Trane Offers Good Leverage To Green Building Retrofits And A Transport Recovery

Trane Technologies (NYSE:TT) is in a good position to take advantage of some meaningful trends in the HVAC-R market over the next few years. In the short term, Trane should benefit from a rebound in residential construction and a recovery in transportation refrigeration. Over more of a medium-term timeline, Trane is well-placed to benefit from green building retrofits in the U.S. and Europe. Longer term, Trane’s healthy balance sheet and global position give it M&A optionality to be a consolidator and to reinvest in newer technologies in HVAC-R and building controls.

While these shares have lagged HVAC-R peers on a year-to-date basis, that doesn’t mean the shares are particularly cheap. Mid-to-high single-digit revenue growth over the next five years and long-term revenue growth around 4% isn’t enough to drive a particularly attractive free cash flow-based fair value, and the shares likewise don’t look particularly cheap on an EV/EBITDA basis. Trane does offer a good story, though, and HVAC is a popular space, so I’m not betting against further gains, but I do think valuation is a factor investors should consider, even if they decide theme or momentum are more important.

 

Follow this link to the full article: 

Trane Offers Good Leverage To Green Building Retrofits And A Transport Recovery