L3harris Technologies (NYSE:LHX) Q4 2025 Earnings call January 29, 2026 10:30 AM ET Company ParticipantsChris Kubasik - CEOKen Bedingfield - CFOKristine Liwag - Executive DirectorMyles Walton - Managing DirectorNoah Poponak - Managing Director and Equity ResearchRobert Stallard - PartnerScott Mikus - Director of Aerospace, Defense and Space ResearchSeth Seifman - Executive DirectorSheila Kahyaoglu - Managing DirectorTony Calderon - VP of Investor Relations and Corporate DevelopmentConference Call Participan ...

Financial Data and Key Metrics Changes - Revenue for 2025 was $21.9 billion, representing a 5% organic growth, with adjusted segment operating margin at 15.8%, up 40 basis points from 2024 [14][15] - Non-GAAP EPS increased to $10.73, an 11% rise year-over-year, while adjusted free cash flow grew to $2.8 billion, over 20% increase [14][15] Business Line Data and Key Metrics Changes - Communications Systems (CS) generated $5.7 billion in revenue for 2025, with a margin of 25.2%, reflecting 4% growth and 50 basis points margin expansion [16] - Integrated Mission Systems (IMS) reported $6.6 billion in revenue, achieving 8% organic growth with a margin of 12.2% [16] - Space and Airborne Systems (SAS) had revenue of $6.9 billion and a margin of 12.3% for 2025, with Q4 revenue slightly up due to increased FAA volume [17] - Aerojet Rocketdyne delivered 12% organic revenue growth, exceeding $2.8 billion, with a margin of 12.5% [18] Market Data and Key Metrics Changes - The company ended 2025 with a record backlog exceeding $38 billion and a Book-to-Bill ratio of 1.3 [10] - Key awards included a $2.2 billion contract from South Korea for airborne early warning jets and an $850 million SDA contract for missile defense satellites [11][12] Company Strategy and Development Direction - The company is focusing on aligning its portfolio with defense priorities, including a recent divestiture of a majority stake in its civil space propulsion business to enhance focus on military needs [3][4] - Plans for an IPO of the missile solutions business in 2026 are underway, with the Department of War as an anchor investor [4][19] - The company aims to increase production capacity for missile systems and solid rocket motors to meet growing demand [5][6] Management's Comments on Operating Environment and Future Outlook - Management highlighted a complex and rapidly evolving defense environment, emphasizing the need for speed and execution [7][9] - The company anticipates a 7% organic growth for 2026, supported by a robust order outlook and record backlog [12][20] - Management expressed confidence in meeting future demand and maintaining operational agility [24][25] Other Important Information - The company has reorganized its business segments from four to three to better align technology and business models [4] - The 2026 guidance includes expected revenue of $23 billion to $23.5 billion, with a segment operating margin anticipated to be in the low 16% range [20][21] Q&A Session Summary Question: Long-term agreements for Missile Solutions - Management confirmed ongoing discussions with the Department of War regarding long-term agreements and expressed optimism about the growth potential of the Missile Solutions business [26][27][30] Question: CapEx expectations - Management indicated a planned increase in CapEx to $600 million for 2026, emphasizing the need for investment to modernize production capabilities [32][34] Question: Government stake in Missile Solutions - Management clarified that the government is expected to hold a single-digit equity stake in the Missile Solutions business post-IPO [39] Question: Revenue outlook for RemainCo - Management projected solid mid-single-digit growth for RemainCo, with expectations of leveraging a potentially increased defense budget in 2027 [44][46] Question: Production plans and competitive landscape in space - Management discussed the ramp-up of production capabilities in new facilities and the competitive landscape for satellite contracts, emphasizing the importance of speed and scale [78][80]

