Industrial Sector Ideas

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>>> Caterpillar Stock : More Recession-Resistant Than You’d Think


Tip Ranks

by Nikolaos Sismanis

Apr 12, 2023


https://www.tipranks.com/news/article/caterpillar-stock-nysecat-more-recession-resistant-than-youd-think


Story Highlights

Caterpillar is more recession-resistant than investors realize, with strong industry tailwinds shielding its performance against a potential market downturn. Its focus on services and strong backlog should also contribute to this rationale.

Given the cyclical nature of its industry, Caterpillar (NYSE:CAT) is often expected to bear the brunt of a recession, leading to a significant impact on its financial performance. With market uncertainty remaining elevated against the backdrop of a tumultuous macroeconomic environment, it makes sense for investors to consider Caterpillar as a rather risky investment these days. While this is technically true, Caterpillar is more recession-resistant than most investors realize.

Planned infrastructure spending remains elevated, benefiting Caterpillar’s results, while its backlog continues to grow, shielding the company against short-term uncertainties. Furthermore, the company’s focus on services is gradually transitioning its revenue mix to a more predictable one, strengthening its position and making it more resilient to potential market downturns.

Coupled with its commitment to rewarding shareholders and the fact that the stock is trading at a reasonable valuation, I am bullish on Caterpillar.

Strong Infrastructure Spending Drives Solid Results

Caterpillar is enjoying a significant boost in demand thanks to record-high infrastructure spending that stems from the 2021 bipartisan Infrastructure Investment and Jobs Act. The legislation provides $1.2 trillion in funding expected to be spent over a five-year period, with a primary focus on road, bridge, and large-scale projects. In fact, as of October 2022, approximately 60% of the $185 billion infrastructure spending was attributed to these key areas.

Given Caterpillar’s leadership in the production of construction equipment and heavy machinery needed to complete these projects, the company is among the top beneficiaries of the bill. This is evidenced by its recent financial performance.

Caterpillar’s 2022 revenues saw a substantial increase of 17% from the previous year, reaching $59.4 billion. The growth can be attributed to higher sales volumes, boosted by favorable price realization and the impact of changes in dealer inventory.

Importantly, the company’s Q4 revenue growth of 20.3% indicates strong upward momentum for upcoming quarters. This is further evidenced by the fact that the company’s backlog rose by $400 million in Q4, bringing the year-end total to $30.4 billion, a 32% increase from the previous year.

These figures should sufficiently exemplify the company’s continued success in a favorable market environment and potential for sustained growth. Regardless, a potential recession is unlikely to result in worsening financials in the short term, given the planned infrastructure spending and growing backlog.

Growth in Services to Enhance Revenue Mix

Caterpillar has taken another strategic step by focusing on the growth of its Services segment. Growing Services revenues should have a positive impact on the company’s revenue mix and improve cash-flow predictability. This is because, through this initiative, Caterpillar is essentially attempting to convert its equipment sales into a source of recurring revenue. This should enhance Caterpillar’s ability to withstand potential economic downturns, further strengthening its resilience to a potential market downturn.

Last year, Caterpillar experienced a noteworthy surge in its Services revenues, reaching $22 billion, marking a 17% increase from the previous year. This growth was propelled by the company’s persistent drive to promote its services through strategic initiatives and investments, as well as effective price realization.

Caterpillar’s assets also grew, having 1.4 million connected assets, up from 1.2 million in 2021. The launch of the company’s new e-commerce app, Cat Central, further amplified its growth in this area. With the highest level of parts availability to date, along with a robust Services segment, the company projects that its Services revenues will hit $28 billion by 2026.

Strong Profitability Boosts Dividends, Buybacks

With strong revenue growth following favorable pricing and sales volumes, Caterpillar has been able to record a strong boost in its profitability. This growth has allowed the company to achieve impressive economies of scale, reflected in an adjusted operating margin of 15.4% in 2022 compared to 13.7% in 2021. The combination of higher revenues and margins has led to even more impressive earnings growth, with adjusted earnings per share skyrocketing by 28% to $13.84.

Thus, Caterpillar was able to increase its rewards to shareholders rather comfortably. In 2022, the company demonstrated its commitment to creating shareholder value by increasing its dividend for the 29th consecutive year. The noteworthy 8.1% hike led to an annualized dividend rate of $4.80, which currently translates to a yield of 2.2%.

The company also took advantage of its boosted profitability to buy back $4.2 billion worth of stock, significantly more than the $2.7 billion repurchased in 2021. Growing capital returns, coupled with strong revenue and earnings growth visibility, should keep stimulating investor interest in the stock. This is also likely to contribute to the stock potentially outperforming the market in the event of a market downturn.

Is CAT Stock a Buy, According to Analysts?

Turning to Wall Street, Caterpillar has a Hold consensus rating based on five Buys, seven Holds, and three Sells assigned in the past three months. At $243.07, the average Caterpillar stock price target implies 10.2% upside potential.

The Takeaway

Caterpillar is currently benefiting from record infrastructure spending, which has led to growing revenues, expanding margins, and record profits. This trend is expected to last over the next few years, which should shield the company from a potential recession in the near term. In the meantime, Caterpillar’s focus on growing its Services segment should improve its revenue mix, making it a more resilient company to potential market downturns further down the future.

Overall, Caterpillar’s ongoing momentum, strong capital returns, and the fact that shares are trading at about 13.85x this year’s projected earnings (about 22% lower than its five-year average forward earnings multiple) form a bullish blend for the stock, in my view.

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>>> Caterpillar or Deere: Which Is the Better Investment?


