特靈科技 (TT) 2026 年第三季法說會：在手訂單達 125 億美元

重點摘要

• 企業有機訂單年增 20%，同時所有部門的有機營收增長 16%。全球大型系統（Applied）訂單增長超過 40%。
• 調整後每股盈餘（EPS）增長 25%。若扣除約 0.10 美元的時間性稅務利益，核心調整後 EPS 增幅為 23%。
• 在商業暖通空調（Commercial HVAC）與資料中心需求的支撐下，在手訂單達到 125 億美元。其中超過 80 億美元排定於 2027 年及以後，包括可能延伸至 2028 年的 10 多億美元。
• 特靈科技（Trane Technologies）將 2026 年有機營收成長展望上調至約 11%，並重申調整後 EPS 指引為 15.20 美元至 15.30 美元。
• 今年以來自由現金流達到 28 億美元。管理層目前預期全年自由現金流將超過淨利潤的 100%。
• 通膨、供應鏈瓶頸及價格實現度偏弱帶來的近期壓力，將全年有機營運槓桿展望降至 20% 出頭的區間，但管理層維持至少 25% 的長期架構目標。

主要財務數據

業務與營運績效

商業暖通空調與資料中心

商業暖通空調仍為主要成長動能。美洲商業暖通空調訂單以雙位數低段的速度增長，而有機營收則增長 20% 出頭。隨著產能提升，大型系統解決方案（Applied Solutions）營收增長超過 60%。

管理層表示，儘管大型資料中心專案存在季度間的波動，但潛在訂單管道依然強勁。追蹤的大型專案數量從第 2 季的約 1,400 個增加至 1,700 個，其中超過 90% 與資料中心相關。公司強調，大型專案訂單本質上較具不均勻性，而非代表基本需求放緩。

Stellar 預計將在 2026 年創造約 5 億美元的營收，獲利貢獻呈現中性。未來幾年，管理層認為有機會將其打造為營收達 10 億美元、EBITDA 利益率在 15% 左右的業務。其目前業務主要與資料中心相關，不過特靈科技也看好其在核心垂直市場的應用潛力。

服務業務

服務業務約佔企業總營收的三分之一，在美洲地區成長了 10%。若扣除中東地區，全球服務業務成長超過 10%。受惠於大型系統安裝量持續擴展以及數位能源管理解決方案，該業務自 2020 年以來的複合年均成長率達 10% 左右的中低段。

住宅與運輸業務

美洲住宅業務的訂單與有機營收均增長約 20%。管理層上調了全年住宅業務展望，預計第 4 季營收成長將落在個位數高段。今年以來進貨與出貨大致維持平衡，9 月底的通路庫存狀況良好。

美洲運輸業務訂單增長達 30% 高段，營收則以個位數高段的速度增長。大型車隊客戶帶動了此波改善，管理層視此為復甦延續至 2027 年並可能發展為多年上升週期的早期訊號。

區域績效

在歐中非地區（EMEA），若不含中東地區，訂單增長超過 50%，營收則以個位數高段的速度增長。扣除中東地區後，商業暖通空調的營運槓桿超過 25%。

亞太地區在中國以外的市場表現強勁。亞洲其他地區訂單增長 70%，營收增長達 10% 高段。佔亞太部門約三分之一的中國市場表現依然嚴峻，導致該區域出現約 1 個百分點的負價格實現度。

管理層展望指引

特靈科技將 2026 年有機營收成長展望上調至約 11%，同時維持調整後 EPS 指引為 15.20 美元至 15.30 美元。全年有效稅率預測維持在 19%。

針對第 4 季，管理層預計有機營收成長落在 15% 左右，調整後 EPS 約為 3.40 美元至 3.50 美元。第 4 季 EPS 包含稅率上升帶來的約 0.10 美元逆風，抵銷了第 3 季的稅務利益。

目前預計全年價格實現度約為 1 個百分點，低於先前的 1.5 個百分點，主因是較短週期業務的時間點與產品組合影響。管理層預計第 4 季全企業的價格實現度將加速至約 1.5 個百分點，美洲地區則接近 2 個百分點。

全年有機營運槓桿預測從至少 25% 下調至 20% 出頭的區間。管理層將此轉變歸因於價格實現度降低、通膨及供應鏈成本。管理層預期第 4 季槓桿率將超過長期目標區間，並持續以長期至少 25% 為目標。

該公司預計在 2026 年配置超過 34 億美元的資金。今年以來已執行約 14 億美元的庫藏股買回，將股利提高 12%，目前預期資本支出約佔營收的 2%。

風險與關注焦點

• 第 3 季供應鏈壓力加劇，需求使風扇、盤管與熱交換器供應商承壓。管理層預期這些瓶頸將持續至第 4 季，並在 2027 年上半年得到改善。
• 受監管法規變動影響的下游電容供應商，曾暫時打亂馬達與驅動器供應。管理層表示相關生產與重工問題現已完全解決。
• 在 2026 年剩餘時間內，價格對比通膨預計仍將是逆風。金屬、燃料、電子零件與元件均呈現通膨現象。
• 中東衝突占歐中非地區（EMEA）利潤率年增率影響的 80% 以上。第 3 季部門營業利益比去年同期降低約 1,800 萬美元。
• 中國持續對亞太地區的定價與利潤率帶來壓力，不過亞洲其他地區的增長抵銷了部分疲軟。
• 管理層在評估 2027 年住宅業務展望時，正密切關注利率與其他經濟指標。

法說會問答環節亮點

在手訂單能見度：在 125 億美元的在手訂單中，超過 80 億美元排定於 2027 年及以後。在手訂單僅涵蓋設備，不包含服務。管理層估計其中有超過 10 億美元可能與 2028 年相關。

定價與利潤率：第 3 季全企業價格實現度約為 50 個基點，其中美洲地區約 60 個基點，歐中非地區 50 個基點。亞太地區因中國市場影響，價格下降約 1 個百分點。商業暖通空調維持正向定價，而住宅業務的促銷獎勵與運輸業務的客戶組合則降低了全企業的價格實現度。