Financial Data and Key Metrics Changes - The company reported sales of $3.8 billion in 2025, a slight increase over the previous year, with earnings per share (EPS) rising 6% to a record $3.85 [10][6] - Free cash flow for 2025 was $546 million, a 15% increase compared to 2024, with a free cash flow conversion rate of 100% [13][14] - The company returned $597 million to shareholders through dividends and share repurchases [6][14] Business Line Data and Key Metrics Changes - North America segment sales were $3 billion, slightly up from 2024, with a segment margin of 24.4%, an increase of 20 basis points year-over-year [10][11] - North America water heater sales increased by 1%, while boiler sales grew by 8% due to higher commercial and residential volumes [7][10] - Water treatment sales in North America decreased by 2%, but sales in priority channels grew by 10% [8][9] - Rest of the World segment sales decreased by 4% to $880 million, primarily due to lower sales in China [11][12] Market Data and Key Metrics Changes - In China, third-party sales decreased by 12% in local currency due to economic weakness and soft consumer demand [9][11] - The company expects China sales to decrease mid-single digits in 2026 due to ongoing market challenges [20][21] - The India business, including Pureit, is projected to grow approximately 10% as the company leverages brand synergies [21][28] Company Strategy and Development Direction - The company is focused on portfolio management, innovation, and operational excellence as key strategic priorities [22][24] - The acquisition of Leonard Valve is aimed at expanding into the water management market, enhancing digital capabilities and integrated product offerings [26][27] - The company plans to continue investing in gas tankless offerings and other energy-efficient products to maintain market leadership [16][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the U.S. residential market is expected to remain flat to down due to pressures in new home construction [18][19] - The company anticipates a return to growth in China in the second half of 2026, driven by internal actions and market recovery [21][38] - Management expressed confidence in the company's ability to navigate competitive pressures and maintain profitability through strategic actions [28][29] Other Important Information - The company has increased its dividend for over 30 consecutive years, with a quarterly dividend of $0.36 per share approved [14][15] - The company expects to repurchase approximately $200 million of its stock in 2026 [17][15] Q&A Session Summary Question: What is driving the persistent downturn in residential volumes? - Management indicated that the downturn is primarily due to pressures in new home construction, with emergency and proactive replacements remaining stable [36][37] Question: What indicators suggest a return to growth in China? - Management highlighted the need to move past the impact of government subsidies and focus on remodeling and refurbishments as key drivers for growth [38] Question: Can you elaborate on the competitive intensity in the wholesale channel? - Management noted that competitive pressure is increasing due to low new home construction and retail gaining market share, but emphasized their strong position in both retail and wholesale channels [42][43] Question: What is the growth outlook for the water treatment business? - Management expressed optimism about continued growth and margin expansion in the water treatment business, driven by strategic focus and integration efforts [70][73]

Southwest Airlines (NYSE:LUV) Q4 2025 Earnings call January 29, 2026 10:00 AM ET Company ParticipantsAndrew Watterson - COOBob Jordan - President and CEOCatherine O'Brien - VPConor Cunningham - DirectorDanielle Collins - Managing Director of Investor RelationsRavi Shanker - Managing DirectorSavi Syth - Managing DirectorTom Doxey - CFOTom Fitzgerald - VP of Equity ResearchConference Call ParticipantsAndrew Didora - Senior Equity Research AnalystAtul Maheswari - Equity Research AnalystBrandon Oglenski - Direc ...