Yahoo Finance

by Jonathan Poland

April 26, 2023


https://finance.yahoo.com/news/caterpillar-deere-better-investment-141241587.html


It could be argued that Deere & Co. (NYSE:DE) and Caterpillar Inc. (NYSE:CAT) have a virtual monopoly on the farm and heavy construction equipment market. While there is some overlap in the equipment offered by these companies, each dominates separate industries. However, both have incredible brand power and financial metrics.

About Deere

Deere & Co., commonly known as John Deere, is a leading global manufacturer of agricultural, construction and forestry machinery, diesel engines, drivetrains (axles, transmissions, gearboxes) and precision agriculture technology. The company was founded by John Deere in 1837 and has a strong global presence, with manufacturing facilities in the U.S, Europe, Asia and South America. The companys products are distributed through a vast network of dealers, distributors and retail outlets worldwide. Collectively, these added up to nearly $52 billion in revenue during 2022.

That said, Deere generates the bulk of its revenue (86%) from two primary business segments, Agriculture & Turf Equipment at $34 billion and Construction & Forestry Equipment at $11.3 billion.

The Agriculture & Turf Equipment division is the largest business, accounting for 65% of total revenue. This segment includes the sale of tractors, combines, harvesters and other machinery used to plant, cultivate and harvest crops. The Construction & Forestry Equipment unit accounts for 21% of total revenue. This segment includes the sale of backhoes, excavators, loaders and other machinery used to build and maintain roads, bridges and other infrastructure.

The two other services are worth billions to the company as well. The Financial Services segment accounted for 6% of total revenue, or $3.2 billion in 2022, providing financing and insurance products to Deere's customers. The Other segment accounted for 8% of total revenue, or $4.1 billion, and includes the sale of parts, services and other products and services.

About Caterpillar

Caterpillar Inc. (NYSE:CAT), often referred to simply as "CAT," was created nearly 100 years after Deere in 1925 through the merger of the Holt Manufacturing Co. and the C. L. Best Tractor Co. Today, the company's products are used in a variety of industries, including construction, mining, energy, transportation and agriculture. The revenue breakdown is pretty straightforward, all told adding up to $59.40 billion during 2022.

Machinery is largest source of revenue for Caterpillar, accounting for approximately 70% of total sales. The company sells a wide range of machinery, including construction equipment, mining equipment, diesel engines and natural gas engines. Engine sales account for around 15% of total revenue.

Finally, Caterpillar has a variety of related products and services, accounting for roughly 15% of total revenue.

What's the difference?

While Caterpillar and Deere may sell similar products, the companies are industry leaders by addressing completely separate markets with notable differences that distinguish them.

One of the most significant differences is in agricultural equipment. Deere is a leading manufacturer of agricultural machinery, offering products such as tractors, combines, cotton harvesters, balers, sprayers, planters, tillage equipment and mowers. Caterpillar, on the other hand, has a more limited agricultural product line, primarily offering Challenger tractors and some hay and forage equipment.

Deere also has a dedicated forestry equipment segment, which includes products like forwarders, skidders, feller bunchers and knuckleboom loaders. Caterpillar does offer some forestry equipment, but has a more limited range.

While both Caterpillar and John Deere manufacture construction equipment, their product offerings differ slightly. Caterpillar has a more extensive range of construction machinery, including products such as motor graders, pipelayers and paving equipment, which are not part of Deere's core product lineup. Deere, on the other hand, focuses primarily on equipment like excavators, backhoes, wheel loaders, dozers and compact equipment. One caveat is that in 2017, with its acquisition of Wirtgen, Deere became a more prominent player in this segment behind Caterpillar and Komatsu. Long term, Deere is not likely to surpass Caterpillar, but the acquisition could take market share away from it.

The bottom line is that these companies cater to different end users for the most part and have distinct brand identities. Caterpillar is known for its dominance in the heavy construction, mining and energy sectors, whereas Deere is primarily recognized for its agricultural and landscaping equipment.

Brand dominance

Caterpillar has consistently delivered reliable, top-quality products to its customers, offering the lowest overall cost of ownership throughout its history. This commitment to excellence has placed Caterpillar as one of the world's most valuable brands. The company is well-positioned to benefit from favorable trends in the construction sector with a huge gain from the $1.2 trillion U.S. infrastructure deal, as the nation faces a significant backlog of road construction projects. In the energy industry, the rebound in oil prices since the Covid-19 floor should prompt exploration and production companies to boost capital spending, which is good news for Caterpillar's oil well servicing products.

As for Deere, the same bio applies and so does a wide economic moat with strong durable competitive advantage. The companys dealer network is a huge differentiator, distributing products and proprietary aftermarket parts and services across numerous regions. With over 2,000 dealer locations in North America and around 3,700 worldwide, the company has a significant presence on every continent. More importantly, dealers are typically large organizations dedicated solely to selling Deere products. It would be nearly impossible for anyone, let alone upstarts, to replicate the scope and coverage of this network.

Financial dominance

Caterpillar and Deere are boring companies. Neither will produce 10 times returns. However, they will not destroy shareholder value either. Both have nearly the same market capitalization, gross margins, return on equity and forward earnings multiples. Since 2001, Deere has driven annual revenue up from $13.8 billion to $55.6 billion. Caterpillar has a similar story, growing sales from $20.4 billion to more than $59 billion since the turn of the century.

Deere has a slight advantage in terms of growth potential and current net profit. On the bottom line, it generates $38,000 more per employee, which translated to $8.2 billion in the last 12 months versus Caterpillars $6.7 billion. However, Deere carries significantly more total debt - $55.6 billion versus $37.5 billion.

Further, both companies have paid out dividends for 33 straight years and Caterpillar has recorded 29 years of dividend growth. For me, it is a toss up, which is why investing in both stocks would make the most sense.

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>>> Deere Hoists Guidance After Earnings Beat. Why DE Stock Fell.