供應鏈韌性：擬議對 Cancoil 的收購旨在加強用於空氣處理機與氣冷式冰水機的大型盤管與傳熱產品的供應。特靈科技已占 Cancoil 出貨量的大約 40%。

2027 年布局展望：在在手訂單與創新的支撐下，管理層預期商業暖通空調將維持強勁。住宅業務進入 2027 年時通路庫存應已正常化，而美洲 Thermo King 預計將受益於運輸市場的改善。正式的 2027 年指引將隨第 4 季財報一同公布。

下一代資料中心系統：管理層表示，特靈科技正與超大規模業者、晶片製造商及其他業界參與者合作開發參考設計，包括 800 伏特直流架構與模組化熱管理系統。250 MW 模組化設計的訂單已在潛在管道中，但未說明具體時間或營收貢獻。

法說會逐字稿全文

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完整財報電話會議逐字稿

管理層陳述

Operator

Good morning. Welcome to the Trane Technologies Q3 2026 Earnings Conference Call. My name is Warren and I will be your operator for the call. The call will begin in a few moments with the speaker remarks and the Q&A session. [Operator Instructions] I will now turn the call over to Patrick Uotila, Director of Investor Relations. Please go ahead.

Patrick Uotila

Thanks, operator. Good morning, and thank you for joining us for Trane Technologies' Third Quarter 2026 Earnings Conference Call. Our webcast and slide presentation are available at tranetechnologies.com, where a replay will also be archived.

Today's discussion includes forward-looking statements. Key risk factors are detailed in our SEC filings. We also use non-GAAP measures. Explanations and reconciliations are in our press release and presentation appendix. Joining me on today's call are Dave Regnery, Chair and CEO; Chris Kuehn, Executive Vice President and CFO; and joining us for Q&A is Donny Simmons, Executive Vice President and Chief Operating Officer.

With that, I'll turn the call over to Dave. Dave?

David Regnery

Thanks, Pat, and good morning, everyone. Please turn to Slide #3. Our focused strategy is aligned to powerful mega trends and continues to propel strong performance. Today, global energy systems are stretched and building still waste about 30% of the energy they pay for. If we want a sustainable and resilient energy future, efficiency isn't optional. It's imperative. Customers choose Trane Technologies because we solve this problem at scale. Our smart systems, advanced controls, and deep service expertise allow buildings and industry to optimize their energy footprint in real time. This enables our customers to boost performance, reduce cost and reduced emissions, and help create more resilient energy systems. When you combine this strong customer demand with our leading innovation and talented team, we are well positioned to deliver differentiated long-term value for our shareholders.

Please turn to Slide #4. Q3 was another strong quarter. Enterprise organic bookings grew 20%, fueled by robust growth across all segments. Our Commercial HVAC businesses delivered outstanding performance with global applied bookings up over 40%, putting our backlog to $12.5 billion. Organic revenue grew 16%, led by the Americas and with growth across all segments. Our Service business, which represents about 1/3 of enterprise revenue, continues to be a resilient growth driver with low teens compound annual growth rate since 2020. All in, we delivered adjusted EPS growth of 25%. This includes a tax benefit of about $0.10 due to timing, excluding this tax benefit, our underlying adjusted EPS growth is up 23%.

We also delivered exceptional free cash flow, reaching $2.8 billion year-to-date and now expect to deliver free cash flow greater than 100% of net earnings for the full year. Given our robust backlog, strong pipeline and proven execution, we are raising our full year revenue guidance and reaffirming our EPS guidance.

Please turn to Slide #5. Our third quarter results were driven by standout performance in the Americas segment. Commercial HVAC delivered exceptional bookings, up low double digits and strong organic revenues up low 20s. As expected, Applied Solutions revenues ramped significantly with growth exceeding 60%. Services in the Americas continues to be a key growth engine, up 10%. The Residential business exceeded our expectations with both bookings and organic revenues up approximately 20%. Our Transport business also gained momentum with bookings up in the high 30s and revenues up high single digits. In EMEA, our performance was solid and in line with our expectations. Excluding the Middle East, segment bookings were up over 50%, and revenues grew high single digits. Our team in Asia Pacific delivered strong results outside of China, with bookings in the rest of Asia, up 70% and revenues up in the high teens. China now represents 1/3 of our Asia Pacific segment.

Now I'd like to turn the call over to Chris. Chris?

Christopher Kuehn

Thanks, Dave. Please turn to Slide #6. As Dave highlighted, enterprise organic revenue grew a strong 16%, supported by robust equipment and services growth. Adjusted EPS increased 25%, underscoring the power of our business operating system. We are capitalizing on unprecedented demand which has created near-term supply chain and inflationary pressures that we are actively mitigating. A prime example is our recent acquisition of Cancoil, one of our key suppliers which strengthens our supply chain and bolsters our heat transfer expertise. Leverage in Q3 improved versus Q2, and we are confident we will see further leverage improvement in the fourth quarter driven by both higher price and productivity.

Please turn to Slide #7. Our third quarter performance reflects solid execution in a dynamic environment and strategic reinvestment for future growth. Operating income margins in the Americas expanded by 50 basis points on strong volume growth that helped offset inflationary and supply chain headwinds. In EMEA, we delivered solid performance in Europe, with segment margins impacted by the continued conflict in the Middle East. Excluding the Middle East, our Commercial HVAC business leveraged above 25%. The Asia Pacific margins were impacted by challenging markets in China, balanced by notable strength in the Rest of Asia.

With that, I'll turn the call back over to David. Dave?

David Regnery

Thanks, Chris. Please turn to Slide #8. Commercial HVAC Americas continues to set the pace with another quarter of exceptional bookings and backlog. Data centers continue to be a powerful driver and our core markets also remain strong. Year-to-date, we delivered growth in 11 of our 14 verticals. As a result, we are raising our full year Commercial HVAC organic revenue outlook.

In Residential, we are also raising our full year outlook, reflecting our strong year-to-date performance. Transport markets continue to show improvement, and we expect strong revenue growth in the fourth quarter leading into a 2027 recovery. In EMEA, we continue to expect flattish organic revenue growth for the full year. With Commercial HVAC offsetting headwinds in the Middle East and Transport. In Asia, we expect strong demand in the rest of Asia to offset challenges in China.

With that, I will turn the call back to Chris. Chris?

