TRANE TECHNOLOGIES PLC (TT): what the price requires
At today's price, TRANE TECHNOLOGIES PLC (TT) is priced for today's economics sustained for ~5.7 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/TT
Headline
| Field | Value |
|---|---|
| Ticker | TT |
| Company | TRANE TECHNOLOGIES PLC |
| Sector / Industry | Technology / Scientific Instruments |
| Current price | $479.34/sh |
| Composition | Americas - Equipment 53% / Americas - Services 28% / EMEA - Equipment 9% / EMEA - Services 4% / Asia Pacific - Equipment 4% / Asia Pacific - Services 2% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 12.5% |
| Operating margin today | 18.6% |
| Margin compression implied | -6.1pp |
| Must persist for | 5.7y |
| Multiple paid | 28x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.6% cost of capital; growth searched up to the 26.5% self-funding ceiling; each 1pp moves the implied horizon ~1.6 years.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.87σ |
| cohort percentile (of 177 peers) | 49 |
| sustained it ~5.7 years at this level | 25% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.81x | 4 | expensive |
| Earnings | 3.65x | 5 | expensive |
| Relative | 2.52x | 5 | expensive |
| Growth | 1.26x | 3 | expensive |
Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $294.02 | 1.63x | yes | FCF base $3.2B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.9%, 6yr projection |
| DCF Exit Multiple | Growth | $442.93 | 1.08x | yes | Exit EV/EBITDA: 26.4x / 28.4x / 30.4x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $302.01 | 1.59x | yes | P/E 23.67x (blended: static sector reference 18x + trailing (TTM) 37x), scenarios: 19.8x / 23.7x / 27.6x (bear / base = reference held flat / bull), EV/EBITDA 16.93x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $140.43 | 3.41x | yes | BV/sh $38.51, ROE (TTM) 33.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $283.76 | 1.69x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $380.91 | 1.26x | yes | Rev $21.6B, growth 6% (input: historical growth; tapered), Terminal P/S: 4.1x / 5.0x / 5.8x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $155.16 | 3.09x | yes | EPS $12.93, growth 7% (input: historical EPS growth), PEG=5.44 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $100.60 | 4.76x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $3.05B × (1−21%) / WACC 8.9% → EPV (no growth) |
| Residual Income | Asset | $217.77 | 2.20x | yes | BV $38.51 + 5yr PV of (ROE (TTM) 33.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $105.84 | 4.53x | yes | √(22.5 × EPS $12.93 × BVPS $38.51) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $190.40 | 2.52x | yes | EBITDA $3.92B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $131.34 | 3.65x | yes | FCF $3137.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $126.85 | 3.78x | yes | SBC-adj FCF $3.04B (FCF $3.14B − SBC $0.09B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $239.13 | 2.00x | yes | EPS $12.93 × (8.5 + 2×6.8%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $20.07 | 23.88x | yes | BV $38.51 × (ROIC 4.6% / WACC 8.9%) (excluded from median) |
| P/Sales Sector | Relative | $242.08 | 1.98x | yes | Revenue $21.60B × sector P/S 2.5x |
| PEG Fair Value | Relative | $131.56 | 3.64x | yes | EPS $12.93 × (PEG 1.5 × growth 6.8% (input: historical EPS growth)) → PE 10.2x |
| Earnings Yield | Earnings | $139.78 | 3.43x | yes | EPS $12.93 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.5b |
| Net debt / NOPAT (after-tax) | 1.14x |
| Net debt / operating income (pre-tax) | 0.90x |
| Interest coverage | 17.3x |
| Share count CAGR (buyback) | -1.5% |
| Burning cash | no |
Bullet Takeaways
- Trane Technologies is a pure-play climate and HVAC maker riding two structural tailwinds, building electrification and AI data center cooling, with 81 percent of revenue and a 20 percent operating margin in the Americas.
- The most distinctive current fact is a record $10.7 billion backlog, up over 30 percent from year-end 2025 on organic bookings that grew 24 percent, giving unusual forward visibility for a cyclical industrial.
- The offsetting risk is the price: at 37 times trailing earnings against a machinery-sector median near 18, the stock already discounts sustained above-industry growth, and the next test is the Q2 report on July 30, 2026.