Deere earnings topped views on strong farm equipment sales


Investor's Business Daily

APARNA NARAYANAN

05/19/2023


https://www.investors.com/news/deere-earnings-q2-de-stock-caterpillar-outlook/


Deere (DE) guided higher for fiscal 2023 early Friday, after easily topping earnings estimates for its second quarter on healthy equipment demand. DE stock jumped to seize a key level, then reversed lower.

On an earnings call, Deere management indicated that Q2 results benefited from a pull-forward of production from the latter half of 2023.

That led to concerns about a sequential sales decline in the current third quarter, with Q2 marking the year's production peak, analysts said.

Deere may have "to manage inventory levels with lower production, so as to exit the year in good shape given the increasing end market concerns due to lower crop prices," William Blair analyst Lawrence De Maria told IBD in an email.

Tractor maker Deere is seen as a bellwether for the farm economy. It also makes heavy machinery for the construction and forestry markets.

Deere Earnings

Estimates: For the quarter ended April 30, Deere earnings were forecast to grow 26% to $8.58 per share, according to FactSet consensus estimates. Total revenue was seen rising nearly 20% vs. a year earlier to $15.993 billion.

Results: Deere earnings jumped 42% to $9.65 a share, though that's a slowdown from 124% in the first quarter. Revenue swelled 30% to $17.39 billion, above expectations, but still the second straight quarter of slowing sales growth.

Production and precision agriculture sales leapt 53%. Smaller agriculture and turf sales grew 16%. Construction and forestry sales rose 23%.

"Deere continues to benefit from favorable market conditions and an improving operating environment," CEO John May said in the Deere earnings release.

"Though supply-chain constraints continue to present a challenge, we are seeing further improvement," May added.

Outlook: Deere now sees full-year net income of $9.25 billion-$9.50 billion, vs. its prior target of $8.75 billion-$9.25 billion. Analysts had forecast net income of $9.06 billion, FactSet shows.

DE Stock Reverses Lower

Shares of Deere closed down 1.9% to 363.55 on the stock market today, falling back below the 50-day moving average. DE stock had gapped up as much as 6% to 393 in the Friday morning session, clearing the 50-day for the first time since early April.

Deere stock peaked last November and has been trending lower, with the 10-week moving average now below the 40-week line, the MarketSmith chart shows.

Caterpillar (CAT), CNH Industrial (CNHI) and United Rentals (URI) are also heading lower and below key levels. CAT stock was almost unchanged, at 214.79, Friday. CNHI stock lost 0.1% while URI stock rose 1.3%.

'Prudent' Move On Production

Deere management "is prudently limiting production to ensure inventories at the dealer level remain lean," Edward Jones analyst Matt Arnold told IBD Friday.

That "should set up another solid year in 2024," he added.

The move comes with the outlook for Deere's end markets under scrutiny.

The World Bank projects agricultural commodity prices will drop 7% this year and will likely fall again in 2024, the Texas Farm Bureau said on May 18.

Prices for all types of farm equipment soared in recent years for reasons very similar to those that drove automobile prices to record levels. As supply chain issues and demand begin to balance, lower farm commodity prices could place additional pressure on farm equipment sales.

In April, construction giant Caterpillar gave a lackluster outlook for equipment sales as well. United Rentals, which rents out scissor lifts and a range of heavy equipment, turned in a mixed report the same month.

Year to date, Deere stock is down around 15%. It pays a 1.3% dividend yield.

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>>> Builders FirstSource Reports First Quarter 2023 Results


Business Wire

May 3, 2023


https://finance.yahoo.com/news/builders-firstsource-reports-first-quarter-110000182.html


Net sales of $3.9 billion, a decrease of 31.6%

Net income of $333.8 million

Earnings per diluted share of $2.41 per share

Adjusted EBITDA of $631.7 million at a margin of 16.3%

Repurchased 7.5 million common shares totaling $627.6 million, a 5.4% reduction of shares outstanding


DALLAS, May 03, 2023--(BUSINESS WIRE)--Builders FirstSource, Inc. (NYSE: BLDR) today reported its results for the first quarter ended March 31, 2023.

First Quarter 2023 Highlights

All Year-Over-Year Comparisons Unless Otherwise Noted:

Net sales decreased 31.6% to $3.9 billion driven by declining single-family starts and commodity deflation, partially offset by growth from acquisitions and one additional selling day.

Gross profit margin percentage increased 300 basis points to 35.3% primarily driven by increased Multi-Family value-added product category mix.

Net income decreased 47.8% to $333.8 million, or $2.41 per diluted share compared to $3.56 in the prior year period, and adjusted net income decreased 41.5% to $410.3 million, or $2.96 per diluted share compared to $3.90 in the prior year period.

Adjusted EBITDA decreased 36.9% to $631.7 million, mainly driven by a decline in net sales and commodity deflation. Adjusted EBITDA margin declined by 130 basis points to 16.3%.

Cash provided by operating activities was $654.4 million, up $474.6 million compared to the prior year period, while free cash flow was $554.5 million, up $423.0 million compared to the prior year period.

Strong quarter-end balance sheet with liquidity of $1.4 billion and a net debt to LTM Adjusted EBITDA ratio of 0.8x.

Repurchased 7.5 million shares of common stock at an average price of $83.17 for $627.6 million, inclusive of fees and taxes.

"We are proud of our results for the first quarter given the challenging macro backdrop. We were able to exceed our forecasts through the strength of our product portfolio, continued execution of our strategic priorities, and the tireless effort of our team members," commented Dave Rush, CEO of Builders FirstSource. "Our best-in-class end market exposure and distribution footprint, in addition to our unrelenting focus on operational excellence, are guiding us through this complex operating environment. We remain committed to enhancing our customer relationships by being the easiest to do business with. Our continued investments in value-added products, productivity initiatives, and digital solutions all work to reduce cycle times and costs, making homebuilding more affordable and efficient. Given our differentiated platform, experienced management team, and clear focus on delivering value-added solutions to our customers, we are well-positioned to outperform."

