Trane Technologies Plc (TT) in Swords, Ireland, is a global climate pioneer that specializes in energy-efficient and environmentally friendly climate solutions for buildings, homes, and transportation. It operates under two brands–Trane and Thermo King. The company's board of directors has authorized a new $3 billion share repurchase program to commence after the completion of its 2021 $2 billion repurchase program. The decision highlights the company's robust cash flow generating capabilities.

However, the stock has plummeted 19.3% in price over the past six months and 16% over the past month. Closing yesterday's trading session at $159.06, the stock is currently trading 23.2% below its 52-week high of $207.06, which it hit on August 03, 2021.

Furthermore, Wolfe Research analyst Nigel Coe lowered the price target for the stock to $202 from $210.

Here is what could shape TT's performance in the near term:

Offloading Ownership

A legal filing with the Securities & Exchange Commission discloses that CFO Christopher J. Kuehn sold 7,007 shares of the company's stock at an average price of $190.00 on Dec. 02, 2021.

Strong Profitability

TT's 10.1% net income margin is 55.9% higher than the 6.5% industry average. Also, its gross profit margin, levered FCF margin, and ROC is 8.3%, 66.6%, and 67% higher than its respective industry averages. Also, its cash from operations of $1.59 billion is 663.2% higher than the $208.10 million industry average.

Premium Valuations

In terms of forward EV/Sales, the stock is currently trading at 2.65x, which is 42.7% higher than the 1.85x industry average. Also, its 6.97x forward Price/Book multiple is 157.7% higher than the 2.70x industry average. Moreover, TT's 2.44x forward Price/Sales is 65.7% higher than the 1.48x industry average.

POWR Ratings Reflect Uncertainty

TT has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TT has a C grade for Value and Stability. The company's higher than industry valuation is in sync with its Value grade. In addition, the stock's 1.27 beta is consistent with its Stability grade.

Among the 93 stocks in the C-rated Industrial – Equipment industry, TT is ranked #48.

Beyond what I have stated above, one can view TT ratings for Growth, Momentum, Quality, and Sentiment here.

Bottom Line

Though the company continues to witness robust demand for its product and services across its business segments, lowered analysts' price targets could weigh on its price performance. The stock is currently trading below its 50-day and 200-day moving averages of $187.10 and $186.55, respectively, indicating bearish sentiment. In addition, given TT's premium valuation, we believe investors should wait before scooping up its shares.

How Does Trane Technologies Plc (TT) Stack Up Against its Peers?

While TT has an overall C rating, one might want to consider its industry peer Standex International Corporation (SXI), Applied Industrial Technologies Inc. (AIT), and Titan Machinery Inc. (TITN), which has an overall A (Strong Buy) rating.

TT shares were trading at $164.14 per share on Wednesday morning, up $5.08 (+3.19%). Year-to-date, TT has declined -18.75%, versus a -3.90% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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