Eaton (ETN) 1 Nov 222022 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] And as a reminder, today's conference is being recorded. I'll turn the call now over to your host, Yan Jin, Senior Vice President of Investor Relations. Please go ahead.

morning. good Hi, joining call. for Eaton's quarter third Thank us earnings XXXX you for With Chairman Arnold, Tom Craig me are today our Vice Chief Okray, President, and Financial Officer. Executive and CEO;

Craig, including opening over today, Tom, highlight third in will company's who will quarter. agenda Our to remarks by turn then the it performance the the he

to They're results been include As questions release of Craig's have of to of therefore and remind The non-GAAP press on at and this through done presentation our future reconciled comments our posted closing the webcast per our forward-looking are the statements. go free for cash calls, past This adjusted website expected appendix. on will have flow website. on end we in we'll A and taking call we'll the be presentation statements is other like be replay. related our earnings you the today adjusted the that commentary. will measures. and today includes accessible available company would I share,

turn presentation. may that, actual our forecasted a to earnings due described risks from and that range materially of release the Our projections wide and will in Craig. our I uncertainties differ over results to are With

in have with Hydraulics is of $X.XX, took XX% of which This, and begin again by of X, records, and prior share and negative posted noting which up FX business, including earnings August the divested number the adjusted I'll We'll Yan. per quarter quarter a place Thanks, XXXX. impact despite from the year. all-time start very another that of highlights on strong Page we of delivered

in with up we accelerate businesses to growth Our of QX up in organic across Americas, think, encouragingly, quarter, also I to And and exceptional Vehicle the eMobility. revenue XX% our QX. all growth in Electrical in had strength in continued XX%

guidance to price with segment I'd the that above posted the in high incrementals up than our quarter. margins team more XXX fully and of year also of the manage points continues end effectively over also offsetting prior inflation. of XX% XX.X%, all-time note We of basis impact our

accelerate last As increased as our increased XX% of and in last a in increased Aerospace the noted XX% to orders rolling continued strength, by compared XX%. led were some up XX% and orders orders quarter backlogs basis, This XX-month On backlogs quarter, another versus Electrical quarter. our say, I'd to here, well. to Aerospace record Electrical, which order also XX%, quarter XX%

flow We we in as year-on-year flow to the increase of results. Lastly, start did momentum our And strong up quarter. sales was and percentage XX% a had performance cash with a generate operating in cash our cash cash free XX% in positive flow. free XX.X% a

working earnings improved So as expected, to we're capital cash both see flow from improved performance. and higher starting

Moving I things want to to our the Page highlight a Tom turn to before over key results, outlook. through I of underpinning long-term that are go to themes And growth in our confidence really X. the quarterly few

energy investments transition that we are plants, to of quarter early directly noted the investments vehicle new the to number while projects $XXX includes digitalization. reviewed electrification, in and the U.S. battery you've these electric the all EV trends the trends. infrastructure. EV read manufacturing semiconductor electrification, million manufacturing wins and new in new new growth Within we benefit As in announcements the that secular of from investments tied stages, very that continue big earlier: And charging some here, of large in still in X we facilities, booked

and the the is These this impact these will stable, this technology But of and it's show In point only incentives different also large year in next grid, And from accelerate. requires of stimulus The fossil all taken number over now, alone. improving batteries keep electrical naturally to some provide. it to trillion is next transition. tied that move growth driver large are store electrical trend bill fact, I'd the that's infrastructure. that few resource and numbers. place renewables towards connecting new will with investments energy to sources up electrical excess of a away products addition, in for the renewable to significant power, years. services it's not grid investments benefits to every announced of been $X.X manage to there's we investments infrastructure deliver The say, yet are to years energy, And and these projects just, in will power

attractive also an solutions, has our as products. our most the a come. growth our data are their create sell industrial legacy businesses all vehicle begin and for I'll reasons to notable well. for centers, require some reflects businesses independence. which the digital in we one, really I’d relating due growth few add we're will These electrification. with lastly, electrical segment just become and extreme society a Eaton. data emerging an Slide higher why renewables, and have We'll drivers we to grid demand seeing years selling deliver to value which priority software ability in the need events to energy a drive insights organic a X important and weather for levels as improving prices investments to And of of And intelligence we of number increase remain Beyond for of higher from say new growth confident our new in resiliency,

of I'd robust. we're very seeing larger system but we eMobility acquisition some coming the than say continues our but not we're also I’d passenger in to anticipated, Power electrification cars, with continues Royal a tied And vehicles, note are of often subsystem for just penetration here, for seeing the here outlook increasing opportunities to need also And projects for in pipeline and be almost the commercial the Here, vehicle. EV new much announcements accelerate entire for week. every the to

our what traditional all cases, used we're train And technology. and our engine. brake of in booked that a we've here. on to doing for opportunities our vehicle legacy for for the seeing engine to of number tied some existing you'll which reference, significant We're our have electric already new driver growth $X expect commercial business, opportunity recall, Vehicle advanced revenue EV point finding billion gears technology, opportunity X is we higher combustion segment per XXx next And in actuation wins the is vehicles applications The over than mechanical are to number in next new new technology. internal become an on our a billion $X valve of as for our eMobility is that we years. Just in a

growth into over in which, the aftermarket cycle, accelerate. the continue years, forecasted it's OEM significant way, Third, Commercial grow XX% we're over rates XX% commercial the benefiting industry and commercial to to next passenger orders, growth build by has growth some will some improve from translating which, years. several up And were continued next aerospace are the to year-to-date. X

to note Overall, see we better I'd high-growth this Souriau we of our with even begin $XXX and trends position in of in we've and just delivered initiatives, to growth Systems, we industrial. expect sales $X tied secular added to Mission markets. delivered in Lastly, as what of the given billion we synergies. when on growth realize And wins almost to our million back platforms some of that stepping growth acquisitions set Electrical, particular noted from our

walk the So over Tom it with through and that, him ask do to what quarterly point at to like this to I'd is turn results.