Mr. Rush continued, "In addition to our focus on profitable organic growth and improving mix, we remain committed to growing through accretive acquisitions. Our recent tuck-in acquisitions allow us to further expand our value-added offerings and reach a more diverse customer base in what we consider to be very attractive markets."

Peter Jackson, CFO of Builders FirstSource, added, "I am pleased with our results in the first quarter. We generated free cash flow of approximately $554.5 million as we leveraged our best-in-class operating platform and extended our track record of effective cost containment and working capital management. We remain disciplined stewards of capital, making another valuable acquisition, and repurchasing $627.6 million of shares during the quarter while maintaining a strong balance sheet and substantial financial flexibility. As we continue to see the benefits of our transformed business, I am increasingly confident that our long-term normalized gross margin percentage is now at 28% or higher versus our previous expectation of 27% or higher. We also believe that we can sustain a double-digit Adjusted EBITDA margin this year. Looking forward, we believe our robust financial position, industry-leading products and solutions, and reputation for providing excellent customer service will allow us to successfully navigate macro volatility and position ourselves for above market growth in the years to come."

Financial Performance Highlights - First Quarter 2023 Compared to First Quarter 2022

Net Sales

Net sales for the period were $3.9 billion, a 31.6% decrease amid a weaker housing environment and commodity deflation of 11.8%, partially offset by acquisitions contributing 5.5% growth and one additional selling day contributing 1.0%. Core organic sales declined by 26.3%.

Core organic sales in value-added products decreased 16.9%.

Core organic sales for Single-Family decreased 34.1%, Multi-Family increased 11.5%, and Repair and Remodel ("R&R")/Other increased 3.1%.

Gross Profit

Gross profit was $1.4 billion, a decrease of 25.2% compared to the prior year period. The gross profit margin percentage increased 300 basis points to 35.3%, primarily driven by increased Multi-Family value-added product category mix.

Selling, General and Administrative Expenses

SG&A was $904.2 million, a decrease of approximately $64.4 million, or 6.6%, driven primarily by lower variable compensation due to lower volume, partially offset by additional expenses from operations acquired within the last twelve months. As a percentage of net sales, total SG&A increased by 630 basis points to 23.3% primarily attributable to decreased leverage to net sales.

Interest Expense

Interest expense increased $0.8 million to $42.1 million, primarily due to higher outstanding debt balances and higher interest rates.

Income Tax Expense

Income tax expense was $91.3 million, compared to $182.9 million in the prior year period, and the effective tax rate in the first quarter decreased 70 basis points to 21.5% year-over-year.

Net Income

Net income was $333.8 million, or $2.41 earnings per diluted share, compared to net income of $639.6 million, or $3.56 earnings per diluted share, in the same period a year ago.

Adjusted Net Income

Adjusted net income was $410.3 million, or $2.96 adjusted earnings per diluted share, compared to adjusted net income of $700.8 million, or $3.90 adjusted earnings per diluted share, in the same period a year ago. The 41.5% decrease in adjusted net income was primarily driven by a decrease in net sales amid a slowing housing environment and commodity deflation.

Adjusted EBITDA

Adjusted EBITDA decreased 36.9% to $631.7 million, primarily driven by lower net sales including a decline in core organic products amid a slowing housing market and commodity deflation.

Adjusted EBITDA margin declined by 130 basis points from the prior year period to 16.3%.

Capital Structure, Leverage, and Liquidity Information

For the three months ended March 31, 2023, cash provided by operating activities was $654.4 million, and cash used in investing activities was $178.9 million. The Company’s free cash was an inflow of $554.5 million.

Liquidity as of March 31, 2023 was $1.4 billion, consisting of $1.2 billion in net borrowing availability under the revolving credit facility and approximately $0.2 billion of cash on hand.

As of March 31, 2023, LTM Adjusted EBITDA was $4.0 billion and net debt was $3.1 billion, resulting in the net debt to LTM Adjusted EBITDA ratio decreasing to 0.8x, compared to 0.9x in the prior year period.

In the first quarter, the Company repurchased approximately 7.5 million shares of its common stock at an average price of $83.17 per share for $627.6 million, inclusive of fees and taxes.

In addition, the Company repurchased approximately 3.8 million shares in April 2023 for $348.4 million at an average price of $91.90 per share, inclusive of estimated fees and taxes. The Company has completed its expanded share repurchase authorization from November 2022 totaling approximately $1.5 billion.

Since the inception of our buyback program in August 2021, the Company has repurchased approximately 80.7 million shares of its common stock, or approximately 39.1% of its total shares outstanding, at an average price of $65.84 per share for a total cost of $5.3 billion. As of April 28, 2023, shares outstanding were approximately 128 million.

In April, the Board of Directors approved a share repurchase authorization in the amount of $1 billion of the Company's common shares.

Operational Excellence Productivity

In the first quarter, the Company delivered approximately $34 million in productivity savings.

The Company continues to believe it can deliver $90 million to $110 million in productivity savings in 2023.

Q2 2023 Company Guidance

The Company expects challenging conditions in housing amid elevated mortgage rates and general uncertainty in economic conditions that may significantly impact the business. As a result, the Company is not currently providing guidance for the full year 2023 but will continue to reassess each quarter.

For the second quarter of 2023, the Company expects to achieve the financial performance highlighted below. Projected net sales and Adjusted EBITDA include the expected benefit of price, commodity, and margin impacts for Q2 2023.

Net Sales to be in a range of $4.0 billion to $4.2 billion.

Adjusted EBITDA to be in a range of $525 million to $575 million.