Christopher Kuehn

Thanks, Dave. Please turn to Slide 9. For the full year, we are increasing our organic revenue growth outlook to approximately 11% and reaffirming our adjusted EPS guidance range of $15.20 to $15.30. For the fourth quarter, we expect organic revenue growth in the mid-teens, with adjusted EPS of approximately $3.40 to $3.50. This includes a $0.10 headwind from a higher fourth quarter tax rate, which neutralizes the third quarter benefit and keeps our full year effective tax rate forecast unchanged at 19%. Looking at the balance of the year, we are updating our full year price realization expectation from 1.5 points to approximately 1 point, primarily reflecting timing and mix across our shorter-cycle businesses. We expect price to accelerate in the fourth quarter to approximately 1.5 points at the enterprise and close to 2 points in the Americas segment. We now expect organic leverage to land in the low 20s an adjustment from our prior expectation of 25% plus, primarily due to the updated price expectation and near-term supply chain and inflationary headwinds, all of which we are actively managing.

Please turn to Slide #10. We remain committed to our balanced capital allocation strategy, which is focused on deploying excess cash to maximize shareholder returns. First, we strengthened our core business through relentless and strategic reinvestment. Second, we maintained a strong balance sheet to ensure optionality as markets evolve. Third, we are on track to deploy 100% of excess cash over time. Our disciplined approach includes pursuing strategic M&A to enhance long-term returns and executing share repurchases when our stock trades below its calculated intrinsic value.

Please turn to Slide #11. We now expect to deploy more than $3.4 billion in 2026, exceeding the high end of our prior range. A key pillar of this strategy is our commitment to shareholder returns. Earlier this year, we increased our dividend by 12%. We also repurchased approximately $1.4 billion of shares year-to-date with significant share repurchase authorization remaining. Our M&A pipeline is active. During the third quarter, we committed to 3 strategic acquisitions, including Cancoil, which we expect to close in late 2026 or early 2027. We now expect CapEx of approximately 2% of revenue in 2026, which will further bolster our strong free cash flow and balance sheet position.

And with that, I'll turn the call back over to Dave. Dave?

David Regnery

Thanks, Chris. Please turn to Slide #13. In Americas Transport, we are seeing positive signs after a multiyear downturn. Preliminary discussions with customers have been encouraging and we believe that markets will continue to improve into 2027 and enter a multiyear up-cycle. Please turn to Slide #14. While we'll provide formal 2027 guidance on our fourth quarter call, I'll share an early view based on current insights.

Globally, Commercial HVAC remains very strong, led by our innovation and direct sales force with backlog up more than 70% from the prior year, we are well positioned for strong growth in 2027. For Residential, we will be exiting 2026 with normalized channel inventories and stronger momentum than the year before. We will be monitoring the interest rate environment and other economic indicators as we move into 2027. In Thermo King Americas, as discussed, we expect market conditions to strengthen through 2027. Services, representing 1/3 of our business remains a resilient growth engine powered by our expanding applied installed base and digital Energy Management Solutions. Underpinning all of this, our business operating system continues to drive productivity while navigating inflation and supply chain dynamics.

In short, we are well positioned for strong performance in 2027 and beyond. Please turn to Slide #15. In closing, our strategy is aligned to powerful megatrends that are intensifying the need for our sustainable solutions and services. Customers choose Trane Technologies for our leading innovation, strong execution and the expertise of our team around the world. With our clear strategy, elevated backlog and booking strength across all segments we are confident in raising our full year revenue guide and well positioned to deliver differentiated shareholder value. And now we'd be happy to take your questions. Operator?

Operator

[Operator Instructions] Your first question comes from the line of Andy Kaplowitz with Citi.

分析師問答

Andrew Kaplowitz

So Dave or Chris, like maybe just a little more color on what you're seeing in terms of the competitive environment in Americas Commercial HVAC. Obviously, orders in the Americas were still good in mid-teens, but it did decelerate from Q2, and I'm sure you're going to tell me data center orders are lumpy. But maybe you could elaborate on what you see in terms of the visibility toward continued strong order growth in Americas Commercial HVAC?

David Regnery

Yes. Andy, it's a fair question. And yes, look, they are lumpy. I think you know that. But look, I think that the pipeline of activity that we're seeing is still very, very robust. And that's very encouraging to me. So I know I've read some of the [indiscernible] reports and I know that there's some conversation about orders are slowing. Let me tell you something, we're not concerned about orders slowing, in fact, the pipeline continues to grow. And we're seeing that not only in the Americas, but we're really seeing that around the globe. When you and I were together a few weeks ago, we talked about Europe, and I told you that we're seeing a strong pipeline there. I'm happy to say that some of that pipeline converted to orders. We actually even had more upside than I thought there with orders where if you exclude the Middle East, they were up over 50%, and we had very strong orders in the rest of Asia. So orders are -- those to me, the order rate was a positive, and the pipeline remains very, very robust. And just to reiterate, yes, the data center orders we will be more lumpy and they're larger than what we would see in our core [ business ].

Andrew Kaplowitz

And then, Chris, I know you lowered your incremental margin guide for the year a bit. But your Americas incremental margin was just south of your 25% long-term target. So maybe you could give us more color in terms of the price cost dynamic that you're seeing. Have you been more aggressive with pricing in your Residential business? And how are you thinking about your ability to get back to that 25% normalized incremental in '27?

Christopher Kuehn

Andy, no change to our long-term framework here of 25% or greater. There are some impacts this year in terms of navigating through a little bit lower price than we expected. And let me spend a moment on that. Look, comps matter in the third quarter, we delivered over 3 points of price last year at the enterprise and actually the Americas delivered over 4 points of price. In our Residential business, we're still experiencing some of the impacts of the transition of the 454B product. Just a reminder, we account for that price actually in volume. That normalizes next year, but that's part of the story here for 2026.

And pricing did come in a little bit lighter in the third quarter than we expected, and it's really due to time and mix in our short-cycle businesses. I'll give you an example or two. Residential had a very strong quarter up 20% in terms of revenues in the third quarter. And when you think about incentives in the IWD channel, as you have higher volumes, there are more incentives there. So we wound up not expecting as much growth in the third quarter Residential that we delivered, but the incrementals on the incentives wound up just being a little bit of a headwind on price.