Thanks, Craig. noting few with regarding I'll points key QX begin results. a our

from with organic by a X% in divestitures, would and exchange been impact impact total the noting larger headwind had acquisitions -- X%, EPS X% by net EPS. sale revenues Related while X% adjusted Further, acquisition XX% which posted of It's EPS, Hydraulics X% adjusted of growth worth an headwind foreign have a that revenue enabled revenue than the profit our in guidance above revenue $X.XX XX% we X% operating net a estimate. growth and X%, growth to stronger on by from With reduced solid XX%, up of growth net operating offset increased partially organic higher of of impact divestitures. X% in, Royal with and that of adjusted for acquisitions of impact the Our growth guidance us was divestitures. of FX $X.XX XX%, sorry, leverage by exchange to margins report both our and and was excluding unfavorable was and the $X.XX the $X.XX midpoint. adjusted and X% All the of acquisitions EPS Power foreign X%.

and we did EPS, with bar to segment continue as last the quarter, all-time adjusted in records profit we raise margin. segment operating Finally,

residential, set with We strength next the margin. strength organically very accelerated margin benefiting had Revenue the driven sales, and to all-time manage profit for to pressures XX% markets. Americas particular commercial quarter. slide. and operating basis effectively utility growth all With in Electrical records more prior strong end was segment. higher institutional, industrial up markets, and to than another by offset in end year, XXX we Moving from continue XX.X% versus to at inflationary respect price points price, Operating volumes. to in

remain prior to accelerated XX% sequentially, year-over-year very quarter. continues basis XX% on in demand in our addition, rolling coming the Orders XX-month In versus at strong. a

of data the center, order end board, into growth strength versus XX% industrial strong Our record prior in quarter On up the translated These basis, sequential backlog, quarter. up a XX%. backlog were orders another across with particular utility markets. and is

by addition center, our pipeline data more driven year-over-year orders in in the especially robust and than utility negotiations project trends doubled growth end strong In markets. major manufacturing, to industrial backlog, and

the XX% for more all-time operating than results solid and X. Page with Organic up up end organic pressures. basis markets. quarter strong, were growth strength QX We We Americas, with and margin growth organic Similar regions strong tailwind was prior a XX% records XX%. row business generating to year, and posted versus both a growth Notably, at in institutional we in offset all XX-month basis points Turning industrial commercial revenue a strength sixth our to an up margin saw B-Line Europe year-over-year. the headwind. higher was Crouse-Hinds particular volume continue growth margin. and inflationary this manage Electrical in of Orders segment on to record also X% XX.X%, profit for were record global Electrical growth. and a Global in with XX of price effectively organically exchange and double-digit solid very foreign is and remained revenue Asia up Backlog rolling Pacific. in to

moving like strong the our results Electrical Industrial of very to to recap our segment. briefly combined businesses, Before I'd

incremental of year-over-year points with basis accelerating and margin operating growth XXX we QX, XX.X% of margin margin XX% XX%, For posted of improvement. organic of

negotiation our generated in also pipeline positioned States. We of orders well growth with growth and XX% overall XX%, than of more backlog profitable very businesses. remain for in and the respectively, our United Electrical doubling We

strengthened commercial generated growth aftermarket year, basis record results Aerospace in quarter increased an within accelerate Backlog XX% growth. up the XXX with commercial quarter points including margin consistent was a saw up the aftermarket On in foreign also are defense OEM from sales order X% prior captured the QX orders commercial versus with Organic the continues in increase military a Our segment military as was Operating with our a and XX% operating over strength basis, all in to Aerospace on profit our XX% now strong our were records order revenue continued, exchange particularly We strong from volume quarter, increased X% quarter. page. headwinds. that up last also spending. prior rolling up record. X% expectations Encouragingly, markets with XX% markets XX%. grew all-time and year end acceleration in revenue sequentially. travel markets. Organic military and benefiting of OEM the next remained markets XX-month for and

Vehicle segment. XX%. Organic our grew to revenue on Moving

also headwind markets. a had and strength in from America FX. America, X% experienced We the [EMEA] South North We

XXX basis inefficiencies. Our light was Operating growth, than manufacturing XX.X% strong up North year of business with our XX%. motor American while points organic more to due was versus South vehicle primarily prior American nearly margin XX% especially business down was

basis note nearly price with important cost. to QX. ability XXX to volume basis growth a on of in improvement progress from were it's and in on with points margin price. This sequential However, up is margins continued offset solid higher inflationary our XX% Incremental reflected cost sequential improvement

growth, Moving XX% results for Revenues XX%, acquisition show of X% eMobility foreign organic including business. our to exchange We the Page headwind. Power and XX% XX. grew from Royal

the continued loss narrowing We operating basis. of year-over-year on trend the a

impact by This margin Royal Power quarter, and basis from the volume XXX acquisition. the growth points operating improved driven organic

to solutions, our for momentum additional continued Breaktor $X revenue achieve We with new billion including billion protection are target wins wins. seeing to $X power platform

conversion protection remains pipeline solutions. innovative opportunity robust Our power and for distribution,

we On our of have the year. the slide, following guidance summary a for

growth Further, XX.X%. the on range margin are for continue to segments, operating to chart, metrics and noted we except and organic to we XX% guidance As all expect the margin. XXXX reaffirming are operating organic eMobility margin we from reaffirming both XX% in XX% of More total. growth operating in specifically,

to not XXXX. $XXX of significant $X.XX our balance in of We're guide guidance Turning increased foreign million we translation the from unfavorable the presentation, our of the that to exchange our for to $X.XX with to Consistent EPS we Page We prior XX. outlook. guide. the adjusted previous mentioned million $X.XX tightened $X.XX. the $XXX impact headwinds changes full show from to range year We per share making throughout

other With our more year expectation. to cash expectations orders and the have unchanged. respect are than flow, full grown backlog for significantly Our items

In growth expense work and cash to key we our good Therefore, and Highlighting guidance. will do continue objectives. flow. to customers QX, to our cash profitable the QX. prioritize have achieve in while QX few at been a on points have to addition, we we have Shifting flow of momentum revenue

points expect growth guidance to operating margin EPS and range, be adjusted year, to Comparing and between the operating organic and represents XX% margin be XX.X%. XXX adjusted in over prior EPS XX.X% XX% midpoint be the respectively. and and $X XX% growth between We the at $X.XX to and increase, basis to

walk market and a outlook us it hand presentation. the Now through to I wrap up to Craig back will