Adjusted EBITDA margin to be in a range of 13.1% to 13.7%.

2023 Full Year Assumptions

The Company’s anticipated 2023 performance is based on several assumptions for the full year, including the following:

Total capital expenditures in the range of $325 million to $375 million.

Interest expense in the range of $150 million to $170 million.

An effective tax rate of 23.0% to 25.0%.

Depreciation and amortization expenses in the range of $525 million to $575 million, including approximately $160 million of amortization related to intangible assets acquired in the BMC merger. Total depreciation projected to be $220 million and total amortization projected to be $325 million.

No change in selling days in 2023 versus 2022.

Productivity savings in the range of $90 million to $110 million.

Conference Call

Builders FirstSource will host a conference call and webcast on Wednesday, May 3, 2023, to discuss the Company’s financial results and other business matters. The teleconference will begin at 8:00 a.m. Central Time and will be hosted by Dave Rush, Chief Executive Officer, and Peter Jackson, Chief Financial Officer.

To participate in the teleconference, please dial into the call a few minutes before the start time: 800-225-9448 (U.S. and Canada) and 203-518-9708 (international), Conference ID: BLDRQ123. A replay of the call will be available at 12:00 p.m. Central Time through Wednesday, May 10, 2023. To access the replay, please dial 800-839-2434 (U.S. and Canada) or 402-220-7211 (international). The live webcast and archived replay can also be accessed on the Company's website at www.bldr.com under the Investors section. The online archive of the webcast will be available for approximately 90 days.

About Builders FirstSource

Headquartered in Dallas, Texas, Builders FirstSource is the largest U.S. supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. We provide customers an integrated homebuilding solution, offering manufacturing, supply, delivery and installation of a full range of structural and related building products. We operate in 42 states with over 550 locations and have a market presence in 47 of the top 50 and 86 of the top 100 MSAs, providing geographic diversity and balanced end market exposure. We service customers from strategically located distribution and manufacturing facilities (some of which are co-located) that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes dimensional lumber and lumber sheet goods, millwork, windows, interior and exterior doors, and other specialty building products. www.bldr.com

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>>> Trane Technologies Reports Strong First-Quarter 2023 Results; Raises 2023 Guidance


Business Wire

Wed, May 3, 2023


https://finance.yahoo.com/news/trane-technologies-reports-strong-first-103000025.html


Highlights (first-quarter 2023 versus first-quarter 2022, unless otherwise noted):

Reported revenues of $3.7 billion, up 9 percent; organic revenues* up 9 percent

GAAP operating margin up 90 bps; adjusted operating margin* up 140 bps

GAAP continuing EPS of $1.35; adjusted continuing EPS* of $1.41, up 26 percent

Reported bookings of $4.3 billion, down 1 percent; organic bookings* down 1 percent

Strong first-quarter book-to-bill ratio of 117 percent

Record backlog of $7.3 billion, up $400 million from year-end 2022

*This news release contains non-GAAP financial measures. Definitions of the non-GAAP financial measures can be found in the footnotes of this news release. See attached tables for additional details and reconciliations.


SWORDS, Ireland, May 03, 2023--(BUSINESS WIRE)--Trane Technologies plc (NYSE:TT), a global climate innovator, today reported diluted earnings per share (EPS) from continuing operations of $1.35 for the first quarter of 2023. Adjusted continuing EPS was $1.41, up 26 percent, excluding $15.6 million of pre-tax non-GAAP adjustments.

First-Quarter 2023 Results

"In the first quarter, we continued our track record of strong financial results and expect our performance to once again rank in the top quartile among industrials," said Dave Regnery, chair and CEO, Trane Technologies. "Our global team delivered robust bookings, organic revenue growth of 9 percent, adjusted EBITDA margin expansion of 100 basis points and adjusted EPS growth of 26 percent.

"Our strong first-quarter performance, diverse and resilient portfolio and unprecedented backlog give us confidence in raising our full-year guidance for organic revenue and adjusted EPS growth. With our focused sustainability strategy, leading innovation and uplifting culture, we are well positioned to continue delivering superior growth and differentiated shareholder returns over the long term."

Highlights from the First Quarter of 2023 (all comparisons against first-quarter 2022 unless otherwise noted)

Delivered strong first-quarter revenue, operating income, EBITDA and EPS growth.

Enterprise reported and organic bookings were both down 1 percent.

Enterprise reported and organic revenues were both up 9 percent.

Strong book-to-bill ratio of 117 percent.

GAAP operating margin was up 90 basis points, adjusted operating margin was up 140 basis points and adjusted EBITDA margin was up 100 basis points.

Strong positive price realization, volume and productivity more than offset inflation related to supply chain challenges and higher costs to serve customers. The Company also continued high levels of business reinvestment.

Enterprise exited the first quarter of 2023 with backlog more than 2.5 times historical norms.

First-Quarter Business Review (all comparisons against first-quarter 2022 unless otherwise noted)

Americas Segment: innovates for customers in the North America and Latin America regions. The Americas segment encompasses commercial heating, cooling and ventilation systems, building controls, and energy services and solutions; residential heating and cooling; and transport refrigeration systems and solutions.

Reported and organic bookings were both down 4 percent.

Reported revenues were up 9 percent; organic revenues were up 8 percent.

Strong book-to-bill ratio of 116 percent.

Americas segment exited the first quarter of 2023 with backlog at approximately 3 times historical norms.

GAAP operating margin was up 40 basis points, adjusted operating margin was up 90 basis points and adjusted EBITDA margin was up 50 basis points.

Strong positive price realization, volume and productivity more than offset inflation related to supply chain challenges and higher costs to serve customers. The Company also continued high levels of business reinvestment.

