HVAC company Trane (NYSE: TT) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 8.3% year on year to $5.75 billion. Its non-GAAP profit of $3.88 per share was 2.3% above analysts’ consensus estimates.
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Trane Technologies (TT) Q2 CY2025 Highlights:
- Revenue: $5.75 billion vs analyst estimates of $5.76 billion (8.3% year-on-year growth, in line)
- Adjusted EPS: $3.88 vs analyst estimates of $3.79 (2.3% beat)
- Adjusted EBITDA: $1.25 billion vs analyst estimates of $1.24 billion (21.8% margin, 0.8% beat)
- Management raised its full-year Adjusted EPS guidance to $13.05 at the midpoint, a 2% increase
- Operating Margin: 20.3%, in line with the same quarter last year
- Free Cash Flow Margin: 10.5%, down from 11.7% in the same quarter last year
- Backlog: $5.63 trillion at quarter end
- Market Capitalization: $105 billion
Company Overview
With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Trane Technologies’s 10.8% annualized revenue growth over the last five years was impressive. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Trane Technologies’s annualized revenue growth of 11.1% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. 
This quarter, Trane Technologies grew its revenue by 8.3% year on year, and its $5.75 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 7.7% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and implies the market sees success for its products and services.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Trane Technologies has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.3%. This result isn’t too surprising as its gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Trane Technologies’s operating margin rose by 3.9 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q2, Trane Technologies generated an operating margin profit margin of 20.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Trane Technologies’s EPS grew at an astounding 19.3% compounded annual growth rate over the last five years, higher than its 10.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Trane Technologies’s earnings can give us a better understanding of its performance. As we mentioned earlier, Trane Technologies’s operating margin was flat this quarter but expanded by 3.9 percentage points over the last five years. On top of that, its share count shrank by 7.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Trane Technologies, its two-year annual EPS growth of 22.7% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Trane Technologies reported EPS at $3.88, up from $3.30 in the same quarter last year. This print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects Trane Technologies’s full-year EPS of $12.31 to grow 12.2%.
Key Takeaways from Trane Technologies’s Q2 Results
It was good to see Trane Technologies provide full-year EPS guidance that slightly beat analysts’ expectations. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its revenue was in line. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 3.1% to $456.84 immediately after reporting.
Is Trane Technologies an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