On the mix side, our Transport Americas business delivered 10% revenue growth in the quarter, and we saw the mix to the larger fleet customers, which with the larger volumes that they buy from, they get a little bit better pricing for that. The good news is that's typically the start of the uptick of the cycle, as the larger fleet start buying earlier. So again, on the way we account for it on price a little bit lower than we expected. But I'll tell you going into the fourth quarter, we're expecting price to be stronger than the third quarter. Think of that around 1.5 points at the Enterprise, closer to 2 points at the Americas segment, and we're putting all of our plans in for next year as well.

David Regnery

And our incremental leverage in the fourth quarter, we're projecting to be north of our target range.

Operator

Your next question comes from the line of Scott Davis with Melius Research.

Scott Davis

Can you hear me okay?

David Regnery

Hey, Scott how are you?

Scott Davis

I'm good. I'm glad you can hear me. On the last call, I seemingly was on mute, I guess. But anyways, I'm kind of confused. Are supply chain is getting worse or better, they almost feel like getting worse. Is that just a -- is that just a -- maybe just how we're seeing it, but what are the remaining bottlenecks? And kind of how are you guys seeing it?

David Regnery

Yes. I'll start with -- yes, we did see supply chain headwinds build as we move through the quarter. However, I will tell you that our team has done a great job of managing through this. Some of this has caused, but -- some of this was caused by what I would call like ordinary supply and demand constraints as we ramp up demand on our suppliers, specifically around like fans, coils, heat exchanger, we're putting a lot of demand on our supply partners. And obviously, they're trying to expand their capacity. We're working with them helping them become great lean operators, but it is putting stress on them. I think that's going to continue through the -- I know that will continue in the fourth quarter. We'll see that get better as we work through the first half of 2027.

Also in the quarter, though, we had to navigate some sudden regulatory changes in early August. And I'm not sure if you're aware of this, but more than 40 companies were added to what they call the US LCA list. So this is a list that blocks goods tied to where there's perceived forced labor from entering the U.S. And unfortunately, in our case, one of our lower-tier suppliers. So think of this as like a Tier 4 to us, maybe even a Tier 5. They make capacitors and they sell to some of our motor suppliers as well as some of our drive suppliers. And what that did was it caused them to have to pivot and find another source. Well, they did that in the quarter, unfortunately caused us to have a couple of weeks where we didn't have supply. And these both drives and motors are components that we are -- just in time for in our manufacturing locations. So we had like 3 or 4 of our plants where we were running product down the line, and we didn't have all the components, then we had -- when the components came in, we had to put those products back on the line, and that caused a relatively large disruption as well as a large cost for rework.

The good news there is that's behind us, or at least 80% of it was behind us at the end of the third quarter. As we speak today, it's 100% behind us. That rework has all been done now. Unfortunately, it was unforeseen item that hit us and our team reacted quickly. Part of our operating system is, believe it or not, to run a line without all the components and how do you do that? So we acted quickly and implemented that. It just was a cost for us in the quarter, and it's behind us now. But look, those things can happen from time to time. It's really how agile you are to be able to adapt to those. And I would tell you with our operating systems we're pretty agile, and I'm proud of what our team was able to accomplish with some pretty stiff headwinds in front of us.

Scott Davis

So Dave, just a natural follow-on. I mean you announced this Cancoil deal. Is this -- are we going to see other types of transactions like this where you guys really just need to be able to control more around your supply chain and just take that risk off the table, assuming there could be a pretty long up cycle in front of us. Is this the type of mitigation that we should expect more deals like this?

David Regnery

Yes. Look, Cancoil is a great company, okay? They've been a supply partner of ours for years. Think of them as manufacturers of coils and heat transfer products. They have a lot of expertise there. This is going to be a nice bolt-on for our company. So we're going to continue to -- if opportunities like this continue to present themselves, we'll be looking at them. And obviously, as a major [indiscernible] player, we're going to get to see lots of opportunities. But this one in particular, it certainly helps us with our supply chain resiliency, and that's obviously one of the reasons why we jumped at it. And also the expertise that they're bringing to us is also going to help us in other areas. I don't know, Donnie, if you want to add anything?

Donald Simmons

Yes, I would just add there. Really a great partner of ours. We represented roughly 40% of the volume. So we're already a major player for them. So us bringing that in-house is a big benefit. Think of these as very large coils that go into large air handlers and large air cooled chillers. So this really does help solve one of our core component issues from a supply chain perspective.

Operator

Your next question comes from the line of Julian Mitchell with JPMorgan.

Julian Mitchell

Dave. Good to connect. Maybe just a first question, please, around organic operating leverage. So I think as you said, that steps up above the sort of placeholder in the fourth quarter. So maybe it's close to sort of 30% after low 20s in Q3. Just trying to understand the drivers of that and how sustainable that rate is as we look into early next year? I realized the comp was very easy from the Resi headwinds in Q4 last year. Is that what's helping it or a onetime catch-up on the components shortage reversing? Just trying to understand sort of how you [indiscernible] that organic operating leverage drive in Q4 and then beyond?

Christopher Kuehn

Julian, it's Chris. So the way you described it. Exactly right. The comps are easier in the fourth quarter. When we think about the third quarter leverage last year was actually over 50%. So a tough comp in the third quarter. But it sequentially gets better in the fourth quarter, a little bit easier comps on price. We've announced a number of price increases this year and that continues to stick. Dave described some of the challenges around supply chain in the third quarter that are behind us now. So that is not carrying over into the fourth quarter. And I think at this point, we're looking forward to ending the year on a strong momentum in terms of leverage, and we're putting the plans in for next year to return to the 25% plus algorithm. That's our long-term algorithm for a very long period of time.

David Regnery

The only point I would add, Julian, is number in our -- in EMEA, okay? If you look -- if you take our Commercial HVAC business and you look at the segment level and then remove the Middle East, it leveraged that over 25%. So it's really kind of isolated as to where we're seeing the issues, the supply chain here for sure. Inflation has been a little bit higher than we thought. Middle East is going to -- next year, obviously, that's going to be hopefully, that gets resolved, but obviously, it's going to be easier comps there. But we're confident in a long-term framework, and that's the important point I wanted all investors to take away. Our long-term framework continues to be the 25% plus. And we're going to continue to invest heavily in our business so we could maintain the future growth that we believe is all possible for Trane Technologies.