Financial Data and Key Metrics Changes - The company reported a record performance in operating expenses as a percentage of revenue, with Operating EBITDA margin increasing by 150 basis points in the legacy business [8] - Full-year cash flow from operations grew by double digits, and free cash flow increased by nearly 27% [8][12] - Operating EBITDA margin expanded by 40 basis points to 30.1% for the full year, overcoming a 140 basis point margin headwind from the acquisition of the Healthcare Solutions business [22] Business Line Data and Key Metrics Changes - The collection and disposal business saw Operating EBITDA growth of more than 8% in Q4, with a margin expansion of 160 basis points [15] - The Healthcare Solutions business improved service delivery metrics and customer service scores, with SG&A expenses for this segment decreasing to 20.8% of revenue in Q4, a 350 basis point improvement from the prior year [24] Market Data and Key Metrics Changes - The company experienced notable growth in special waste, renewable energy, and recycling, while residential collection volume showed signs of improvement [21] - The pricing environment remained healthy, with core price growth of 6.2% in Q4 [20] Company Strategy and Development Direction - The company plans to focus on growing its core business, maximizing returns from recycling and renewable energy investments, and driving growth in healthcare solutions [13] - A new $3 billion share repurchase program was authorized, alongside a 14.5% increase in the planned quarterly dividend rate for 2026 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, noting signs of recovery in the industrial line of business and expectations for steady residential volume improvement [31][35] - The company anticipates Operating EBITDA growth of 6.2% at the midpoint for 2026, with free cash flow expected to grow nearly 30% [12][27] Other Important Information - The company completed automation upgrades at five recycling facilities and added facilities in four new markets, enhancing the performance of its recycling network [11] - The company expects to return about $3.5 billion to shareholders through dividends and share repurchases in 2026, representing over 90% of expected free cash flow [13] Q&A Session Summary Question: Can you provide perspective on the top-line guidance and the macro backdrop? - Management remains cautiously optimistic about the macroeconomy, noting a recovery in the industrial line of business and signs of improvement in residential volumes [31][32] Question: Can you discuss the integration of the Healthcare Solutions business and pricing initiatives? - Significant progress has been made in customer service metrics, with expectations for better price realization in 2026 as the integration continues [37][39] Question: What is the outlook for 2026 in terms of healthcare solutions and cost synergies? - The company expects 4.2% price growth and 3% top-line growth in healthcare solutions, with ongoing efforts to reduce SG&A expenses [39][85] Question: Can you clarify the decision regarding 2027 financial targets? - Management indicated that detailed guidance for 2027 will be provided a year from now, emphasizing the difficulty of predicting long-term performance [46][47] Question: What is the expected margin expansion in the collection and disposal business for 2026? - The target for margin improvement across the portfolio is approximately 50 basis points on a same-store sales basis [49]

Financial Data and Key Metrics Changes - In 2025, the company achieved record revenues of $5.6 billion in Q4 and over $3.6 billion in gross profit for the full year, including nearly $1.6 billion from parts and service [6][11] - Adjusted net income for Q4 was $105 million, with adjusted diluted EPS of $8.49 from continuing operations [11] - Gross profit margin in the U.S. saw a slight decline in new vehicle sales, while used vehicle revenues increased approximately 4% [12][14] Business Line Data and Key Metrics Changes - Parts and service gross profit reached record levels, contributing significantly to overall profitability [4][6] - F&I (Finance and Insurance) performance improved, with PRU (Per Retail Unit) increasing by 13% in the U.K. [9][15] - Used vehicle operations held volumes flat year-over-year, but GPUs (Gross Profit per Unit) declined approximately 8% on a same-store basis due to higher acquisition costs [12][14] Market Data and Key Metrics Changes - In the U.K., new vehicle same-store volumes declined by 8.2%, while used vehicle same-store revenues increased over 9% [14][15] - The U.K. market faced challenges from weak economic growth, inflation, and increased competition from new entrants, particularly Chinese OEMs [7][31] - Chinese OEMs' market share leveled off at around 12%, impacting competitive dynamics in the U.K. [31] Company Strategy and Development Direction - The company is focused on operational excellence and capital deployment towards high-growth opportunities, including acquisitions of brands like Lexus