Investment Rating - The industry view is rated as Attractive [6] Core Insights - US Industrials are expected to drive broad margin upside into Q2 2025, with a forecasted sequential operating margin (OM) expansion of just 45 basis points (bps), significantly below the 105 bps average observed over the last decade, indicating a low bar due to tariff cost inflation concerns [3][9] - Companies best positioned for margin upside are those that are pushing prices early and decisively in Q2, particularly in industrial-facing categories with elevated metal content [3][4] - The report identifies several equities as attractive for Q2 margin beats, including Stanley Black & Decker (SWK), Allegion (ALLE), Trane Technologies (TT), Vertiv Holdings (VRT), and Eaton Corporation (ETN) [3][4] Summary by Sections Margin Outlook - The forecast for Q2 2025 indicates a conservative modeling of margins, with a focus on the delta between forecasted Q2 YoY margin expansion and realized Q1 YoY margins [3][13] - The report highlights that the ability to sustain pricing power and grow volumes will be critical for companies to maintain excess margins in the current cost environment [8] Pricing Power - US Industrial pricing power is viewed as an under-appreciated driver of operational durability, with companies realizing strong real EPS growth and healthy incrementals through inflationary periods [8] - The report emphasizes that the best-positioned companies for price increases include Eaton (ETN), Fastenal (FAST), Trane Technologies (TT), and others [8] Market Dynamics - The report notes that macroeconomic uncertainty is high heading into the second half of 2025, which may impact investor sentiment and company performance [3][4] - The cumulative percentage change in Producer Price Index (PPI) from May 2025 compared to February 2025 is tracked to capture tariff impacts, indicating strong pricing power in certain sectors [3][4]

Core Insights - Carrier Global Corporation successfully met its previous growth targets, achieving a 100 basis point margin increase and a 15% growth in EPS, exceeding the initial 10% target [3] - The company reported cash flow equal to net income, aligning with its financial goals [3] - The focus of the recent Investor Day was on accelerating growth, with a target growth rate of 6% to 8% per year, although the actual growth was recorded at 4% [4] Financial Performance - The company aimed for a 50 basis point margin increase per year but achieved a 100 basis point increase [3] - EPS growth was targeted at 10% annually, with actual growth reaching 15% [3] - Cash flow was successfully aligned with net income, indicating strong financial health [3] Growth Strategy - The primary focus of the Investor Day was on strategies to accelerate growth, addressing the gap between targeted and actual growth rates [4] - The company expressed a conservative outlook on market growth, estimating low single-digit growth globally [4]