Julian Mitchell

That's helpful. And maybe just one follow-up, Dave, in a way to where you left off on reinvestment. Just wondered as you look across the business, particularly some of the larger pieces like Applied Commercial HVAC on the smaller side, Residential. Do you see anything changing in terms of competitive dynamics? I think Residential, a lot of companies are struggling to get price. And then on the Applied side, we received a lot of questions about a lot of supply coming on from different manufacturers and could that affect pricing? Any thoughts on that, please?

David Regnery

Yes. I mean on the pricing side, look, we've been saying this for a long time, as you become an innovative company, right, it helps with pricing. So we're going to continue to invest in our innovation. We're going to continue to invest in what the future is going to be for Thermal Management Systems and whether that's in a data center or that's in our core market, that's fundamental to who we are. So we're never going to back off of those high investment levels. Because we know we could always sell innovation to our customers. We can always sell a total cost of ownership. We could always sell [indiscernible]. So that's our strategy. It's been working quite well for the last 5 or 6 years, and it's going to work well into the future as well.

Christopher Kuehn

And Julian to be clear, Residential delivered positive price in the third quarter, a sequential improvement from the second quarter, remained a little bit lower than we thought based on the fact that we had much stronger volume growth and that IDBD channel, the incentives I previously mentioned. But the business has announced two price increases this year, early April effective date, early July effective date and they continue to take all the cost inputs and leveraging our business operating system to to drive not only negotiations with suppliers to ultimately productivity. And then to the extent there's still inflation, we'll look at pricing, but just leveraging the business operating system here for that business as well. But again, sequential improvement in price and we'd expect that to continue to be better in the fourth quarter than in the third quarter.

Operator

Your next question comes from the line of Amit Mehrotra with UBS.

Amit Mehrotra

Maybe this one is for Chris. Just a quick one on Stellar, I know you have $500 million going to $1 billion run rate in '28. Currently sort of neutral to EPS. What is the normalized margin opportunity? That's obviously a big ramp in revenue. What's sort of the normalized margin? And when can that sort of become more meaningfully accretive?

Christopher Kuehn

Yes. No change to the outlook for Stellar for 2026 and around $500 million of revenue and really neutral on the earnings line. We described a few months ago on our last call around the investments we saw in the business to scale with volume. One of our large investments in not only the factory in Florida, but also the new factory that's in the process right now of commissioning in Texas. So continue to execute on those investments here in the quarter. And we've described it, Amit as in a couple of years now -- in a couple of years' time, mid-teens EBITDA opportunity. So we as we put together our plans together 2027, but backlog remains very strong. The fundamental theme of modular designs and the need for modular chiller plants on jobsites remains very, very strong. And we're putting the investments in place to be ready for a couple of years right now to make it a $1 billion revenue business with mid-teens EBITDA.

David Regnery

And the pipeline remains very strong. The activity we're seeing there within the Stellar business. And just so everyone's clear. Stellar today is predominantly almost 100% data centers. We believe that, that will continue to be an opportunity but we believe this will move to our core verticals as well. We just want to make sure, [indiscernible], that's why we're spending a lot of money deploying our operating system so we could flex more as our customers' needs.

Amit Mehrotra

That's great. And just as a quick follow-up. Dave, I know you talked about the lumpiness of orders, but the decline, at least sequentially in orders in the Americas was double digits, book-to-bill still above 1, but it was down a lot and you talked about interest rates. And is it really just lumpiness? Is that what explains it? Or are there sort of some non-data verticals that are a little bit also longer cycle that are starting to feel a little bit of this pause on from an interest rate perspective?

David Regnery

No, I would say it's lumpiness. I mean, look, if you look at mega projects, and I know I'm the one who probably doesn't like looking at mega projects, but that list continues to grow. I mean, we were in the second quarter, we were talking about tracking 1,400 projects. We're tracking 1,700 projects now. Some of those have greater opportunities than other. A lot of those are over 90% of those are data centers, but there's also some nice high tech in there as well. So look, it's going to be lumpy, okay? These orders are quite large. And I could -- I am not concerned about order rates. In fact, our backlog now at $12.5 billion. Look, we're executing well on the front end of our business. Pipeline is strong. We'll continue to have a bit of lumpiness, but we also continue to see strong order growth.

Operator

Your next question comes from the line of Steve Tusa with Wells Fargo.

David Regnery

Steve, another voice. So glad to hear you again. I saw you on TV the other day, you look great.

Charles Stephen Tusa

Yes, yes. Not feeling so good this morning, but it's what it is. And thanks. Happy to be back for sure. Just on the backlog, you guys give kind of a figure of what's booked for forward years. I think it was $6 billion last quarter. What's that number roughly around now?

Christopher Kuehn

Yes. It's over $8 billion of the $12.5 billion of backlog end of September would be for 2027 and beyond, Steve. So that continues to grow.

Charles Stephen Tusa

Okay. And then if you guys actually reported kind of price mix, if you will, in Resi, I think there's a bit of confusion out there, just the way you guys report. What would price mix have been in the quarter? And then what are you guys actually expecting for price cost this year, however, is the right way to look at that? I mean, are you guys like underwater, neutral-ish a little bit positive. I assume you're below kind of the 20 bps to 30 bps algo that you usually target?

Christopher Kuehn

Yes, I'll start with your second question. We've described price versus inflation this year as being a headwind. It was in the third quarter. We're anticipating that in the fourth quarter and the full year, and that is baked into our guide. We continue to remain nimble here as we think about offsets to inflation. And one of the levers there as we leverage our business operating system will be price. So we're actively managing that. But I do expect it to be a continued headwind through the balance of this year.

On residential, when we launched the 454B product last year, think of that as the pricing on that was in the high single-digit range. And we accounted for all of that in volume. And that carryover to 2026 is also reported in volume for us this year. If I look at on a year-over-year basis, we have positive price on those products. So again, we're accounting 454B initially in volume on a year-over-year price, it's positive, and that will all normalize as we go into next year.