Thanks, Tom.

the typical very the Page on. to me we're they strong our and trends, our Electrical, company. for an recession And have frankly, in Together, year next approximately to XX. orders market XX% a a and all Turning for account growth on total model sitting industrial centers, at that look backlog the good end facilities of are that revenue saying expected Within don't let We XXXX. quite we backlogs are early given by provide to significant orders it the see some market the and impact assumptions but record will begin data growth strongest expecting utility our expect have secular the of growth. and, see

As are projects point announced this a some year reference, far of so up industrial XXX%.

that of The what years. the accounts and to years segment sales for expected segment be market we over higher XX-month support be will strong large need continued total electric sales. Industrial Commercial orders renovation are cyclical year. resi is regulations seen and is in will will residential Within inventories as the QX, are introductions to would, for machinery in EV the motor frankly vehicle to that market growth. incentives downturn that institutional. home, somewhat segment expecting the some by of see will markets the these keep our segments and new not And orders number aerospace the been however, of year the content some C&I the for of stimulus big growth And sector, So aerospace weak I'd electric vehicles. up see X% also production to seeing aftermarket basis modest And And and light really you'd from through last the to this note, expected and we've markets we'd be well expected note you a momentum on we renovation higher imagine accelerate our only spending. a company new we're can Increasing vehicle significant as while commercial next for benefits come. and strong which relatively Of institutional XX% and significant business. residential expect to recovery. to OEM markets the quarter expect of yet offset a and drive we've in to to it of year. rolling see are and government do accounts The next is market both rebuild strength see [XX%] per segment in our expect residential. quite the more I where commercial and number build a the in with ramp-up in one government aerospace see note

market expect flat at be we vehicle quite quite commercial Lastly, frankly levels. to but healthy

call, thinking markets want know expected total, year you just assumptions in points preliminary are XX% growth year. to specific to close for here. expect maybe like to of a our let details another our next share company. the more And but So lastly, be XX, that did of our provide with on XXXX naturally positive Page earnings see we our February and growth on on organic We'll I'd growth we few organic to good

say our our First, orders earnings our I'm particularly growth. our margins, and strong with results, I'd pleased with QX

ongoing to headwinds. environment, higher-quality earnings manage and balance our these the significant better And business the and and record with record for the track higher and higher interest, delivered promised, on what We a once commitments, and portfolio inflationary continue and The of again share. that supply margins, including to company in of adjusted we has we're well despite And so transformation remain adjusted headwinds FX, I profits delivered growth, headwinds year, significant challenges offsetting deliver and FX interest we earnings despite consistency. around margins increase pension per about talked the the doing operating QX. -- chain

we optimism. prepared know of a despite significant our good have and flex As next expect our deliver costs for We slowdown, we'll more into we remain expectations. said, But and downturn. look attractive recession be to event in as We how a year, optimistic do we we've reasons decrementals. the

we with going next of strong with many in that expectation strong backlogs supply record are of a have next year. and inefficiencies Second, will opportunities. materially trends momentum into growing the our and year operational get momentum chain with pipeline growth disruptions businesses, the and driving better an We're

quarter, great Q&A. the feel the about we'll with turn about great it that, Yan, we So for outlook. back to And you,

to Thanks, turn the you Craig. guys it that, over will Instructions] I to instructions. operator give With [Operator the

[Operator Instructions] Nicole Our first Bank. will from question be Deutsche with DeBlase

you Maybe enough it's maybe feasible early us be be incrementals. start end we going through outlook. guidance, least were I it's guidance for just think of you giving a long-term incrementals, at through the at I'm a expectations kind can as market just curious walk bit know for if with that to your starting XXXX but kind to And to point.

that. start with Let's

I appreciate the question, Nicole.

through can position you place that. to And kind a working to now at to we'll profit activity that. think of right going incremental get around prepared year, we But the XX% your imagine, be right about the we're this As that by to we have be as a But our of thinking the for about a specific kind and on rate more planning XXXX at point. would XX% this good say naturally time I company think next I call be plans you think number juncture. would a on is lots for and QX in running you in get the earnings February probably read models give of

acceleration orders. surprised encouraging the quarter as that then most Got guess Definitely was the America I it. even huge comps And this see me what to in difficult. get Electrical just

Q-on-Q more a you into acceleration. maybe the what bit if drove could So little dig

Yes.

-- our in shared broad-based data in business. the up some and were in strong, markets about had the talked had Electrical extremely utility orders of orders mean we've industrial we very I Americas strength we've specifically, XX%. in some commentary, centers markets strong, As pretty

resi even in basis, still really on XX%. so orders Even had a broad-based. were was there, And up we some XX-month it the rolling that market

the And say today lot market to some call talked so tough certainly in we And lots of been really any trends basically it continuing really only in I'd into it market is utility investments from the particular center tied strength this a where our customers really data I plans the are I'd point really energy heading. debate strength. strong long-term not at know there's we're was out which that to Americas it's these but direction markets And had even really transition slot really, out weak, we data about is the of in that these in strong say to general in Obviously, but benefiting to But big to the commitments grid of that centers. resiliency, XXXX. place and market, point are today hold and looking production see about.

continue business, So that once for to we absolutely strong these see to very pleased continue it we're we've showing about see some strength our to as tied our time. Americas in again, and revenue ship supply will And talking the that that convert ability been trends orders with. up of resolve to we have in issues we chain some we to obviously deal and the to

Yes.

data in the XX% the almost amplify trailing a basis, XX%. months, quarter-over-quarter to a and over XX Americas, on Just centers up on

slowdown. seeing So it. we've of hearing not been noise on We're that

the to Next with line Morgan Stanley. of Josh Pokrzywinski

out? maybe look we parse we going the XX, see Maybe Craig, seen, it's you attribute And or in a volatility. else? some kind anything you rolling continue with of to comps that this some there quarter-to-quarter I guys lead around order always surge on to should that about anything tough we of or the know stimulus out hard chunky to are to have that Because think as would order timing times that here.