Bull Case
Lead with where the money sits, because the geography is the tell. The 10-K organizes Trane by region, and its Americas segment, per the disaggregation, produces 81 percent of revenue at a 20 percent operating margin, with EMEA and Asia Pacific at 17 and 23 percent respectively. That is a company earning premium industrial margins on the back of one dominant, high-return home market, and it funds those returns from a genuinely defensive business: heating, cooling, and ventilation are non-discretionary, and roughly a third of the model is recurring services. The 10-K describes maintenance agreements running "between 12 months and 60 months" recognized over time as the customer consumes them (accession 0001628280-26-005731), the kind of attached, multi-year revenue that smooths the equipment cycle and compounds as the installed base grows.
The growth story is the part that has repriced the stock, and it is booked, not hoped. Q1 2026 organic bookings surged 24 percent to drive a record $10.7 billion backlog, up more than 30 percent from year-end, with a book-to-bill ratio near 150 percent, meaning Trane took in half again as many orders as it shipped. The engine is data center cooling: applied solutions bookings jumped over 160 percent, the third straight quarter above 100 percent, and the Stellar Energy acquisition added about $1 billion to backlog in modular data center cooling. The 10-K frames the strategy behind it as continuous portfolio refreshment, stating that "the ongoing refreshment of our product and service offerings portfolio requires strategic choices of a significant investment" (accession 0001628280-26-005731), and management is converting those investments into orders faster than it can build. On that strength, the company raised full-year 2026 guidance to roughly 7 percent organic revenue growth and adjusted EPS of $14.75 to $14.95.
The financial quality underneath is what separates Trane from a cyclical betting on a boom. Return on equity is 33.7 percent, free cash flow converted at 108 percent of net income across four consecutive positive quarters, the share count is falling, and the dividend is growing on a modest 32 percent payout. Leverage is moderate and well covered. This is a business generating real cash, returning it, and simultaneously funding a backlog that gives it visibility most industrials never get. The AI-infrastructure buildout needs vast amounts of cooling, and Trane sells exactly that, with the orders already on the books to prove demand is not theoretical. Analysts have moved with it: 13 of 24 rate the stock a strong buy with a mean target above $524.
Bear Case
The moat is real but narrower than the AI-cooling narrative implies, and the bear case is that the market has priced the narrative as if the moat were wider. HVAC is a competitive equipment industry where the durable advantage comes from installed-base density and service attachment, not from a proprietary technology others cannot replicate. The 10-K itself lists competition among its most significant risks and notes that keeping pace requires "the development, commercialization and acceptance of new and enhanced products and services" (accession 0001466258-25-000122), an admission that the position must be continuously re-earned through spending, not defended by patents. Every large industrial, from Johnson Controls to Carrier to Daikin, is chasing the same data center cooling demand, and the applied-solutions surge that is driving Trane's backlog is precisely the segment where new capacity and competitive bidding tend to arrive fastest. Booking growth of 160 percent is spectacular and also the kind of number that attracts supply.
The cyclicality has not been repealed, only deferred by backlog. A record order book built on a construction-and-data-center capex boom is a forward promise contingent on those projects proceeding, and the 10-K catalogs the ways they might not: it warns of "the imposition of tariffs and quotas, trade embargoes" and of shortages, supply chain risks, and price increases (accessions 0001628280-26-005731 and 0001466258-25-000122). Data center construction in particular is tied to a single hyperscaler capex cycle that has historically moved in waves; a pause there would convert today's book-to-bill of 150 percent into a very different number quickly. The recent quarterly trajectory already shows the equipment side softening seasonally, with operating margin easing from 20 percent in mid-2025 to 15.6 percent in the March quarter and operating income down 5 percent year over year, a reminder that even a well-run climate business does not grow in a straight line.
Now the price, which is the crux. No valuation family reaches it: the stock is rich on assets, earnings power, peer multiples, and even forward growth, and the trailing multiples, 37 times earnings and 28 times EBITDA against machinery-sector medians of 18 and 12, quantify the premium. Working backward, the price implies operating growth held near the company's self-funding ceiling for about six years, a persistence only about a quarter of comparable fast-growers have sustained even that long. The company earns an 18.2 percent operating margin today and the price does not need margin expansion; it needs the current growth rate to last, and to last through a full cycle. If data center orders normalize, if commercial construction softens, or if competition compresses the applied-solutions margins now running hot, the growth durability the price is paying for shortens, and a stock discounting six years of ceiling-rate compounding has a long way to fall to meet a business growing at ordinary industrial rates. The bull owns a great company; the bear notes the price already assumes it stays great without interruption.