Charles Stephen Tusa

One more quick one. There's a lot of history out there about these hybrid ductless products. You guys, I think, have a pretty nice hedge through your Mitsubishi Trane JV. Am I correct about that?

Donald Simmons

Yes. Steve, this is Donnie. And yes, we do have a partnership there with Mitsubishi that helps us with the hybrid systems. I think a lot of the discussion you're hearing is also around a side discharge outdoor unit. We also have that in our own portfolio as well. That -- the trend in the marketplace is that, that part of the portfolio is growing, and we would expect that to continue to grow.

David Regnery

With 20% growth. A lot is growing in Resi.

Operator

Your next question comes from the line of Toby Okwara with Morgan Stanley.

Tobenna Okwara

I wanted to follow up on some of the Service commentary. I mean it looked like the comp was getting easier quarter-over-quarter, but the organic still stepped down. Is there anything to call out there? Is it just some time differences? Or how should we think about it?

David Regnery

Look, our Service business is strong. I mean if you took the Middle East out of our number, our Service business on a global basis was over 10% again. And as you go back, I think we're back to 2020, I was quoting numbers where our compound annual growth rate is in that low teens rate. So this is a very strong, very dependable engine that we have in our company, and it represents approximately 1/3 of our revenues. And I would tell you that it doesn't happen by accident. We invest heavily in our Service business, whether that be on the training side or that would be the tools that we provide our service techs, so they're the best possible in front of our customers. Remember, all of our Service technicians are company employees, company trained and they do a great job every day of representing Trane Technologies with our customers.

Tobenna Okwara

And kind of a follow-up on that piece and also kind of tying into the broader labor side of it. How much does market labor constraints kind of factor into some of the supply chains and inefficiencies you've called out? And any sense on how like hiring and training practices are trending in second half and potentially for '27?

David Regnery

Yes. I mean just so I'm clear, is your question on the Service side or is it on the supply side, both?

Tobenna Okwara

The labor side, both for service and for your own manufacturing.

David Regnery

So on the service side, I'll start with that. And we saw this coming probably, I don't know, I'll say, 3 years ago. And we've developed apprenticeship programs where we're basically developing some of the best technician in the world in our company. And this is a very -- it's registered with the Department of Labor here in the United States. It's a very robust program. Think of it as a 4-year program. Some of it is classroom, some of it's on the job, mentorships, I mean we're really proud of what we've been able to accomplish with that program. And we're getting a lot of -- I was at an event recently out in Detroit, and we were actually presented an opportunity to describe this. So other companies can learn from what we've been able to do to really promote work in the essential workforce as it's being referred to.

So look, we're very proud there. and that pipeline continues to grow. I think we have now over 350 in the program, and that number is going to continue to grow. So that's a good sign. On the supplier side, that's one I can't really comment too much about it. I'm not -- I don't have that level of detail. I would just tell you that skilled labor, the essential worker is certainly something that we all need to make sure that we're helping to develop the next set of workers that are going to continue to make the United States and really all of the manufacturers around the world, [indiscernible] manufacturers. And we're participating certainly within our own operations, whether that be in our service organization or in our plants to make sure that we develop, we create career ladders, and people understand that if you come to Trane Technologies, it's not just a job for a year, it's a job for a career. And we want all the employees to think that way.

Operator

Your next question comes from the line of Joe Ritchie with Goldman Sachs.

Joseph Ritchie

So look, I want to focus on some of the announcements you've made recently. You had the successful lab demonstration for 800 volts DC architecture, and then the 250-megawatt reference designs with Stellar. I'm just wondering, as you talk to hyperscalers, how quickly are these like next-generation systems and modular plants moving from reference design to the actual pipeline? And then also, how does that change your content per facility?

David Regnery

Yes. If I told you the answer to the first one, we wouldn't be here, but [indiscernible]. Look, we're doing a lot of work with hyperscalers and other influencers and the 800 direct current system that we were able to demonstrate, okay, that's going to happen, okay? We could all get varying levels as to the when. Okay. I would just tell you that we'll be ready. And when we get the right standards developed around that, we're more than capable of delivering that. And that's a good thing, right?

In the data center vertical, Joe, and I've said this for a long time, innovation has continued to evolve very, very quickly. And I want everyone to know that we're sitting at the table helping to develop the future data centers. And they referred to as reference design or next-generation that we're there, we're developing it, and it's fun and it's exciting. On the CDU, Donnie, I don't know if you want to comment on that.

Donald Simmons

In terms of...

David Regnery

Was it the 250 megawatts from LiquidStack?

Donald Simmons

Yes. So that modular design that we have there is -- I mean, your question is how fast will that be adopted? I mean we've got orders in the pipeline now that we're projecting to be -- to come in for that portfolio. So it's very positive.

Joseph Ritchie

Great. That's helpful. And then just a quick one on the EMEA margins. I know that the Middle East is like roughly 15% of that overall business. How much of the margin impact that you're seeing this year is coming just from the Middle East situation?

Christopher Kuehn

Joe, it's Chris. Yes, for the third quarter, if you were to think of it as probably 80-plus percent of the impact of the margins in EMEA are due to the conflict in the Middle East. It's important to look at the dollars as well as the percentages. So when you look at the dollars on a year-over-year basis, it's around $18 million of an operating income impact lower this year than last year. And of that, I'd say over 80% of it is really due to the deleverage in the Middle East in terms of the conflict.

The other piece of it would be we've done some acquisitions in the region, and we're making some modest investments there to take what I'd call lower-margin businesses and ultimately make the investments to have them grow. But the Middle East is certainly having a big impact on the segment itself. The good thing is if you take the Middle East out and you look at Commercial HVAC across the segment, leverage is over 25% in the quarter. So it's executing well, and we'll get through to Dave's earlier point, we'll see what this means for 2027, but it's unfortunately a big impact to the segment.

David Regnery

I'm very happy, Joe. I'm very happy with the order rates that we're seeing in EMEA. That's going to give us a lot of momentum as we move into 2027. So Middle East will -- obviously, the comps are going to get easier there. Chris explained to you how that does have a pretty big impact on our margins there, but we'll get behind that. Hopefully, the world gets behind and we don't have a war going on. But the order rates that we saw in the third quarter were very, very encouraging to us.