and Acura [6][7] - Restructuring initiatives in the U.K. aim to improve efficiency and profitability, with ongoing adjustments to the operational model [7][16] - The company emphasizes the importance of aftersales and F&I as stabilizers in the U.K. operations while leveraging U.S. best practices [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating near-term challenges while building a resilient platform for long-term growth [10][69] - The macroeconomic environment remains dynamic, with a focus on controlling costs and improving operational efficiency [9][10] - There is a belief in the potential for organic growth in both the U.S. and U.K. markets, particularly in aftersales and used vehicle segments [50][51] Other Important Information - The company disposed of 13 dealerships, generating approximately $775 million in annualized revenue, while also repurchasing over 10% of outstanding shares [7][18] - Liquidity as of December 31 was $883 million, with cash flow generation yielding $699 million of adjusted operating cash flow [17][18] Q&A Session Summary Question: What were the impairments tied to this quarter? - Impairments were primarily related to the U.S. business, particularly within the Audi brand and the Maryland/D.C. market [21][22] Question: Are there specific productivity actions in the U.S.? - The company is deploying AI and productivity tools across various operations, leading to improved technician productivity and lower costs [24][25] Question: What is the status of the U.K. restructuring plan? - The restructuring is in the early stages, with ongoing adjustments to meet acceptable profit levels [29][30] Question: How do Chinese OEMs impact the market? - Chinese OEMs have leveled off at around 12% market share, but the company feels well-positioned due to its focus on luxury brands [31][32] Question: What are the expectations for used GPUs and SG&A post-restructuring? - Used GPUs are expected to improve with better discipline in the U.K., while SG&A is targeted to be around 80% on a long-term basis [39][40] Question: What is the outlook for lease returns and their impact? - An increase in lease returns is expected to provide a controlled source of premium used cars, positively impacting the used car business [52][53] Question: What are the expectations for the used vehicle market in the U.S.? - The company is optimistic about the used car opportunity, focusing on disciplined acquisition and leveraging AI for smarter purchasing decisions [60][61]

Trane Technologies (NYSE:TT) Q4 2025 Earnings call January 29, 2026 10:00 AM ET Company ParticipantsAmit Mehrotra - Managing Director and Industrial Sector HeadAndy Kaplowitz - Managing DirectorChris Kuehn - VP and CFOChris Snyder - Executive DirectorDave Regnery - Chair and CEOJeff Hammond - Managing DirectorJeff Sprague - Founder and Managing PartnerJoe Ritchie - Managing DirectorNigel Coe - Managing DirectorScott Davis - Founding Partner, Chairman and CEOSteve Tusa - Managing DirectorZac Nagle - VP of In ...

Financial Data and Key Metrics Changes - ConnectOne Bancorp ended 2025 with $14 billion in assets and a market cap exceeding $1.4 billion, marking a significant milestone as it surpassed the $10 billion asset threshold [4] - The operating earnings for the current quarter represented an 18.6% increase sequentially over the third quarter, driving the quarterly operating return on assets to 1.24% and return on tangible common equity to 14.3% [10][16] - The tangible common equity ratio increased to 8.62 as of year-end, with expectations to reach 9% [16][22] Business Line Data and Key Metrics Changes - Client deposits increased by approximately 5% on an annualized basis in the second half of 2025, reflecting strong relationship inflows and a reduction in broker deposits [6] - The loan portfolio grew by an annualized 5%, driven by strong originations, although offset by elevated payoffs due to higher refinancing rates [7] - The percentage of non-interest-bearing demand deposits increased from 17% to over 21%, while brokerage deposits declined from 12% to 6% of total assets [9] Market Data and Key Metrics Changes - The bank's net interest margin widened significantly over the past quarter and year, with expectations for continued positive trajectory throughout 2026 [7] - The company anticipates a modest loan portfolio increase in the 3%-5% range due to expected higher payoffs [13] Company Strategy and Development Direction - ConnectOne is focused on maintaining a client-first culture and executing a disciplined approach to balance sheet management, prioritizing optimization and sustainable moderate growth [17] - The company plans to consolidate five branch locations as part of its branch rationalization efforts, while also anticipating modest staffing growth to drive improved revenue and operating synergies [8][12] - The management emphasizes the importance of technology and operational efficiencies, including the integration of AI to enhance productivity and service delivery [70][71] Management's