bit the the terms the of Yes. or But XX the in because in the you that's seeing and in are It's know question, parts these electrical in lot rolling of we facilities, quarter, lot about in in I'd quarter, about a be for And as Tom a No. investment compelling. grid as actually we're program large dollars very a the or we in seeing as announced. gives go despite projects more there actually investments. to know, impact lot been these which meaningful as because question, certainly very panel as at big impact that the to were there's of today that some tend say, of are a quarter-over-quarter specify a on try efficiency meaningful tend start directly have stimulus. having to about investment energy tried those perhaps vectors will point, to And numbers resiliency. around it's just that cycles an reassuring in us It's numbers us. quoted -- to number But the I a point again, multiyear application growth why to of little out that infrastructure. months significant commentary, continue We road markets say of the kind stimulus those that surge seeing my Those tougher story from are not I'd in different well your in share we'll from whether what grid strength. that confidence where quarter, its order been that not of some comps. but think building we new also of a you're that provide -- these that give XX point that I upgrading time for be your question a would and not other multiyear anticipate see X large or really come. color company. yet. And certainly in orders we is our It's to Stimulus, this of down backlog, just which to a into on of your the growth helping mentioned there -- projects we've industrial probably away will you infrastructure It's pretty that’s as think one more us at in battery electrical investments going certainly to that projects whether we're through, some they particular once Most electrical-intensive that's transition. another still qualify than about the participate. programs to actually specifically

And things, long-term that confidence gives so our another the in one Josh, of just Electrical us business it's outlook specifically. of these

in the the on up Data negotiations more U.S. In XXX%. major projects. quarter, the a equally are over up just year-to-date strong. over And and manufacturing almost little the XXX% centers numbers color

really strong the really, projects. major just So on numbers

just piece sort all that that there. it. Got on, touched Obviously, the is there's some think about of here fencing to know then helpful. would Like enter? get any backyard a but a on like X% addressable Eaton's you as guess, you lot quick to ring in addressable of follow-up of tracking. infrastructure do what your Is XX% of guys to And I dollars market some broader spending electrical, those helpful. would stimulus things to be That's market? I at those not How a or, increase point. as big start you that sort a are increase,

impact Yes. a growth. or on I'd to the be it's us say how early specifically maybe a to little for relative put going bit And able to handle opportunity the relative

continue it's all going going X all see Josh, at too to But road, indicator better to a a help quite As over to bit in down of are say the all that give just out. today, you XX to how it's I years. you help know, going good. to, hope they these frankly, accelerate some But us mean frankly, accelerate growth, at that next the just But things I infrastructure. little are be next point, to would just not electrical be this quite very X going stimulus growth months to we but is big billion-dollar us the at play programs programs this it's will to directly would that. targeted our point early

of Obins to America. go we'll with Bank Next, Andrew

been data give Can you're that very more us question. I on protocols you system -- but debated color positive just know Just a just centers? about have maybe talk

some noise. getting very we're you. hard background It's Andrew, hear to

-- Andrew, were we data but centers, We heard

second. one me give Just

Let me try this. Is this better?

better. Much

Yes.

we are you're know -- What So and lot bullish, center I just different color just vertical. as the is I geographies but market. could of guys regarding just you different noise and seeing? verticals this there's said, on data focus market centers, just a geography within if data more on by

strong clearly in Yes. Maybe strongest in -- very would growth the market. question, of some the -- geographically, about market, if XX% in colo we're certainly you if today, be Very Andrew. and We some think the in mean know growth also hyperscale but the market guess seeing appreciate growth you on-prem. strong Americas And I I I the hyperscale. Americas

So seen relative We're growth tend data little also we this markets. center to the not in that strong to Asia and growth IT again, but center in the slower to we're in growth channel Asia. slower broad-based Once be in are like once again, channel, markets that little a in still the markets that growth we market, good growth that slower the broader have phase really in relatively Europe from market, is those seen but growth, have seeing in and data really a Europe a seeing seeing the certainly distinguish relatively Americas. we're growing. But growth in cycle. still shorter single And IT good strength

interest gone Great. as And you clearly cash generative. are have allocation, rates up, just on capital

in You're to the perspective? from a XX more it buyer. changed deal more or to And XX market has less likely Eaton of landscape the months? likely How make a next strategic from see your does

and you on value what's valuation. point, lag fairly the at to into significant that of on of interest the expectations realities know, company's translate going there's And say in seller I'd their changing expectations say market some always, would the as I between needs rate is. a what environment

that's we'll continue to opportunity event as overreach. asset our our not said will asset increase a very come the think hunt And so right priority the the in and that be the it's today, back overpay. and buyer. expectations, little But these line we've a come seen don't have say buy buyer, transactions. in at to And change of opportunities in still continue you be would that looking valuations and in on not material or any we bit. therefore out But use would having we'll don't to early, really we to expectations. valuations But I this very we disciplined point And for of kinds to the likelihood certainly in as for doing past, say, said an a it us company. the that, valuations general, environments, stock. with in expect in We've We intend disciplined I'd would been

Nigel we'll Coe Wolfe And to with next, go Research.