Operator

Your next question comes from the line of Andrew Obin with Bank of America.

Andrew Obin

Just want to confirm, when you said that pricing in third quarter was below expectations. Was that both Residential and Commercial or just Residential?

Christopher Kuehn

Think of it really in the short-cycle businesses, Andrew. I think of, say, Residential and Transport were really the big drivers there and Unitary as well. So I think about again, the strong performance in both of those businesses on a revenue side and in the short-cycle businesses in Residential, the higher incentives and in Transport, the mix up to the larger [indiscernible] customers really a Q3 impact. We don't see that repeating into the fourth quarter, but it is having an impact on the full year, and that's why we're expecting pricing for the full year to be around 1 point but pricing in the fourth quarter will accelerate versus the third quarter. Think of that as around 1.5 points of the Enterprise and approaching 2 points at the Americas segment in Q4.

David Regnery

Which will again...

Andrew Obin

[indiscernible] was fine, right?

Christopher Kuehn

Yes. Positive price in Commercial HVAC.

David Regnery

Pricing in Q4, Andrew, is going to provide some momentum going into 2027.

Andrew Obin

And then just a follow-up on EMEA. The strong orders. Is a technology -- because clearly, you're very active with new technology introduction in Europe. But are you seeing any [indiscernible] change in attitude towards just HVAC, getting a bit of a mixed message. Some OEs are more constructive that we are seeing some change after last years heatwave and [indiscernible] would say, "Hey, not much is happening. What do you sort of stand on that?

David Regnery

I mean obviously, I think for sure, that will have an impact. You're probably going to see it more on the Resi side, maybe then on the Applied segment. I'm sure there will be an impact there. Look, Europe, the pipeline of activity is in both core and in data centers. So it's really both -- so we're very proud of what that team has been able to develop and deliver around the innovation. I think we've talked about this in the past with Thermal Management Systems there, really just kind of changing the game and in Europe, there's the carbon footprint and how we can really help our customers reduce their carbon footprint is still super, super important and we have great solutions that we're winning with our customers in really all of our verticals there.

Donald Simmons

Yes, I would add to that, which is a lot of time we talk about electrification of heat. So you're asking about air conditioning. But when we look at the electrification of heating in Europe is also growing, where then we're able to provide both cooling and heating from the same plant as opposed to having a boiler operation and a chiller operation providing an applied solution to a customer.

Operator

Your next question comes from the line of Noah Kaye with Oppenheimer.

Noah Kaye

So Dave, you've said in the past, we're kind of 4 years into the 18-month recovery on Transport. And it looks like you're finally seeing some inflection there. So mix issues in 3Q aside, is it fair to think about the incrementals on that recovery being above the 25% organic kind of average for the company? And I would assume that partly supports better 4Q organic incrementals, but maybe just frame for us what recovery means?

David Regnery

Yes. Look, first of all, very bullish on our Thermo King business in the Americas. They had order growth over 30% which is great to see. As Chris said earlier, a lot of that was the large fleets. We tend to see the large fleets jumping faster, okay? So that's good -- that's a great sign. And I would tell you that we also have fundamentals that would say the recovery that act is forecasting, maybe it's not at 28% growth that they have for 2027, it will be a robust number which is going to be great for that business. Chris, I don't know if you want to talk about the incrementals?

Christopher Kuehn

Look, as we think about volumes coming up, that will give us a nice opportunity to get strong incrementals on volume. We're obviously putting all of our plans in place as we think about pricing for next year. The business actually opened up the order book here in October for the first half of 2027. We're remaining very nimble around the cost inputs to think about what pricing needs to be and they're executing the business operating system. So look, it should be very much a contributor into next year as we think about 25% or better incrementals as we start and look into [indiscernible] year.

Noah Kaye

Yes. helpful. And then it looked like the M&A impact to reported leverage was -- actually looks a little better now versus the prior guide. So maybe just unpack but a little bit for us. Is it more operating profits -- what is better versus your prior expectations given your earlier comments on Stellar?

Christopher Kuehn

Yes. I mean, Stellar hasn't changed in terms of the revenue and/or the expectations on bottom line performance. We've purchased a couple of other businesses here in the channel, namely in transport and a few others we mentioned earlier. But a little bit of a lot of small numbers here on the delta. It will still be meaningful of a 500 basis point delta between reported incrementals and organic incrementals, but we're still seeding these acquisitions with investments, making sure that we've got strong growth going into next year.

David Regnery

And Noah, obviously, as the longer we own some of these businesses and we deploy our operating system we certainly see them improving as we deploy that.

Noah Kaye

So there's maybe some of that improvement already.

Operator

Your next question comes from the line of Nigel Coe with Wolfe Research.

Nigel Coe

Can you hear me okay?

David Regnery

Hi, Nigel. How are you doing?

Nigel Coe

Dave, good to hear your voice, I'd say. So maybe to start off with maybe just a bit more color on '27 as you see it. I know you haven't given guidance, but I'm just curious of that backlog, how much of that backlog is convertible or shippable in '27? And then if we do get to a 35,000 unit market for TK Americas next year, 30% growth. How much of that -- how does it translate to an actual segment number for Trane?

David Regnery

Yes. As far as the backlog goes, Chris already talked about this. We've got $8 billion beyond 2027. Some of that is in 2028, though. So just be aware of that. And remember, our backlog is equipment only. So there's no services in that number. On the Thermo King side, look, I don't believe that ACT has a number out there in 2027, I think there -- I think it came down a little bit. I think they're at 28% growth. I don't think that's realistic for a lot of other reasons like basically can trailer OEMs actually ramp up at that level. I don't think they can. But I think it's going to be a robust year for Thermo King in 2027, which -- and beyond, by the way, these these up cycles don't -- they're not -- they tend to go for a longer period of time.

And yes, you're right, we've been in a trough for a while, and I'm just glad to -- I'm glad to see that trough hopefully ending, and I look forward to reporting our fourth quarter results here in January and hopefully be able to tell you that story is continuing.

Christopher Kuehn

And just on the [indiscernible] of backlog, that's for 2027 and beyond. And as Dave described, there's probably some backlog we're already building here for 2028 that could be over $1 billion at this point.