Comments on Operating Environment and Future Outlook - Management acknowledges competitive pressures, political developments, and broader market sentiment as ongoing challenges, but expresses confidence in the company's ability to navigate these hurdles [8] - The outlook for 2026 includes expectations for margin expansion, improved operating efficiencies, and increased non-interest income, despite potential pressures on loan growth [10][14] Other Important Information - The effective tax rate was adjusted downward to 26% for the quarter, with a projected go-forward rate of 28% [15] - The company is well-positioned for opportunistic M&A, with a focus on maintaining financial discipline and evaluating potential transactions based on strategic fit rather than size alone [24][77] Q&A Session Summary Question: Can you speak about the capital stack and preferred redemption? - Management focuses on tangible common equity and aims to reach a ratio of 9%, which would enable dividend increases and stock buybacks [22] Question: Is M&A more likely in 2026? - M&A activity is heating up, but decisions will depend on financial discipline and the value of potential transactions compared to stock buybacks [23][24] Question: What is the outlook for loan growth and deposit competition? - Management anticipates that deposit growth may exceed loan growth due to slower loan growth guidance from payoffs, but expects overall growth to be about equal [54] Question: What is the size and composition of the loan pipeline? - The loan pipeline is approximately $600 million with an average weighted rate of 6.2%, consisting of a mix similar to the current loan composition [41][42] Question: What is the expected provision for loan losses? - The expected provision for loan losses is projected to be in the range of $5-$6 million per quarter, considering the current credit environment [46] Question: How is technology being utilized for operational efficiencies? - The company has incorporated leading technologies, including AI, to enhance efficiency and reduce labor costs, while maintaining a focus on client relationships [70][71]

Financial Data and Key Metrics Changes - The company achieved approximately 37% year-over-year adjusted EBITDA growth in 2025, with adjusted EBITDA for North America at $560 million for the fourth quarter of 2025 [28][34] - Full year 2025 net sales for the standalone IP business exceeded $15 billion, with approximately $2.3 billion of adjusted EBITDA expected to accelerate rapidly over the next 24 months [17][21] - The company expanded adjusted EBITDA margin by 230 basis points in 2025, despite facing $958 million of accelerated depreciation due to footprint optimization and higher depreciation related to the DS Smith acquisition [29][30] Business Line Data and Key Metrics Changes - North America saw significant progress with a run rate cost benefit of approximately $510 million, including $110 million related to footprint optimization in 2025 [28][29] - EMEA's standalone business is projected to have full year 2025 net sales of approximately $8.5 billion and adjusted EBITDA of around $800 million, with ongoing transformation expected to yield benefits in 2026 [21][24] Market Data and Key Metrics Changes - North America is characterized by a high degree of supply integration and steady demand growth, while EMEA has more localized dynamics with relatively higher demand growth [12][13] - The market remains soft but broadly stable in EMEA, with continued pressure on board pricing [43] Company Strategy and Development Direction - The company plans to create two publicly traded, scaled, regional packaging solution leaders in North America and EMEA, aiming to maximize long-term value for shareholders [6][11] - The 80/20 performance system will continue to guide the company's operations, focusing on simplifying, segmenting, resourcing, and growing to drive sustainable value creation [8][15] - The separation will allow each business to tailor its strategies to meet distinct customer expectations and regional opportunities [11][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory for 2026, projecting enterprise net sales of $24.1 billion to $24.9 billion and adjusted EBITDA of $3.5 billion to $3.7 billion [47] - The company anticipates that the separation will enhance each business's ability to make organic and inorganic investments, further improving cost positions and customer experiences [22][24] Other Important Information - The company plans to invest approximately $400 million in EMEA throughout 2026 to support ongoing transformation and 80/20 implementation [28] - The separation is expected to be completed within 12-15 months, with the transaction structured as a spin-off of the EMEA Packaging business to shareholders [26][27] Q&A Session Summary Question: Can you provide assumptions behind the Free Cash Flow guidance of $300 million-$500 million? - The company confirmed that price is not included in the guidance and has issued a price letter to customers [51][52] Question: Will the spin-off provide an opportunity to review the dividend policy? - The company will maintain its current dividend policy through 2026 and will evaluate it in conjunction with shareholders post-spin [56][57] Question: Why is the separation process expected to take 12-15 months? - The timeline is due to the accounting complexities involved, although the company aims to expedite the process [68][70] Question: How confident is the company in achieving the projected growth in the second half of 2026? - Management expressed confidence based on actions already taken and the expected accumulation of benefits from ongoing initiatives [74][76] Question: What is the relative profitability of new volume wins compared to lost business? - The company indicated that new volume wins have been at quality levels consistent with market pricing discipline, contributing to expanding margins [86][88]

Financial Data and Key Metrics Changes - In 2025, ConnectOne Bancorp demonstrated strong performance with $14 billion in assets and a market cap exceeding $1.4 billion, marking a significant transition beyond the $10 billion asset threshold [4] - The operating earnings for the current quarter increased by 18.6% sequentially over the third quarter, with a quarterly operating return on assets reaching 1.24% and a return on tangible common equity of 14.3% [10] - The net interest margin widened significantly, with expectations for continued positive trajectory throughout 2026 [7][11] Business Line Data and Key Metrics Changes - Client deposits increased by approximately 5% on an annualized basis in the second half of 2025, reflecting strong relationship inflows and a reduction in broker deposits [6] - The loan portfolio also grew by an annualized 5%, driven by strong originations, although offset by elevated payoffs due to higher refinancing rates [7] - The percentage of non-interest-bearing demand deposits increased from 17% to over 21%, while brokerage deposits declined from 12% to 6% of total assets [9] Market Data and Key Metrics Changes - The bank's performance metrics improved significantly, with a focus on building strong capital and driving efficiency [7] - The Long Island market showed early gains in deposits post-acquisition, indicating potential for further growth in that region [44] Company Strategy and Development Direction - ConnectOne is focused on maintaining a client-first culture and executing a disciplined approach to balance sheet management, prioritizing optimization and sustainable moderate growth [17] - The company plans to consolidate five branch locations as part of its branch rationalization efforts, while also anticipating modest staffing growth to drive improved revenue and operating synergies [8][12] - The management is committed to leveraging technology, including AI, to enhance operational efficiencies and maintain a competitive edge in the market [70][74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged competitive pressures, political developments, and broader market sentiment as ongoing challenges, but expressed confidence in the company's ability to navigate these hurdles [8] - The guidance for net interest margin includes expectations for gradual improvements, with potential rate cuts factored into projections [11][82] - The company is well-positioned to capitalize on client-driven opportunities in key markets, with a focus on delivering sustainable value to stakeholders [8][17] Other Important Information - The effective tax rate was adjusted downward to 26% for the quarter, with expectations for a go-forward rate of 28% [15] - The tangible common equity ratio increased to 8.62 as of year-end, providing flexibility for dividend increases and opportunistic stock repurchases [16] Q&A Session Summary Question: Can you speak about the capital stack and optimal positioning? - Management emphasized a focus on tangible common equity, aiming to reach a ratio of 9% to enable dividend increases and stock buybacks [22] Question: Is M&A activity expected to increase in 2026? - Management noted that M&A activity is heating up, but decisions will be based on financial discipline and the value of potential transactions [23][24] Question: What is the outlook for loan growth versus deposit growth? - Management indicated that deposit growth may exceed loan growth due to slower loan growth guidance from payoffs [54] Question: Can you provide details on the loan pipeline? - The loan pipeline is approximately $600 million with an average weighted rate of 6.2%, reflecting a mix similar to the current loan composition [41][42] Question: What is the expected provision for loan losses? - Management projected provisions in the range of $5-$6 million per quarter, considering various factors affecting credit quality [46] Question: How is technology being utilized for operational efficiencies? - Management highlighted the integration of AI and other technologies to enhance efficiency and reduce labor costs, maintaining a focus on operational leverage [70][74]