Trane Technologies (TT) Q4 2025 earnings summary

Executive summary

• Achieved strong 2025 results, exceeding adjusted EPS guidance and bottom-line commitments, with robust bookings and record backlog for 2026, despite softness in residential and transport refrigeration markets.

• Maintained a focused strategy on innovation, digitalization, sustainability, operational excellence, and balanced capital deployment, supporting long-term growth.

• Compound annual revenue growth of 11% and adjusted EPS growth of 24% since 2020.

Financial highlights

• Q4 2025 organic bookings up 22% year-over-year, driving record backlog of $7.8 billion; full-year organic revenue grew 6%, with adjusted EPS up 16% to $13.06.

• Free cash flow conversion reached 98%–106% since 2020, with 2025 free cash flow at $2.9 billion.

• Adjusted EBITDA margin for 2025 at 20.1%, up 70 bps; Q4 adjusted EBITDA margin at 17.9%.

• Adjusted operating margin for 2025 up 90 bps to 18.5%; Q4 margin flat at 16.3%.

• Days sales outstanding at 57.4; inventory turns at 6.4.

Outlook and guidance

• 2026 guidance: 6%-7% organic revenue growth, adjusted EPS of $14.65-$14.85 (up 12%-14%), and reported revenue growth of 8.5%-9.5%.

• Q1 2026 organic revenue expected to be flat, with adjusted EPS of ~$2.50.

• Residential market expected flat to down up to 5% for 2026, with Q1 as the trough; recovery anticipated in 2H 2026.

• Commercial HVAC and services expected to drive growth, with transport markets recovering late 2026 into 2027.

• Free cash flow expected to be at least equal to adjusted net earnings in 2026.