Valuation
The price is a bet on how long, not how much. At $479.78 (July 2026), the market pays about 28 times company-wide operating income, which inverts into an assumption that operating growth holds near Trane's self-funding ceiling for roughly six years. The near-term pace is not the stretch, the company has recently delivered it, and the required margin is actually below what it earns today: the framework's value band implies a roughly 12.6 percent operating margin would justify the price against the 18.2 percent Trane already earns, so this is explicitly a growth-and-longevity bet, not a margin-expansion bet. The demanding part is duration: only about 25 percent of comparable fast-growers sustained this rate for even five to six years, which is why the priced-in assumption reads as elevated.
The valuation methods are unanimous that the price sits above what standard frames support. Asset-based, earnings-power, peer-multiple, and even forward-growth methods all land below the stock, so this is not a case where one lens disagrees; it is a quality premium the whole market of methods cannot reach. The trailing multiples name the same thing plainly, 37 times earnings and about 28 times EBITDA against machinery-sector medians of 18 and 12, and the honest read is that the backlog is the bridge the market is crossing: a record $10.7 billion order book, up more than 30 percent from year-end with a 150 percent book-to-bill, is the forward evidence the multiple leans on, and the FY2026 guide of $14.75 to $14.95 adjusted EPS puts the stock near 32 times that forward number.
What grounds the premium is cash and returns rather than promises. Free cash flow converted at 108 percent of net income across four positive quarters, return on equity is 33.7 percent, leverage is moderate and well covered, and the share count is falling while the dividend grows on a 32 percent payout. Solvency is not the question here; the question is durability. The concrete bet at this price is that the data center and electrification demand feeding the backlog persists at above-industry rates for years, not quarters, converting the order book at the mid-to-high-20s incremental margins management guides. If it does, the price is defensible; if the demand wave that built the backlog crests, the methods' verdict, that the price already sits beyond every standard frame, becomes the operative one.
Catalysts
The last print set a high bar and raised guidance into it. Q1 2026, reported April 30, delivered organic bookings up 24 percent, reported revenue of $4,969 million (up 6 percent), and a record $10.7 billion backlog with a book-to-bill near 150 percent. The standout was applied solutions bookings up over 160 percent, the third consecutive quarter above 100 percent, with data center cooling, health care, higher education, and government the strongest verticals, and the Stellar Energy acquisition contributing about $1 billion to backlog. On that, management raised full-year 2026 guidance to roughly 7 percent organic revenue growth (about 9.5 percent reported) and adjusted EPS of $14.75 to $14.95, guiding roughly 10 percent revenue growth in Q2 and low-teens growth in the second half.
The next scheduled event is the Q2 2026 earnings report on July 30, where consensus looks for EPS of about $4.27, up roughly 10 percent year over year. The single most important disclosure will be backlog conversion, whether the record order book is turning into shipped revenue at the incremental margins management guided, and whether data center bookings sustain their triple-digit growth or begin to normalize. Continued strength would validate the second-half low-teens growth guide; a deceleration in applied-solutions orders would be the first sign the demand wave is cresting.
Analyst sentiment has been moving up alongside the numbers: Bernstein raised its target on HVAC growth, the mean sits near $524 with 13 of 24 analysts at strong buy. The Stellar Energy integration is the strategic thread to track through the year, its scaling toward a roughly $1 billion revenue target is what underpins the more aggressive backlog-conversion scenarios. The items that would move the thesis are the July 30 backlog and margin figures, any change to the full-year EPS range, and management commentary on whether hyperscaler cooling demand is broadening or concentrating.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- CARR (CARRIER GLOBAL CORPORATION)
- (no filing in the citation store)
- JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
- (no filing in the citation store)
- LII (LENNOX INTERNATIONAL INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings call · Yahoo Finance · Yahoo Finance; Daily Political · Q1 2026 earnings call; Tickeron · Investing.com; Yahoo Finance; Daily Political