Okay.

you market through. end market where to a like modest one, X% The the We by you'd number, outlook, -- leasing there had the coming the It are say money type XXXX lender I seems looks you're for I'm healthy. is looking rates. stimulus growth some to guess pick growth. like it got So C&I if really X% surprised

wondering, just collateral color it Europe, that Is driving great. Any what's be residential? would from it Asia Pacific? Is damage So view? there some

were but to unpack seeing that growth XX-month we're XX%. little way, rolling the market. XX% on globally, up I the we appreciate good by still outbound in bit my They of in up basis, Orders in it actually kind quarter. commentary, C&I -- tried a we're the a

that's indications actually, we really And in side, say and early government government. a And in And letup. around the government. really in the so market really of dollars in some what quarter. we're I'd and well. do quarter spending see on that very of we commentary, not growth, seen to you'd institutional strong But market accelerating to that signs, seeing orders government some and the and biggest institutional where have actually particularly my as noted but we're in commercial continues any I of with call seeing extremely the And a expect growth of the

generally to most world, the strong market. in Europe we a region tends region these be of in I the think C&I as well But speaking, more really had a markets. very the quarter the strongest end as across in Americas

in And also. Asia

the and strong. as institution. particularly as I markets well months. XX grew strong on very month commercial trailing was quarter-over-quarter was Actually, XX strong in a as Europe government and commercial quarter-over-quarter. on in end a the quite well mean as a Asia trailing on all

record so somebody some mean, of mind, numbers backlogs some expect point, at But as I are earlier, strong to And numbers. in terms more these growth be and do that growth to moderate we're in place mean, XXX%. cases up, in some mentioned order I than we're slow we sitting on going some really the up, keep intake. also at anniversary-ing

little see. are And you see demand. markets, bit our normally backlogs is which of visibility today number even if slowdown about we some next some these XX% year's almost so giving into of what in of Xx a that And of us you'll have a end that, likely

it mean I it. all that's Yes, Right. great. sounds

pretty We've quarter remained Just in got the free flow. a follow-on strong. what changes in is on wondering rates 'XX. Growth fourth question up But big cash plan. lined my really

confidence needs kind of what free cash So flow. drive just and the wondering that to happen to

on Yes. We X X the by X days. in cycle. days. had improved very strong Days hand up conversion No, remarks. I went days, on We cash appreciate the up a question. We another it payables tried to QX touch prepared

So that. we felt about really good

prepared to to I we've is growth. of our about question that, know No of to Recognizing in going think hit taking flow cash to remarks the get prioritize want we're what care and customer and work do objective. you got let free organic protecting orders to the it. the we terms

Scott with we'll Next, to go Davis Research. Melius

that more a was number anything a it running the -- particularly about kind this price bit that not don't little I've a But for I heard a half precise, -- be typically core price same Is been than XX% specific And can of think quarter? of in asking price. range. it's

Scott. Yes,

the As in because a customers, upon said and depending largely prior the we volume given markets, is selling. you we commodities calls huge between specifically that out the variation such that price know, various we're there's haven't

given we that price. say haven't and so And but both a growth, number, we XX% growth would healthy that in I volume – within out had

well. as volume in growth Strong

not or customers of above really product? to arms to growth they are mean going global of -- incentive ahead certainly ahead you to What get to rates is trying the are growth have my the Are actual be your some order demand get -- to some a able above levels in inventory I'm just to they they -- because incentive your paranoid around quite end I market some trying increases? they're it's build by just GDP levels. anticipated 'XX? Do price sense are trying guys get of

Yes.

end First very doing of well. all, say are markets I'd our

is, semiconductors, investments batteries seeing grid in what big building of fact, like these in reflection We lot And new plants for a in hardening. in heightened of factories today talked building investments investments a new and factories for things we're manufacturing. EV so just and about activity, heightened industrial

our not. of place markets in and to really we're in broadly they're this all customers that, are And more I need participating the some in not strong channel. more many I so seeing distribution that's like inventory, line. marketplace said that any in we're some today build get overstocking the Having And right -- markets that is point cases, would around a There would today, now. to evidence and in the nervousness at say at

we orders little would before, get than normally an And so a in as earlier order. mentioned getting process we're we bit probably the

some more getting well, very lead sales distributors, general, in in you it are out we're as data So strong. of can distributor see our and But time. their the

If some that you they big in reported. look distributors the at numbers of the electrical

we'll Barclays. And to go Julian with Mitchell

firstly, I I for think the a on just quarter to second. focus fourth wanted

where sequentially clarify saw margins that, you looks So a there's like or concentrated sequentially that's kind flattish of of in the very in big Maybe It there's like aerospace what margin seems going please, kind segments. on maybe the XX you're division, of reversal quarter. on down else it sales in versus ARO assuming if anything kind third on and bps margins so. the and just

of I in is know, versus perform function you OE you your of had a strong in quarter from as mean you really mix Yes. Aerospace And aftermarket business, Joe, Aerospace a in sales. the as QX. this of know really how we so much

you Profitability quarter, -- a much strong of aerospace very difference any your bit margin given upon margins very depending And in guidance is for our any around a But one mix will executing and year. But we mix certainly push Backlog or and business you see quarter, that And can, in a in way in percentage or little so we is well. very numbers as well. typically given shipments or have major customers, as with with more levels OEM you're well. and certainly still growing. in of some implied ramp, another, line and shipping. are different how the but doing that OEM embedded can large, are you in the -- see business OEMs would in in is the the than fact, Team doing saw our is is by a much as probably QX. probably

we so think concerns in no business the about We is And great shape. have aerospace.

suppose, would be my kind around just follow-up, of then And I volume growth.

the in been quarter. said, third As it's you healthy

So assuming digit. up, let's it's say, mid-single

you ease, understand revenues? into could so kind backlog constraints backlog conversion see in we chains acceleration think Maybe growth through around? even kind work quarters you volumes of in as from accelerate of an do are down. As about think the few slow supply as us revenue help that here supply incremental next sales into volume your of moving the And as just orders

that last -- just quite catch and it's these try breath chasing, little in months drilling we're frankly, to I slowdown, our a a with appreciate orders quite we've the we to of been really some the backlogs frankly, at where question, what deal for and building least XX bit the need business. of we in

the in the bit possible a gives you be working business yes, in have ability a past to just absolutely dues can the of off slowdown grow I'd a say so where it's that you scenario what your backlog that, could despite to And the marketplace. continue

we of coming the and I time. So And go are little some we the they on that's mean secular marketplace. execute keep growth these the coming, to playing to this to trends some going of broadly think in But into frankly, breather for entirely in ability orders backlog. quite a keep that fairly saw take need date, And results, on you possible. bit our a to as we're

what levels activity, investing economic going and higher these in for to responding chain businesses We're we that is to we're we're think growth way support investing. higher a that is to the for we're doing some supply capacity to capability in these time so come. our be and with things to of in and And deal growth ensure higher position

to Next, Ritchie Sachs. with we'll Goldman go Joe

Yes.

