Analyst Note| Brian Bernard, CFA, CPA |
Trane Technologies' first-quarter 2022 results and outlook were largely as we expected. Organic revenue increased 12% year over year to $3.4 billion, but adjusted operating margin declined 70 basis points to 11.5% due to ongoing supply chain challenges and rising operating costs. Nevertheless, unlike close competitor Johnson Controls, which also announced earnings on May 4, Trane maintained its full-year adjusted EPS guidance ($6.95-$7.15) despite these headwinds. That said, Trane will need to flex its pricing power to defend its earnings guidance. Indeed, the firm raised its 2022 revenue growth guidance to 10% (from 9%) previously due to additional pricing actions. We expect to increase our current $124 per share fair value estimate approximately 2%, primarily due to the time value of money since our last update.