Ingersoll Rand 10-Qquarter ended 2026-06-30
Americas commercial HVAC demand drove growth, but inflation and investment costs squeezed margins.
Filed 2026-07-30 16:45 ET
Key figures · Q2 FY2026 · period ended 2026-06-30
- Revenue$6.4BYoY +10.6%QoQ +27.9%
- Operating income$1.2BYoY +5.2%QoQ +57.8%
- Net income$925.7MYoY +5.8%QoQ +58.4%
- Total assets$23.9BQoQ +5.1%
- Total debt$4.6BQoQ 0.0%
How total debt adds up Long-term debt $3,924M + Short-term borrowings and current maturities of long-term debt $693M Total debt $4,617M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$8.6BQoQ +0.4%
- Tangible book value−$1.9BQoQ +0.1%
How this filing reads
- Health+0.5H1 free cash flow was $1.56B, with $2.5B of unused revolver commitments against $4.62B debt.
- Momentum−0.2H1 revenue rose 8.5%, while income was flat and margin fell 130 basis points.
- Outlook0.0Management cites enduring building-efficiency and replacement demand, while margin recovery remains unproven.
Executive Summary
Trane Technologies delivered demand-led growth in Q2 2026, but inflation and investment costs prevented that growth from translating proportionately into earnings: revenue rose 11%, while operating income increased 5.2%. Americas commercial heating, ventilation and air-conditioning demand remains the growth engine, while weak transport refrigeration and geopolitical disruption weighed on EMEA. Acquisitions expand data-center cooling and building-automation capabilities, but also increase integration exposure and intangible assets. For investors, the filing supports the demand thesis more clearly than the profitability thesis: cash conversion improved substantially, although customer-payment timing contributed, and margin recovery remains the key test.
Key Financial Highlights
| Metric | Q2 2026 | H1 2026 / 6/30/2026 balance | Investor interpretation |
|---|---|---|---|
| Revenue | $6.35B; +11% Y/Y | $11.3B; +8.5% Y/Y | Volume, rather than pricing, drove growth. |
| Gross profit | $2.26B; +4.6% Y/Y | $3.99B; +3.9% Y/Y | Gross margin fell 200 bp in Q2 and 160 bp in H1. |
| GAAP operating income | $1.22B; +5.2% Y/Y | $2.00B; broadly flat | Q2 operating margin fell to 19.3% from 20.3%. |
| Total segment adjusted EBITDA | $1.42B | $2.38B; +5.6% Y/Y | Non-GAAP segment earnings also grew slower than revenue. |
| Net earnings | $926M; +5.8% Y/Y | $1.51B; +2.1% Y/Y | Bottom-line growth lagged sales. |
| Diluted EPS | $4.16 vs $3.89 | $6.78 vs $6.55 | Share-count reduction supported per-share growth. |
| Operating cash flow | — | $1.71B vs $1.03B | Cash exceeded same-period net earnings. |
| FCF: operating cash flow minus capital expenditures | — | $1.56B vs $823M | Lower capital expenditures reinforced improved cash conversion. |
| Total assets | — | $23.9B | Acquisitions expanded the asset base. |
| Total equity / tangible common equity | — | $8.65B / $(1.90)B | Goodwill and intangible assets exceed reported equity. |
| Cash / total debt | — | $1.32B / $4.62B | Cash fell 25% from year-end; debt was broadly flat. |
- Growth composition: Q2 organic growth of 9.0% comprised 8.7% volume and 0.3% pricing; limited pricing contribution left earnings exposed to inflation.
- Cash conversion: working-capital cash use declined to $63.0M from $613M, helped by customer down-payment timing; contract liabilities rose to $2.74B from $1.72B, making payment timing important to the sustainability of cash generation.
- Capital allocation: H1 repurchases of $756M reduced outstanding ordinary shares by 1.2M, or 0.5%, net of issuance; stock-based compensation was $51.9M and dividends paid were $463M.
- Earnings quality: H1 other income included a $22.6M non-cash investment-remeasurement gain, which is not operating improvement.
- Balance-sheet composition: goodwill of $7.03B and net intangible assets of $3.52B explain negative tangible equity; $563M of goodwill additions increased acquisition-related valuation exposure.
Business Developments
Americas generated 83% of Q2 revenue, increasing 12% to $5.27B as commercial and residential demand strengthened. Management identifies energy efficiency, building decarbonization, replacement demand and service opportunities as enduring growth drivers. Asia Pacific revenue increased 11%, with strength outside China offsetting Chinese softness.
EMEA revenue declined 1.5% in Q2, while adjusted operating income fell 26% to $91.4M. Transport refrigeration weakness, Middle East conflict effects, inflation and integration costs made this the clearest regional drag.
Stellar Energy Americas, acquired on 2/17/2026 for $553M gross consideration excluding $185M cash acquired, and the remaining LiquidStack interest expand data-center cooling capabilities. Distribution acquisitions and a 49% investment in Kieback&Peter extend sales-channel and building-automation capabilities. These moves broaden the offering, but their financial contribution must emerge through subsequent operating results.
Risk Assessment
- Margin pressure: inflation and investment costs exceeded productivity and pricing benefits, so continued volume growth may deliver limited incremental profit.
- Regional and trade disruption: transport refrigeration weakness, Middle East conflict, tariffs and supply-chain disruption threaten EMEA recovery and input-cost control.
- Acquisition and valuation exposure: Stellar purchase accounting included $379M of goodwill and $315M of identifiable intangible assets, creating integration and impairment risk.
- Legacy asbestos liabilities: the proposed Aldrich and Murray plan contemplates a $545M trust contribution; approval, timing, ultimate liability and insurance arrangements remain unresolved.
- Liquidity and cash timing: acquisitions and shareholder distributions reduced cash despite higher operating inflows; $400M of commercial paper and potential $256M debenture puts add funding needs, partly mitigated by $2.5B of unused revolving commitments.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.
Strategic Outlook and Investor Actionables
Management is betting that energy-efficient buildings, replacement demand and expanded cooling capabilities sustain growth, while productivity eventually absorbs inflation and investment costs. The opportunity is a broader, service-supported cooling franchise; the threat is continued growth without adequate margin conversion.
- Americas demand: Q2 revenue of $5.27B rose 12%. Sustained growth alongside stable or improving regional profitability would validate the demand thesis; slowing sales and further margin erosion would weaken it.
- EMEA recovery: Q2 revenue was $698M and adjusted operating income $91.4M. Recovery requires operating earnings to improve with transport demand; continued profit declines despite stable sales would indicate unresolved cost or integration pressure.
- Earnings and cash conversion: H1 operating margin fell to 17.7% from 19.0%, while operating cash flow reached $1.71B. Improvement means margins recover and cash generation persists beyond favorable down-payment timing; further compression or reversal of working-capital benefits would undermine earnings quality.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 006 · prompt bdad6d7239