questions, I follow-ups others guess, from maybe really, clarification what already So X asked. have

The first going M&A just back portfolio. to one,

backlog XXXX like shape. would guys this leverage is You target a around willing uncertainty be higher Clearly, there's to in around I of done lot, across good concern your Craig. multis. and in the to the I'm environment? really levels lot know kind a But curious, concern for have broader of go just what you leverage

be what I'm would right on so And expectation curious the leverage? your just deal, for

and I know, for some as been the you around mean, Joe, you've years. company

strategic for an past, company, the tend to the we in as organization, levered have, We And generation. right cash deal. a very good up as have

I at willing And historically. are lever so same to levels up not of to for would right that today. I tell deal, perfectly be we've in and we'd say been the front those will that that us, go deals for right us you the

the we in I just want I marketplace be to going transactions. likely we've certainly that's expectation could transaction to without But need of much likely to out the bigger, require some that's near-term of with set terms done kind very -- fund don't to want strategic lever an that be lever recently cash to if we a more transactions and -- that so around I bite-sized up a one, same we at would deals that willing order deals But consistent up find do up, larger the are it. just don't of the are do reality from to And in that see type lever us largely we'll of we time, can of do. what to are which and

everybody, I Yes. X.Xx that mean leverage. net for bit. the to little we're a amplify And just at baseline

very we've credit got a rating. strong So

capacity to constraints supply So especially we've up, to chain will going even a large go cash the better got our And point. forward. starting Craig's to mitigate, get with generation

see So lot a flexibility. of we

helpful. And just question. get Julian to That's this well. know I trying was my as Got it. maybe at follow-on then

seems year-over-year growing, you for call on So to around focus a maybe year to XXXX, get Americas of that doubling year the suggest kind time this business. set It's head at it, another our growth. business. hard when like of Electrical organic in It like comments up my you're backlog your for yourself I'll this mid-teens double-digit

the just us business. it just that contextualize frame Americas or Electrical -- help of just your so for And kind maybe for just

given an strong. very our the into negotiations negotiations, dealing are is Yes. That Tom I think to even strong, right? I about, largely math trends strong your strong talk with. certainly continue Orders backlog is secular that order, before one, these negotiations -- not get mean necessarily, we’re be we wrong, heard you the as

we year, We'll that to mentioned next terribly revenue translate in would in of growth give good not math are And end the we we likely of expect so do of indications We're bit a to tried of the your that's and growth for in slowdown. should what slowdown. markets February. event wrong. kind next to And with do how says those not you that as year. the to next It various we're expect Americas market little XXXX. year that position is to by even number a a providing a perform even we end markets a some in in But in

secular run trends I we order secular are the we're I think seeing And consistent think flow a are with backlog coupled here. the real. market these at And forecast, the primed chart presentation, trends beginning end with the that. and good of for

to been capacity. The big challenge have really date the we just don't has

seeing. that make growth supply on opportunities. the And QX capacity that's sure position we what to addressing but Our this now, demand. would convert suppliers in capacity quarter deal these chain mean, our deal obviously, we're a the in in growth have own great right I this we're much growth place in our facilities with in don't in be are if we with to not more the also only to to had higher

John Walsh to Suisse. go with we'll Credit Next,

because I'm this have year-over-year you you think Are question important. volume XXXX? seeing really to come just to seen growth accelerating we've at try So I -- it's going apologize. volume or I as through gone again accelerating

In Yes. quarter, word, John -- yes. on Each

and I companies And already it's know next early incrementals. year? I returns, us That’s a the tax asset about had talked Yes. couple call just to then confirm of line pension that. I about about wanted you anything what We've great. this line And below we just out Thats season. think hear. remind to but sensitivity, wanted to top as

there's mean I a I that's parts. moving lot John. mean a Yes. question, great of

discount for yield curve, associated first. year. if returns, assess be that few. name trying headwind And we're We've rate, our headwind that. right big to a next pension of shape got to through had take now. Let's surprised how going We're asset is we with plan the wouldn't a just I

As it type to relates of interest expense, the dynamic. same it's

swap got interest income. You've

You've got FX income.

will year-to-date and CP managed balances We've basis short-term look very rates. this got on You've year good. effectively that and increasing a

indicated I through prepared this focused said going year. to remarks, And going deliver focused QX. doing we'll a year we working As on all we on as what XXXX. do. stay next our had able we guess is in in of I headwinds what to were be what's And we're we'll were would those happen to we headwind more we And in well. that see

just better And offsetting do have which expect, that as are well. headwinds many my Tom to will of real this in that as inefficiencies, these we driven chain that some supply commentary, get next by number And I many had be and year. of of constraints, we expect articulated those of an mentioned these operational we that offset enormous year operational inefficiencies we've to

have -- number And than to to our XXXX. efficiently we're think a so they in because effectively more these an XXXX of run we and have going facilities will more offset in

to Capital we'll RBC Dray Markets. Deane go with And next,

been a situation. everyone the and component been supply has One inefficiencies semiconductor that's in of electronic nagging the electric chain

You get the might second worse it guys thought in half.

been it playing has out? how So

I and we say expect said a better. think it of earnings get What as what to call No. QX I'd is didn't we that -- our part

anything see challenge there. end we're before or related a QX to another that's And almost that challenge XX and sometime up it improvement XXXX. second electronic -- almost half of we played got Logistics with didn't challenge. so resins. we we be material in for way semiconductors get dealt fact, We In probably a going commodities, obviously, with continues out expect and that -- saw in it any we've steel, better. probably the aluminum. copper, to say in saw we think a largely probably we in improvements, metal-based seen improvements to But until that I'd months some better dealing And

We're to working we be seeing challenge. are other a So semiconductors through continue improvements but commodities. in it,

long That's company a this been around just and the touched bit good And Joe's to a to time. follow-up, you've we've hear. in Craig, a on And before the answers then question.

minimize you'll So non-res to that cycle. so we'd value spirit and and the portfolio place in asking see the much is the so permits served in prior in about end the you appreciate forth. question exposed all secular would of And But markets, cycles, be today more non-res and data non-res was it's the and this company this the and starts has of drivers, you center to cycle. electrification, whether

Just correct in your of I help forth. backlog and elongate terms so demand. cycle sure and want make the this that's should to given

helpful. would in positioned the part So any how a dependent around just better And is of question and this downturn non-res. you're on of less color that be

What couple points, of a I'd say, to maybe clarify just Deane.

the of an company the to downturn. portfolio markets, growth. we're commentary, company in one And is cycle. there'll way. future as the therefore, made next than continue absolutely by them year. other cycle, of we've will we the economic more term the in strong And long that yet mild residential. convinced And think very my no XX% the the conclusion to a agree is that company to First the all, be that perform will true. see means of your our have just in event our mentioned But moves conclusion, cyclical And differently everything and be I with nonres be we less positioned And absolutely

said, And today, so the as of is for X% company us, we residential.

