookings grew 5% year over year to $5.2 billion, marking the second highest quarter in Trane’s history. Regnery said that when looking at historical norms, the backlog is “over 2.5 times what’s normal,” per the report. About 90% of that backlog comes from commercial HVAC — mainly applied solutions with long service tails that have an estimated value at eight to 10 times the initial sale price, per its earnings presentation. This elevated backlog level, attributable to high demand for commercial HVAC products, provides strong visibility and assurance for future revenue as the company heads into 2025, Trane said.
Third quarter Commercial HVAC bookings increased in the low-single digits year over year and climbed approximately 35% on a three-year stack, Trane said in its presentation.
“We are building a strong track record of market outperformance, particularly as increasing project complexity plays to our unique strengths in innovation and direct sales and service,” Regnery said on the call.
Regnery noted that Trane’s installed base is “expanding rapidly” and emphasized the importance of connected solutions and ensuring that assets are always performing the way they are designed.
“Consuming energy at the level assets were designed “at that level is so important. … We have done hundreds of energy audits in buildings, and we know that [conservatively] 30% of the energy after the meter is being wasted,” Regnery said. “However, if you are connected to an asset, you could always ensure that it's performing the way it was designed and that's going to continue to be a significant tailwind for our service business well into the future.”
In its Americas commercial HVAC segment, the company expects continued strong demand for its solutions, as it makes “unwavering reinvestments” and focuses on its core strategy, it said in its presentation. Customer paybacks remain compelling, amid a growing demand for decarbonization projects, it noted.
“We're … in early innings on the journey to decarbonize hundreds of billions of square feet across the built environment,” Regnery said on the call. “Increasing complexity of these project opportunities plays to our unique strengths, and we're seeing this in our bookings, backlog and pipeline of projects.”
Trane’s commercial HVAC segment growth was also driven by its data center vertical, which is expected to grow at a mid-teens clip for the foreseeable future, Regnery said. “Data centers is one strong vertical, but … there's a number of verticals that have been strong for us this year, almost nearly all of them year-to-date showing strength.”
