Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the U.S. Multi-Industry sector, indicating a potential reversion of sector stock leadership based on the REVERT framework [1] - The sector is expected to perform in-line with the S&P over 2025, suggesting catch-up potential in the remaining months of the year [6] Company-Specific Insights - **Johnson Controls (JCI)**: The new CEO may clarify portfolio reshaping strategies, including potential divestments in Fire and Security segments [4] - **Emerson Electric (EMR)**: Expected to raise operating leverage goals at the upcoming Capital Markets Day in November [3] - **Rockwell Automation (ROK)**: Anticipated to provide details on a $2 billion reinvestment program in November [3] - **Honeywell (HON)**: Conducting a strategic review of its Productivity and Warehouse businesses [4] - **3M (MMM)**: Despite an EPS guide raise, the company faced a sell-off due to underwhelming top-line growth outlook; however, organic sales and margin performance appear strong [7] - **Trane Technologies (TT)**: Bookings growth is expected to accelerate in the second half of the year, with a positive outlook for 2026 [7] Market Dynamics - There is a mixed sentiment regarding the industrial recovery, with some companies reporting year-on-year sales growth for the first time in years, while others caution that this may be due to easy comparisons and not indicative of strong growth [8] - Onshoring in the U.S. is expected to benefit industries like semiconductors and pharmaceuticals due to tariffs and policies [9][10] - The consensus remains negative on residential and consumer exposure, but potential U.S. interest rate cuts could shift this perspective [11][12] Investment Sentiment - Short-term investor consensus favors companies like APG, GEV, GTES, JCI, NVT, and VRT, while less favored names include CARR, EMR, IR, LII, RRX, and SWK [15] - DOV is highlighted as a potential bottom-fishing opportunity due to its poor stock performance [16] - HUBB is expected to see top-line acceleration despite lowering its 2025 organic sales guide [17] Earnings Guidance and Estimates - EPS estimates for FY25 are at or above the high end of the guided range for several companies, including ETN, GEV, JCI, LII, PNR, ROP, TT, and VRT [22] - Conversely, estimates for CARR, FTV, IR, and RRX are at or near the lower end of guidance [22] Strategic Considerations - The call emphasizes the importance of upcoming investor meetings and events for companies to clarify their strategies and outlooks [21] - The potential for acquisitions in the second half of the year is noted, with companies like ALLE, APG, DOV, IR, PH, and ROP being likely candidates [4] Conclusion - The U.S. Multi-Industry sector is navigating a complex landscape with mixed signals regarding recovery and growth potential. Companies are preparing for strategic updates and potential shifts in investor sentiment as they approach key earnings reports and investor events.

Q2 2025 Financial Performance - All-in revenue increased by 5% year-over-year[6], driven by a 1% organic growth and contributions from acquisitions (+3%) and foreign exchange (+1%)[6] - Bookings increased by 7% year-over-year[5], with a year-to-date book-to-bill ratio of 1.02[6] - Adjusted Segment EBITDA margin reached 25%, a 110 bps increase year-over-year[5], with Adjusted Segment EBITDA up $47 million, a 10% increase[6] - Adjusted EPS increased by 16% to $2.44[5], while reported EPS increased by 14% to $2.03[6] - Free Cash Flow represented 7% of revenue and 45% of adjusted earnings[6] FY 2025 Guidance - Revenue growth is projected to be between 4% and 6%[5] - Adjusted EPS from continuing operations is expected to be between $9.35 and $9.55[5] - Free Cash Flow is projected to be 14% to 16% of revenue[19] - Capital expenditures are estimated to be between $190 million and $210 million[19] Segment Performance - DEP (Engineered Products) revenue decreased by 5% organically, with a 140 bps increase in Adjusted Segment EBITDA margin to 21%[7] - DCEF (Clean Energy & Fueling) revenue increased by 8% organically, with an 80 bps increase in Adjusted Segment EBITDA margin to 21%[7] - DPPS (Pumps & Process Solutions) revenue increased by 4% organically, with a 180 bps increase in Adjusted Segment EBITDA margin to 33%[7] - DCST (Climate & Sustainability Technologies) revenue decreased by 6% organically, with a 60 bps increase in Adjusted Segment EBITDA margin to 20%[7] SIKORA Acquisition - The acquisition is valued at €550 million[22] - SIKORA is expected to generate approximately €115 million in revenue in 2025 with ~30% EBITDA margin[22]

Investment Rating - The industry view is rated as Attractive, with specific companies like ALLE, LII, MMM, and WSO being analyzed for their performance and outlook [6]. Core Insights - The report anticipates modest Q1 earnings beats, but emphasizes that outlooks will significantly influence equities, particularly focusing on April demand commentary and price/cost dynamics for the rest of the year [2]. - There is a strong emphasis on pricing power as a key factor for companies to navigate through tariff uncertainties, with a belief that those able to push prices will fare better in terms of near-term revisions [13][19]. - The report highlights a shift in activity towards US Industrials due to reshoring trends, suggesting that US companies are well-positioned to capture a larger share of global capital expenditure [68]. Summary by Sections Company-Specific Analysis - **ALLE**: The consensus modeling is viewed as conservative for Q1 but aggressive for the rest of the year, with expectations of a modest Q1 EPS beat driven by residential construction dynamics [78][79]. - **LII**: Expected to see a strong beat in Q1, but with a fade in performance anticipated due to difficult comparisons in the second half of the year [6]. - **MMM**: Identified as a top risk due to tariff pre-buy concerns, with a projected Q2 growth of 5% quarter-over-quarter, which is considered aggressive [6]. - **WSO**: Positioned well to achieve pricing power and potentially positive revisions if it can maintain high gross margins amidst tariff inflation [6]. Macro Environment and Trends - The report discusses the impact of tariffs on production and project activity, noting a slowdown in project activity due to uncertainty, while production is expected to continue [9][31]. - It highlights that the US accounts for approximately 30% of global consumption, which provides a competitive advantage for US manufacturers in the face of international competition [9]. - The report indicates that the preference for industrial over consumer exposure is driven by a more capital-intensive world, suggesting a positive outlook for industrial sectors amidst rising inflation [10][20]. Pricing Power and Market Dynamics - The report emphasizes that companies with strong pricing power are likely to perform better in the current macroeconomic environment, where uncertainty is prevalent [13][16]. - It notes that pre-buys are generally negative indicators, as they signal a potential decline in future demand, particularly for companies heavily reliant on international sales [41][45]. - The analysis suggests that the ability to maintain price/cost neutrality will be crucial for companies as they navigate through tariff implementations [13][41].