So XX% electrical residential. or nonres of is

we extremely markets utility, data industrial other nonres really term are that a in certainly the that everything in end lot covers of XX% of right these So well doing centers, markets, do in now.

secular would that and is company we've And to cyclical done of markets, even really grow get more that terms face a the absolutely to So will much conclusion expect the the of that's end the tried we've portfolio less growth in your we really we've be the in company tied a to done. what to recession. moves exposure on correct basis. growing go-forward But trends

Craig talked about on this, on just trailing XX%. utilities basis, On about XX a numbers I just year-over-year XX%. couple Yes. year-over-year And this, saying. put Data I months, again, a orders to centers we've and basis growing about what was trailing XX% mean, XX%. XX-month but on just amplify of to a more mean about about

to Deane. are these your nonres numbers, big So use words,

the have Snyder we with Next, line UBS. Chris of

XXXX know more follow price to that to the And XX% the some XXXX prior kind levels on the normalized it range. or in is around wanted the the to of matches targets. guess feels But still question company's in I incrementals commentary like I the get cost that I targeted was of favor. up

mentioned You that productivity guys would earlier next efficiency year. return

push tailwind So that of there or XX% to offsets that has any back, margin so? down there as well. incremental a the Are that kind just kind of

as is question. growth I a some the I'd other these that businesses. into And that big the about equation facing and quite making to we're of we that that investments the trends of appreciate we're of the frankly, invest. say And inside we need have side talk

in in putting we to the great on so feet see we and more ensure take advantage street we're to a intend would to growth we this that the growth that likes to that position -- investing prioritize and And there. and of do technology and

give the think a we you juncture, we'll like. well it's number year. planning we Tom whether these this February at still or perhaps XX%, around still forces. details when around a But as from or more standpoint, of a we countervailing entrant them next get number you think So better we have think, to pension mentioned

year. think all your more right we of that we position now. way is models XX% kind still so And still next to incremental the we'll update as know for And in

all very been a large slow-moving lot talk Clearly, color. the strong. aggregated on much projects. already then planned you coming of quick through? And announcements Can this the investments of very, the does generally about we've a follow-up how that has $X.X kind that And then appreciate just you that well. provide? of is construction data Really visibility on of These manufacturing highlighted guys very as this trillion and the matches of reshoring what are kind also, --

be we of point, today which no, not today think I In negotiation the where one indicated it important seen kind But reflected dramatically. No, sales. $X.X pipeline, our in book really it's think at this announcements. is and to certainly Tom the of not book order this of is We've some Yes. we've an up impact most trillion not could not in order your hit any today in of cases, our on this hardly these and you seen in or of point. our reflected

just confidence these so another of a And lot us around of electrical gives business. one of rate the our that growth future things

O'Dea to Wells go Joe Fargo. with we'll Next,

about I that to the back of from time and line detail kind of see in order more determine pipeline goes the wanted little time to what bit sort project. kind negotiation kind then a to U.S. than to line circle major as used order generation. doubling on And negotiation from talking typically, the and on more the to and just then what of you what of that qualifies a revenue from you

say we generally it's There's point, tend projects in out the pipeline visibility where negotiation have be channel the we application. today of to. that that's I'd to a the I'd large say large we involved today, don't a do distribution -- on track it's project. Yes. that's your lot stuff specifying necessarily to But going great in

X It varies can can actually the a can It once I short it in negotiation projects, from depending them. And again, cycle supporting. mentioned, going and be mean and great It are the sale, days. order, order can be have say so -- project. tracked And upon XX the as on days. as we XX up the short I numbers upon months. quite a you're historically that have as it between depending from visibility can vary. I'd varies an end, those months. to widely it It And -- be we dramatically. And be to these can mean it them project XX

then anything then And spec-ed in? mix the whether talk if and you shelf, management might or about more shelf could things. inventories all commoditized spec-ed. the of of some the distribution be side Could that inventory opposed mix the to kind you seeing what versus there just more it. that's in And at you're differing sort be terms of product on more that seeing of distribution Got the that’s come off of of trends, more be off down as would

to we business need or strength markets. distributors second almost say, Yes, of part I'd the think we really answer in more part don't are that reflection today, that's of about than want. And talked we question, have have of end inventory our we saying the any I the broad-based today your where a our maybe

faster growing are others. markets some So than

And sell that growing. distributor a around commodity. today. part, anything really are markets your true call supporting challenges almost we the would demand most really have the point of I don't To board their we around the -- across think for don't All commoditization, we

order. And about our think we do a you space an industrial or particular in electrical even designing an specifically highly most from what is to go application getting of specified. in engineering businesses, solution the to you If

to tend find don't that. You

you or job project. once can a a trade You win you stuff win

deliver into is engineered to solution. really because the tend You project it that

assets I our we're we're think happen. doesn't bad you what things about people. in business, If stuff protecting And essentially, doing if mean and electrical really work, the

our think engineered a or have that much is wiring devices what that solution in could big highly part, engineered retailers. be for of like we sold are and not so commodity what most through specified. box one the But highly highly we sell may what really our commodity. we side, some which through And in sold distributors do most we the case, And and some businesses be the on the of you sell, of call could I'd or

