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Trane Technologies plc (TT) Hits Fresh High: Is There Still Room to Run?

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Have you been paying attention to shares of Trane Technologies (TT - Free Report) ? Shares have been on the move with the stock up 3.5% over the past month. The stock hit a new 52-week high of $306.13 in the previous session. Trane Technologies has gained 22% since the start of the year compared to the 7.5% move for the Zacks Business Services sector and the 14.4% return for the Zacks Technology Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 1, 2024, Trane Technologies reported EPS of $2.17 versus consensus estimate of $2.13.

For the current fiscal year, Trane Technologies is expected to post earnings of $10.19 per share on $18.94 billion in revenues. This represents a 12.72% change in EPS on a 7.12% change in revenues. For the next fiscal year, the company is expected to earn $11.37 per share on $20.22 billion in revenues. This represents a year-over-year change of 11.56% and 6.79%, respectively.

Valuation Metrics

Trane Technologies may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Trane Technologies has a Value Score of C. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 29.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 24.3X. On a trailing cash flow basis, the stock currently trades at 27.8X versus its peer group's average of 12.3X. Additionally, the stock has a PEG ratio of 2.51. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Trane Technologies currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Trane Technologies fits the bill. Thus, it seems as though Trane Technologies shares could have a bit more room to run in the near term.

How Does TT Stack Up to the Competition?

Shares of TT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Xperi Inc. (XPER - Free Report) . XPER has a Zacks Rank of # 1 (Strong Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of A.

Earnings were strong last quarter. Xperi Inc. beat our consensus estimate by 1,000%, and for the current fiscal year, XPER is expected to post earnings of $0.37 per share on revenue of $518.56 million.

Shares of Xperi Inc. have gained 2.1% over the past month, and currently trade at a forward P/E of 29.65X and a P/CF of 87.97X.

The Technology Services industry is in the top 35% of all the industries we have in our universe, so it looks like there are some nice tailwinds for TT and XPER, even beyond their own solid fundamental situation.


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