Nigel Coe

Okay. That's helpful. And then I'm sorry to be annoying. Just want to go back to the price question. Obviously, we'll get the price kind of disclosure in about a few hours in the 10-Q. We're backing into like 50 basis points or so far for the enterprise. Based on your comments around Resi and Commercial, if you were to consider that, that's helpful. But as Asia Pac last quarter was slightly negative. And just given the margin performance in APAC, I'm wondering if that's maybe gotten a bit worse and I'm thinking of China perhaps. But any comments on that would be helpful?

Christopher Kuehn

Yes. I'll share with you the numbers you'll see. I mean, for the third quarter, you're right. Enterprise was around 50 basis points. Americas was up about 60 basis points in price. So positive price in the Americas, to my earlier comment about transport and the mix to the larger fleets, Transport was actually negative in the quarter based on that mix. So just to give you a little bit of maybe more insight on the Americas sub businesses. But EMEA had positive price of 50 basis points, and Asia did have a negative price of around 1 point really all attributable to China here as we're just, again, focused on the customers we want to do business with.

Operator

Your next question comes from the line of Joe O'Dea with Vertical Research.

Joseph O'Dea

Can you elaborate on the inflation side of things? Where it stands now for 2026 relative to how you were thinking about it earlier in the year? And then any detail on the different buckets. So if we think about commodities and components or logistics and supply chain inefficiencies and tariffs just to unpack some of the inflation drivers?

Christopher Kuehn

Yes, versus 3 months ago, 6 months ago, 9 months ago, I put all those categories into higher inflation, Joe. Obviously, the commodity markets and the metals markets, we can see where that is, net inflationary fuel cost, inflationary, Tier 2. Is it electronics and components, inflationary. So it's been a pretty dynamic year as we think through the inflation. We described this year as a bit of a headwind as we think about price versus inflation. And we're putting our plans in place for next year to return to our long-term algorithm of positive price over inflation, 20 basis points to 30 basis points. So we're going to measure twice and cut once here, so to speak. But we'll provide more color on that in our Q4 call, but it has remained an inflationary environment, and we're going to drive further negotiations with suppliers. We're going to drive the productivity in the plants. And whatever is left over, we're going to look at pricing as we leverage our business operating system.

Joseph O'Dea

That's helpful. And then shifting to Americas Resi HVAC. Can you just talk a little bit about direction of travel there, good growth in the third quarter, the year pacing better than initially thought. It does look like that growth is expected to slow in the fourth quarter. Was there any pull forward ahead of anticipated price increases. I think that you're managing before price increases? And then just bigger picture on the confluence of replacement demand versus mortgage rates and consumer sentiment, how you're thinking about demand in Resi HVAC moving forward?

David Regnery

Look, I mean, I think as far as the third quarter goes, obviously its stronger than we anticipated. We already talked about that. I'll remind you there's a relatively easy comp there too. But it was certainly stronger than we thought. Look, the fourth quarter, there's no pull-through. There's no pull forward there. So I think that the fourth quarter will be fine in the fourth quarter. I think when you start getting into 2027, I'm not ready to guide 2027 yet, but obviously, we have to have our eyes wide open. As I said in our prepared remarks around the fact that we pay attention to what's going on with interest rates. Obviously, that could be an impact.

But we think that the Resi business, we've been more bullish on Resi than maybe others have been, certainly in 2026. And I think that's proving to be accurate. See what happens in 2027. On the repair versus replace. Look, we haven't -- we had a very strong quarter in [indiscernible]. We had a very strong quarter, we call it supply business or parts. So we're not really seeing any clear direction there, whereas last year, obviously, we saw a lot of repair versus replace just because the refrigerant [indiscernible] weren't able to get complete units installed.

Christopher Kuehn

Joe, let me add. Year-to-date sell-in and sell-through are roughly equivalent to each other. Inventory in the channel at the end of September was in very good position. That's very similar to where we saw it throughout each of the quarters this year. And for the fourth quarter, in terms of our guide, we're expecting residential to be up in that high single-digit range, again, but easier comps on a year-over-year basis. But otherwise, the fundamentals in the business remain intact here as we're managing inventory and selling [indiscernible].

David Regnery

And I also tell you that our team is executing at a very high level in that business, too.

Operator

Your next question comes from the line of Varun Govindaraj with Bernstein.

Varun Govindaraj

So just picking up on the point of reference design someone brought up earlier. Trane puts out a lot of these what role does that play in the [indiscernible] process? Is it more of a tool showcasing expertise? Or have you found it almost necessary to engage with some kinds of customers?

David Regnery

I would tell you that we get called to sit around a lot of tables to help whether it be hyperscalers or other influencers to think through how we can make the thermal management system more efficient. And we have a team that led by our Chief Technology Officer and his team of experts that are really, really good at it. And that's why we get called to a lot of different tables to help design what the future is going to look like. There's -- in the data center world, you're going to hear a lot more about this, there's trade-offs that need to be considered. But it used to be all about PUE, and that's still obviously very, very important. But there's other trade-offs that need to be considered that we're really good thinking through because we like to think of everything at a system level.

I mean that's kind of like our DNA and kind of like what we do in all of our core verticals, we've just taken that thought process to the data center vertical. And I think if you talk to some of the hyperscalers or some of the chip manufacturers, they'd say it's a refreshing view and how we look at what's possible for the future. So I expect more reference designs, not less in return it's really just, again, speaks to the innovation that Trane Technologies can bring to the table.

Varun Govindaraj

Absolutely. Appreciate the color. And then just as a quick follow-up. Outside of chillers, CDUs and then modular via Stellar, are there any other white spaces in the data center space that you're looking at and thinking of expanding into?

David Regnery

Yes. I mean, obviously, I won't go into the M&A pipeline, but as a major HVAC player on a global basis, we're going to see lots of opportunities. I would just tell you that we're going to be disciplined, and we like our portfolio, that we have today. We certainly like our service capability that we have today. And -- but we'll also be opportunistic as opportunities present themselves to us.

Operator

We have reached the end of the question-and-answer session. This concludes today's call. As always, Pat and Chris with Investor Relations are available for any questions. Thank you for joining. You may now disconnect.