Europe, Middle East and Africa (EMEA) Segment: innovates for customers in the Europe, Middle East and Africa region. The EMEA segment encompasses heating, cooling and ventilation systems, services and solutions for commercial buildings and transport refrigeration systems and solutions.

Reported and organic bookings were both up 10 percent.

Reported revenues were up 16 percent, including approximately 6 percentage points related to acquisitions offset by approximately 6 percentage points of negative foreign exchange impact. Organic revenues were up 15 percent.

Strong book-to-bill ratio of 116 percent.

EMEA segment exited the first quarter of 2023 with backlog approximately 60 percent more than historical norms.

GAAP operating margin was up 530 basis points, adjusted operating margin was up 540 basis points and adjusted EBITDA margin was up 510 basis points.

Strong positive price realization, volume and productivity more than offset inflation related to supply chain challenges and higher costs to serve customers. The Company also continued high levels of business reinvestment.

Asia Pacific Segment: innovates for customers throughout the Asia Pacific region. The Asia Pacific segment encompasses heating, cooling and ventilation systems, services and solutions for commercial buildings and transport refrigeration systems and solutions.

Reported bookings were up 11 percent; organic bookings were up 13 percent.

Reported revenues were up 5 percent including approximately 3 percentage points related to acquisitions offset by approximately 6 percentage points of negative foreign exchange impact. Organic revenues were up 8 percent.

Strong book-to-bill ratio of 133 percent.

Asia Pacific segment exited the first quarter of 2023 with backlog approximately 70 percent more than historical norms.

GAAP operating margin was up 310 basis points, adjusted operating margin was up 340 basis points and EBITDA margin was up 390 basis points.

Strong positive price realization, volume and productivity more than offset inflation related to supply chain challenges and higher costs to serve customers. The Company also continued high levels of business reinvestment.

First quarter of 2023 cash flow from continuing operating activities was $17 million and free cash flow use was $52 million. Working capital levels ended the first quarter as expected, reflecting seasonal inventory build.

Year-to-date through May, the Company deployed approximately $720 million, including $170 million in dividends, $300 million for share repurchases, and approximately $250 million for M&A.

The Company expects to continue to pay a competitive and growing dividend and to deploy 100 percent of excess cash to shareholders over time. In the first quarter of 2023, the Company increased its annual dividend by 12 percent to $3.00 per share annualized. Since launching Trane Technologies in March of 2020, the Company has raised the quarterly dividend by 42 percent.

Raising Full-Year 2023 Revenue and EPS Guidance

The Company expects full-year reported revenue growth of approximately 9 percent to 10 percent; organic revenue growth of approximately 7 percent to 8 percent versus full-year 2022.

The Company expects GAAP continuing EPS for full-year 2023 of $8.20 to $8.40. This includes EPS of $0.10 for non-GAAP adjustments. The Company expects adjusted continuing EPS for full-year 2023 of $8.30 to $8.50.

Additional information regarding the Company's 2023 guidance is included in the Company's earnings presentation found at www.tranetechnologies.com in the Investor Relations section.

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>>> Exponent Reports First Quarter 2023 Financial Results


GlobeNewswire

Exponent, Inc.

April 27, 2023


https://finance.yahoo.com/news/exponent-reports-first-quarter-2023-200100014.html


MENLO PARK, Calif., April 27, 2023 (GLOBE NEWSWIRE) -- Exponent, Inc. (Nasdaq: EXPO) today reported financial results for the first quarter of fiscal year 2023 ended March 31, 2023.

“Exponent had a solid start to the year, growing revenues by over 9% on a year-over-year basis. This is a testament to the strength and resiliency of our business model, which is built upon a highly diversified portfolio of critical and integrated services,” commented Dr. Catherine Corrigan, President and Chief Executive Officer. “We continue to position ourselves for future growth by adding to our world-class team of scientists and engineers, increasing headcount year-over-year by 12% through strong talent acquisition and improved retention.”

“Increased demand for our reactive services, which have been foundational to Exponent since our inception, supported our results in the first quarter. This work includes robust litigation-related activity as well as product safety- and recall-related work. Our proactive engagements were driven by work in the consumer products, chemicals, utilities, automotive and life sciences sectors,” continued Dr. Corrigan. “As we look ahead, our expertise will be increasingly sought after as the world places greater emphasis on safety, health, and environmental issues. Exponent remains well positioned to address our clients’ needs across the product lifecycle, developing solutions for today while empowering innovations for tomorrow.”

First Quarter Financial Results

Total revenues and revenues before reimbursements for the first quarter of 2023 increased 9.2% to $140.3 million and $128.7 million, respectively, as compared to $128.5 million and $117.9 million in the first quarter of 2022, respectively.

Net income was $29.1 million, or $0.56 per diluted share, in the first quarter of 2023, as compared to $29.6 million, or $0.56 per diluted share, in the same period of 2022. The tax benefit for the classification of tax adjustments associated with share-based awards realized in the first quarter of 2023 was $3.6 million, or $0.07 per diluted share, as compared to $6.0 million or $0.11 per diluted share, in the first quarter of 2022. Including the tax benefit, Exponent’s consolidated tax rate was 18% in the first quarter of 2023, as compared to 9.7% for the same period in 2022.

EBITDA1 increased to $35.8 million, or 27.8% of revenues before reimbursements, in the first quarter of 2023, as compared to $34.5 million, or 29.2% of revenues before reimbursements in the first quarter of 2022.

In a separate press release today, Exponent announced its quarterly cash dividend of $0.26 to be paid on June 23, 2023, and reiterated its intent to continue to pay quarterly dividends. During the first quarter of 2023, Exponent paid $14.5 million in dividends and closed the period with $125.6 million in cash and cash equivalents.

