Ralliant (RAL) TD Cowen's 54th Annual Technology, Media & Telecom Conference summary

Business performance and market trends

• Noted a significant inflection in business performance since the spin, with strong growth in test and measurement and defense segments, and a $1 billion backlog in defense.

• Book-to-bill ratios improved to 1.1–1.2 in Q1, with healthy demand trends expected to continue through the year.

• Growth guidance for the year is 5–8%, with higher growth expected in test and measurement and sensors, but some caution for the second half due to geopolitical and supply chain uncertainties.

• Industrial segment returned to growth, with potential for further upside if positive trends persist.

• No evidence of pre-buying or inventory build; 70% of business is short-cycle with 90–120 days visibility.

Strategic focus and investment

• Emphasis on competitiveness and R&D velocity, especially in test and measurement, with recent product launches and focus on AI and workflow applications.

• R&D investment in test and measurement is mid-to-high teens percent of revenue, higher than the company average.

• Capital allocation prioritizes organic investment, followed by shareholder returns and then M&A, with a target of returning about 50% of free cash flow via share repurchases.

• Incremental investments are balanced with margin considerations, using a disciplined framework for capital allocation.

Segment outlooks and operational execution

• Defense segment has a $1 billion backlog to be delivered over 2–3 years, with ongoing capacity expansion and execution focus.

• Defense margins expected in the low-to-mid 20% range, with some margin dilution as growth accelerates and more contracts become TINA-compliant.

• Test and measurement segment aims to smooth cyclicality by expanding into new applications and maintaining product competitiveness.

• Utilities (grid) segment saw record orders in Q1, with high single-digit growth expected as capacity expands.

• Supply chain security and diversification are ongoing priorities, with increased inventory to support growth and mitigate risks.