US Electrical Equipment & Multi-Industry: EE/MI Morning Note - JCI preview; LII and HVAC shipments

Research evidence excerpt

US Electrical Equipment & Multi-Industry: EE/MI Morning Note - JCI preview; LII and HVAC shipments

he commercial HVAC market. However, we don't expect

changes to the full year outlook with the setup indicating a gradual residential

recovery. The recent changes to cost inflation and tariff dynamics should be largely

neutral to earnings, in our view (lower cost inflation offset by less surcharges).

For 2Q, we model $7.74 EPS, 2% ahead of consensus. Our estimates include 1%

organic sales decline and 40bps year over year operating margin contraction.

Looking at segments, Home Comfort Solutions should remain under pressure,

with 5% organic decline and elevated decrementals driven in part by $5-$10

million of absorption headwinds, resulting in 90bps margin contraction. In

contrast, Building Climate Solutions should continue to show strength with 7%

organic sales growth and high 20s incremental margins. On costs, we expect 2026

inflation assumptions to moderate from the prior 5% framework given recent

tariff adjustments. We would view this as broadly profit neutral, as any reduction

in cost is expected to be offset by rollbacks in tariff related surcharges.

Looking ahead, we model $24.63 EPS for 2026 which is 1% ahead of consensus.

Our estimates include 4% organic growth but a modest 10bps year-over-year

segment margin contraction to 20.3%. We model low 20s incremental margin

driven by pricing, cost actions, and productivity.

April AHRI Shipments show stabilization; sell through still muted- AHRI released

April data on Friday which showed continued signs of stabilization in HVAC shipments.

For April, air conditioner and heat pump unit shipments were up 5% year over year,

similar to March. Additionally, sell-through ($ sales) was up 4.5%, similar to March. This