Business Overview

Exponent’s engineering and other scientific segment represented 83% of the Company’s revenues before reimbursements in the first quarter of 2023. Revenues before reimbursements in this segment increased 11% in the first quarter as compared to the prior year period. Growth during the quarter was driven by continued strong demand for Exponent's services from the transportation, utilities, consumer electronics, and life sciences industries.

Exponent’s environmental and health segment represented 17% of the Company’s revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment decreased 1% in the first quarter as compared to the prior year period. Excluding the impact of foreign exchange of $478,000, revenues before reimbursements for the environmental and health segment increased 2% in the first quarter as compared to the prior year period. Work in this segment was primarily driven by Exponent’s safety-related engagements evaluating the impacts of chemicals on human health and the environment, as well as activity in the life sciences industry.

Business Outlook

“Our accelerated recruiting efforts over the last year have strengthened our unique position to meet the complex and dynamic needs of our clients. As always, we will continue to strategically manage headcount and balance utilization based on market demand, which will support our business model over the long term,” commented Richard Schlenker, Executive Vice President and Chief Financial Officer.

Our full year 2023 guidance is unchanged. For the second quarter of 2023, as compared to the same period one year prior, Exponent anticipates:

Revenues before reimbursements to grow in the high-single to low-double digits; and,

EBITDA1 to be 27.5% to 28.5% of revenues before reimbursements.

For the full year 2023 as compared to the same period one year prior, Exponent anticipates:

Revenues before reimbursements to grow in the high-single to low-double digits; and,

EBITDA1 to be 28.0% to 28.5% of revenues before reimbursements.

“For over five decades, Exponent has stood firmly at the cornerstone of engineering and scientific excellence, connecting the lessons of past failures with tomorrow's solutions to create a safer, healthier, and more sustainable world. Our first quarter results demonstrate Exponent's resilient business model and continued financial strength. Backed by our world class talent, multidisciplinary capabilities, and diverse client relationships, we remain confident in our ability to grow Exponent profitably and drive long-term value for our shareholders,” concluded Dr. Corrigan.

Today's Conference Call Information

Exponent will discuss its financial results in more detail on a conference call today, Thursday, April 27, 2023, starting at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. The audio of the conference call is available by dialing [phone] or [phone]. A live webcast of the call will be available on the Investor Relations section of the Company's website at www.exponent.com/investors. For those unable to listen to the live webcast, a replay of the call will also be available on the Exponent website, or by dialing [phone] or [phone] and entering passcode 6019209#.

Footnotes

1 EBITDA is a non-GAAP financial measure defined by the Company as net income before income taxes, interest income, depreciation and amortization. EBITDAS is a non-GAAP financial measure defined by the Company as EBITDA before stock-based compensation. The Company regards EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of the measures to GAAP is set forth below.

About Exponent

Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's interdisciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes, ensure the safety and health of their users, and address the challenges of sustainability.

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>>> Comfort Systems USA Reports First Quarter 2023 Results


Business Wire

April 26, 2023


https://finance.yahoo.com/news/comfort-systems-usa-reports-first-201000627.html


HOUSTON, April 26, 2023--(BUSINESS WIRE)--Comfort Systems USA, Inc. (NYSE: FIX) (the "Company") today reported results for the quarter ended March 31, 2023.

For the quarter ended March 31, 2023, net income was $57.2 million, or $1.59 per diluted share, as compared to $86.8 million, or $2.40 per diluted share, for the quarter ended March 31, 2022. The first quarter of 2023 included a diluted per share net gain of $0.12, including $0.08 related to prior tax years, due to a tax change and $0.15 from the favorable resolution of certain litigation matters. The first quarter of 2022 included a diluted per share net tax gain of $1.49 related to prior years. Revenue for the first quarter of 2023 was $1,174.6 million compared to $885.2 million in 2022. The Company reported operating cash flow of $126.9 million in the current quarter compared to $63.7 million in 2022.

Backlog as of March 31, 2023 was $4.44 billion as compared to $4.06 billion as of December 31, 2022 and $2.73 billion as of March 31, 2022. On a same-store basis, backlog increased from $2.73 billion as of March 31, 2022 to $4.32 billion as of March 31, 2023.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, "We started 2023 on a very positive note, with remarkable increases in revenue and earnings per share. Our mechanical operations again performed at high levels and our electrical segment continued its trend of improving profitability. Cash flow was unusually strong, especially for a first quarter, and our backlog increased yet again, reflecting good ongoing demand in traditional and modular construction. Our already strong quarterly earnings were further increased by favorable resolution of certain litigation matters."

Mr. Lane concluded, "Our teams across the country continue to execute. Thanks to their excellence, and in light of the strong ongoing demand that we are experiencing, we remain optimistic about our prospects for continued growth and strong profitability in 2023."

The Company will host a webcast and conference call to discuss its financial results and position on Thursday, April 27, 2023 at 10:30 a.m. Central Time. To register for the call, please visit

https://register.vevent.com/register/BI9b57002f12ed44b78143f9dedccc3592.

Upon registering, participants will receive dial-in information and a unique PIN to join the call. The call and the slide presentation to accompany the remarks can be accessed on the Company’s website at www.comfortsystemsusa.com under the "Investor" tab. A replay of the entire call will be available on the Company’s website on the next business day following the call.

Comfort Systems USA® is a leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, with 173 locations in 132 cities across the nation. For more information, visit the Company’s website at www.comfortsystemsusa.com.

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Alamo Group - >>> These three businesses can carry on growing even in the face of a mild recession.


https://www.fool.com/investing/2023/03/28/these-3-growth-stocks-are-screaming-buys-right-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Given the uncertainty in the markets and the economy now, it makes sense to start looking at some under-the-radar stocks with growth prospects that don't rely strongly on the economy.

