Trane Technologies Offers A Multipart Puzzle Between Industry Drivers, Macro Risk, And Valuation

I described Trane's (NYSE:TT) valuation as "interesting" earlier this year, as the HVAC sector had weakened on a slowing outlook and what I believed to be sector rotation. While I wasn't fully comfortable with the valuation, I thought growth prospects were stronger in the near term than the Street was appreciating, and that has been borne out this year by the company's results.

The shares have appreciated close to 10% since that last article, outperforming not only the broader industrial space, but other HVAC and refrigeration companies like Carrier (CARR), Johnson Controls (JCI), and Lennox (LII). On the positive side, I like Trane's leverage to what I believe can be a multiyear trend of efficiency-driven upgrades, but on the negative side, I have some concerns about 2023 expectations and the valuation.

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Trane Technologies Offers A Multipart Puzzle Between Industry Drivers, Macro Risk, And Valuation