David with to go ISI. we'll And Raso Evercore

I again, the outgrow that positive think, base year? it Europe to reasons, year, growth next Europe, your there's mild year? recession do scenario But obviously scenario recession for Europe? the In stay market throughout in in you throughout variety dynamic the where in for the the outgrow more Obviously, see America case in much, of remains positive scenario. secular do you same trends, in a North does your that a ability And and the in credibility see

great energy in wider obviously Europe other mean is one it's given today it's I out. what's and around happens resilience. than of the question, Ukraine, happening possibilities the region around of range we given uncertainty a perhaps the much any that Clearly, Yes. modeled haven't Dave, world what the fully and in energy

continue And that imagine hold up we're so in Europe where seeing, the to orders be currently a there's possibilities scenario of orders well. a you wide range certainly that could

that whether and backlog but have flowing in or backlog could change quickly into Europe, building also upon not built are you We have Germany. gas depending

I regional a if severe view. fall flex now the more where we more so we're the the I with board think that across we And wide, take possibilities we dealing they a the a and of need good range end more in And is right with Europe of going Europe to perhaps have really said anticipated. are markets why And than world, rest the ready. in quite deal to because growth one severe ready scenario up -- we while to we're of anticipating which downturn than than plan a be but anticipating will reasons we're

Would go I'm sorry, -- you ahead.

was to I going Yes, add. just

note did important quarter, it's see the end And think for markets, Europe. in commercial in fairly to of I strong, that some growth in and order we in the example, institution.

see do there. we're some growth we So still slowing, but seeing

basis? any answered in there in year-over-year a X so backlog Europe saying, on large you the in Well, is quarter. if Any sense you of Europe with a how in Global sense share orders Electrical the of follow-ups Electrical my you're of us -- X in positive are

-- don't number I up is I that Europe I basis have in XX%. a on mean our XX-month believe backlog rolling

I numbers have. I think the

is So -- the still backlog

what well. as is have XX% I

Okay.

backlog So Europe? in XX%, the

overall, up is Global Yes. XX% yes.

Okay.

than So number. higher. even it's the Europe actually is more global

exactly. Yes,

out how avoid cancellations -- you in figure Americas to much drive particular, do kind have can Global into 'XX we're to if coverage and Electrical think just Europe, in of trying aerospace I you the

of us, for as percentage they're mean, And Europe, relatively mean I you a I our can revenue, smaller. imagine as

roughly would account XX% sales. what, Europe of for, the X%, company today So

a yes, in not if can have about company's a on you we certainly Europe and our slowdown overall the organization its the within an impact given so And bit in of think outsized mix. really -- absorb performance relative share

go we Linzey Americas. Brett Mizuho to with next, And

of to covered. then you kind on work thoughts something if I growth. through lot perhaps those range ground markets. market I carryover outgrow. appreciate some 'XX get X% some X% But have of I I of for the additional guess imagine and the weighting mid-single-digit, I A arrows, price

So just maybe curious pieces. how would other those dimension you

us to you in for of February. that be say the want We'll you to in going it's mean that the market there's generally data kind do price know to clearly, I'd way. insight. give think well, I by the price. is as But early I carryover

And price so there when you well. built into that is some think about a market index, as

early debate just particular do than much mean generally into for this markets markets. But at numbers. price to better it's you're there We would company-related is what us good. data. can But is built be that how I expect in. less more to built than any You give you it Is are or to going point assuming? growth

it's And than just any assumption. at you that this be early fair to would detail point. more so But that a give

but understood. margin you robust, backlog. No, very just on orders booked, could Obviously, profile And the the looks the color of if share more some Yes. being X just like on curious relative off terms I material of share mix highs. But come expect costs can to anything in would price what's to favorability some prices there in being you be there? or shipped, would

that some unconventional cases, about -- say and the -- I'd we as that prior took we're on in early calls, on you not say many reprice and steps backlog. know, I'd pretty we've talked

argue the Certainly, our the less of different we're today, profitability not future not it. we direction of a not that commodity the question in But and terribly business would our and the or underlying around is profitability say it's the there's margin is is business. on backlog So more and kind -- of way or today performing what can see different inflation and in today. prices terribly the the the backlog I I than backlog, today the that change would pricing deflation today than seeing whether business the

Berenberg. Phil to with Buller go we'll And

anywhere from price. don't price. you feel I me, you you're But as or on one break appreciate approaching do please. Just though ceiling out at a

are You've which seeing where But in clearly price kicking different businesses? managed areas, supply see there the most in pretty explained to elasticity quarter clearly can the side the order demand about and back price you increase uniform have areas any in you're now figures. across convicted we the outstripping manner Or intra a pretty are in?

No, I appreciate question. the

you tends that our get first time, Prices tell pricing you -- long over think hold industry. sticky if about they I'll -- increase, is you be period this price it. to a typically in and The thing you of once industries a

distribution, some one either buy our think the have But the not supply our supply today advantages is seeing with some to we're come in big what I demand, of we're really, and distributors. that and but off that not the our the price really costs because down we obviously levels. major seeing of today, business demand, because of for we commodities we're is just labor-related it, peak -- one the come But through seeing suppliers, -- inflation. I'd it overall of say seeing because have good are broadly we on goes is hand, more than

costs tend of we at seeing deflation aggregate, is have. terms that That to price in today to perhaps this that of what the we aggregate. does some labor a deflationary we probably where behind not into in But necessarily in reflection think And really be us point, I inflation that anticipate we're in don't of is worst think of accelerated in of continue and I a We we're do But pace. -- commodity bigger a on the to an deflation we're really our is input major costs. all-in ceiling will environment at sticky. so the And inflation will an the on think see seeing think some go idea inputs ceiling either to a message basis. The your happens offset an cycle.

questions no in to the company. I'll And further that, turn back queue. with it

guys. Thanks,

have We of reached the do the call, we everybody's and end appreciate questions.

any day. you and As answer great questions. will always, -- Have Thank a for joining us. be myself follow-up available Chip for

Thank you.

Ladies participation. and your today. gentlemen, for you your Thank that does for conference conclude

You disconnect. may now