That's the case for buying stocks like infrastructure and vegetation management equipment company Alamo Group (ALG), aviation services company AAR (AIR -1.21%), and electrical products company nVent Electric (NVT 0.19%). All three have solid growth prospects that should tide them through a difficult economy. Here's why.

1. Alamo Group: Don't forget it

It's no secret that the industrial sector has battled surging prices in raw materials and logistics over the last few years, and Alamo Group is not immune to these factors. Moreover, supply chain disruptions and labor shortages have hurt Alamo's ability to deliver products.

Should you invest $1,000 in Alamo Group right now?

For reference, Alamo operates in two divisions. Its vegetation management business supplies mowers and cutters to governmental, agricultural, and commercial turf markets. The industrial equipment division provides infrastructure-maintenance equipment (for snow- and ice-clearing, road sweepers, and the like). As such, Alamo is a play on the need to maintain infrastructure and public spaces.

The key to the investment case for the stock rests on the idea that its end-market demand is likely to hold up relatively well in an economic slowdown. Meanwhile, its cost and supply chain pressures will ease if a slowing economy alleviates stress on the supply chain.

That argument is strengthened by Alamo Group's $1 billion backlog as of the end of the year -- a figure equivalent to 63% of the $1.6 billion in revenue that Wall Street analysts expect for 2023.

Meanwhile, a combination of mid-single-digit sales growth and margin expansion leads Wall Street to expect double-digit earnings growth for the next few years. Trading at 17.6 times earnings estimates for 2023, Alamo Group looks to be an excellent value.

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>>> Generac Holdings Inc. (NYSE:GNRC) - Number of Hedge Fund Holders: 31


https://finance.yahoo.com/news/14-stocks-pop-according-jim-150048076.html


6-Month Performance as of March 30 (Relative to SPY): -47.00%

One of Jim Cramer's top picks from October 2022 was Generac Holdings Inc. (NYSE:GNRC). The company is an American manufacturer of backup power generation facilities Cramer said that the he liked how low the stock was, enough to add it to his charitable trust. Shares of Generac Holdings Inc. (NYSE:GNRC) have lost 47% over the past 6 months, relative to the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), as of March 30.

At the end of Q4 2022, 31 hedge funds were bullish on Generac Holdings Inc. (NYSE:GNRC) and held stakes worth $588.2 million in the company. Of those, Ariel Investments was the top investor in the company and held a stake worth $132 million.

Meridian Funds made the following comment about Generac Holdings Inc. (NYSE:GNRC) in its Q4 2022 investor letter:

“Generac Holdings Inc. (NYSE:GNRC), is a manufacturer of power generation equipment with a leading position in home standby generators. Generac also offers consumers a home energy management system that harnesses and stores power from the sun to be used for backup during utility power outages. Severe weather events that strained already-overburdened power grids in California, Texas, and other key markets have created a significant opportunity for home power generation equipment manufacturers. Moreover, with the future potential to aggregate these distributed energy resources through the company’s grid services business, homeowners have the potential to monetize these assets. The stock declined during the quarter as the company reduced its full-year revenue guidance due largely to labor shortages in Generac’s dealer network which resulted in a slowdown in installations and implementations. As a consequence, dealers have reduced their on-site inventory. During the period, we exited our position in the company.”

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Quanta Services (PWR) - >>> Quanta is a leading national provider of specialty contracting services, and one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry. Quanta has operations in the United States, Canada, Australia and other selected international markets.


https://finance.yahoo.com/news/growth-investor-1-stock-could-134501559.html


PWR is a Zacks Rank #3 (Hold) stock, with a Growth Style Score of A and VGM Score of A. Earnings are expected to grow 10.3% year-over-year for the current fiscal year, with sales growth of 9%.

Five analysts revised their earnings estimate higher in the last 60 days for fiscal 2023, while the Zacks Consensus Estimate has increased $0.24 to $6.99 per share. PWR also boasts an average earnings surprise of 4.7%.

Looking at cash flow, Quanta Services is expected to report cash flow growth of 41.3% this year; PWR has generated cash flow growth of 25.1% over the past three to five years.

Investors should take the time to consider PWR for their portfolios due to its solid Zacks Rank rating, notable growth metrics, and impressive Growth and VGM Style Scores.

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Quanta Services, Inc. (NYSE:PWR) - >>> Navellier & Associates’ Stake Value: $10 million


https://finance.yahoo.com/news/louis-navellier-top-10-stock-160351252.html


Percentage of Navellier & Associates’ 13F Portfolio: 2.23%

Number of Hedge Fund Holders: 47

Quanta Services, Inc. (NYSE:PWR) is an American contracting services corporation that provides infrastructure services for electric power, pipeline, industrial and communications industries. Louis Navellier's hedge fund owned a $10 million stake in Quanta Services, Inc. (NYSE:PWR) as part of its portfolio for the third quarter of this year. The stake came through the fund owning 78,928 shares of the company, and it represented 2.23% of its investment portfolio.

On November 8, KeyBanc analyst Sean Eastman raised the price target on Quanta Services, Inc. (NYSE:PWR) to $174 from $156 alongside an Overweight rating on the company's shares based on what he calls greater confidence in the multiyear, mid-teens EPS growth algorithm.

Insider Monkey’s Q3 2022 920 hedge fund survey outlined that 47 funds had invested in the firm, a jump from just 34 in the previous quarter. William Harnisch's Peconic Partners LLC is the company's largest shareholder for the quarter, with approximately 5.53 million shares worth $1.3 billion.

Similar to NVIDIA Corporation (NASDAQ:NVDA), Costco Wholesale Corporation (NASDAQ:COST), CF Industries Holdings, Inc. (NYSE:CF), and ConocoPhillips (NYSE:COP), Quanta Services, Inc. (NYSE:PWR) is one of Louis Navellier's top stock picks.

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