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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 6.7% over the past month. The stock hit a new 52-week high of $327.09 in the previous session. Trane Technologies has gained 30.1% since the start of the year compared to the 2.9% move for the Zacks Business Services sector and the 7.8% 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 April 30, 2024, Trane Technologies reported EPS of $1.94 versus consensus estimate of $1.64.

For the current fiscal year, Trane Technologies is expected to post earnings of $10.24 per share on $18.94 billion in revenues. This represents a 13.27% change in EPS on a 7.12% change in revenues. For the next fiscal year, the company is expected to earn $11.35 per share on $20.22 billion in revenues. This represents a year-over-year change of 10.85% 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. Investors should consider the style scores a valuable tool that can help you to 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 A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 31X current fiscal year EPS estimates, which is a premium to the peer industry average of 23.7X. On a trailing cash flow basis, the stock currently trades at 29.7X versus its peer group's average of 11.9X. Additionally, the stock has a PEG ratio of 2.67. 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 meets the list of requirements. Thus, it seems as though Trane Technologies shares could have potential in the weeks and months to come.

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