Q3 2026 Dover Corp Earnings Call

October 22, 2026

Operator: Good morning, and Welcome to Dover's Q3 2026 earnings conference call. Speaking today are Richard J. Tobin, President and Chief Executive Officer, Chris Woenker, Senior Vice President and Chief Financial Officer, and Jack Dickens, Vice President, Investor Relations. After the speakers' remarks, there will be a Q&A session. If you would like to ask a question during this time, press star and then the number one on your telephone keypad. If you would like to withdraw your question, please press star two.

Speaker #2: Good morning, and welcome to DOVER's third quarter 2026 earnings conference call. Speaking today are Richard J. Tobin, president and executive chief executive officer; Chris Winker, senior vice president and chief financial officer; and Jack Dickens, vice president, investor relations.

Speaker #2: After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, press star and then the number 1 on your telephone keypad.

Speaker #2: If you would like to withdraw your question, please press star 2. As a reminder, ladies and gentlemen, this conference call is being recorded. And your participation implies consent to our recording of this call.

Operator: As a reminder, ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not agree with this term, please disconnect at this time. Thank you. I would now like to turn our call over to Mr. Jack Dickens. Please go ahead, sir.

Speaker #2: If you do not agree with this term, please disconnect at this time. Thank you. I would now like to turn our call over to Mr. Jack Dickens.

Speaker #2: Please go ahead, sir.

Jack Dickens: Thank you, Leslie. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through 12 November, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Rich.

Speaker #3: Thank you, Leslie. Good morning, everyone. And thank you for joining our call. An audio version of this call will be available on our website through November 12th, and a replay link of the webcast will be archived for 90 days.

Speaker #3: Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings.

Speaker #3: We assume no obligation to update our forward-looking statements with that. I will turn the call over to Rich.

Richard J. Tobin: Thanks, Jack. Good morning, everyone. Let's get started on slide 3. Overall, it was a solid quarter. Organic growth accelerated to 7%, led by our secular growth markets and supported by durable demand across the majority of the portfolio. Bookings were the highlight in the quarter. Orders were up 16% year over year, with growth in all five segments. Book-to-bill was 1.03 for the quarter. Our backlog is up 35% versus this time last year, which supports our confidence in the forecast and provides very good momentum heading into 2027. Adjusted EPS was $2.88 per share, up 10% in the quarter. We remained active on capital deployment, announcing two bolt-on acquisitions that add complementary capabilities, low-cost manufacturing, and geographic breadth to our businesses. We also repurchased over $330 million of our shares in the quarter.

Richard J. Tobin: Thanks, Jack. Good morning, everyone. Let's get started on slide three. Overall, it was a solid quarter. Organic growth accelerated to 7%, led by our secular growth markets and supported by durable demand across the majority of the portfolio. Bookings were the highlight in the quarter. Orders were up 16% year-over-year, with growth in all five segments. Book-to-bill was 1.03 for the quarter. Our backlog is up 35% versus this time last year, which supports our confidence in the forecast and provides very good momentum heading into 2027. Adjusted EPS was $2.88 per share, up 10% in the quarter. We remained active on capital deployment, announcing two bolt-on acquisitions that add complementary capabilities, low-cost manufacturing, and geographic breadth to our businesses. We also repurchased over $330 million of our shares in the quarter.

Speaker #4: Thanks, Jack. Good morning, everyone. Let's get started on slide 3. Overall, it was a solid quarter. Organic growth accelerated to 7%, led by our secular growth markets.

Speaker #4: And supported by durable demand across the majority of the portfolio. Bookings were the highlight in the quarter. Orders were up 16% year-over-year, with growth in all five segments.

Speaker #4: Book-to-bill was 1.03 for the quarter, our backlog is up 35% versus this time last year, which supports our confidence in the forecast and provides very good momentum heading into 2027.

Speaker #4: Adjusted EPS was $2.88 per share, up 10% in the quarter. We remained active on capital deployment, announcing two bolt-on acquisitions that add complementary capabilities.

Speaker #4: Low-cost manufacturing and geographic breadth to our businesses. We also repurchased over 330 million of our shares in the quarter. We are narrowing our full-year guidance towards the upper end of the range.

Richard J. Tobin: We are narrowing our full-year guidance towards the upper end of the range, with organic growth of 5% to 6% and adjusted EPS from $10.60 to $10.75 per share, representing double-digit growth consistent with our long-term algorithm. Let's go to slide 5. Our secular growth markets now represent over 25% of our total revenue, up from 18% in 2024. Across the top of the slide, we show our expected growth rates in each of these markets this year. In total, these markets are material driver of our overall revenue growth in 2026, and we expect that trend to continue in 2027. We have purposely built these platforms through R&D spending and new product development in our legacy businesses, as well as through targeted M&A. Our business model is unique.

Richard J. Tobin: We are narrowing our full-year guidance towards the upper end of the range, with organic growth of 5% to 6% and adjusted EPS from $10.60 to $10.75 per share, representing double-digit growth consistent with our long-term algorithm. Let's go to slide five. Our secular growth markets now represent over 25% of our total revenue, up from 18% in 2024. Across the top of the slide, we show our expected growth rates in each of these markets this year. In total, these markets are material driver of our overall revenue growth in 2026, and we expect that trend to continue in 2027. We have purposely built these platforms through R&D spending and new product development in our legacy businesses, as well as through targeted M&A. Our business model is unique.

Speaker #4: With organic growth of 5 to 6 percent and adjusted EPS from $10.60 to $10.75 per share, representing double-digit growth consistent with our long-term algorithm.

Speaker #4: Let's go to slide 5. Our secular growth markets now represent over 25% of our total revenue, up from 18% in 2024. Across the top of the slide, we show our expected growth rates in each of these markets this year.

Speaker #4: In total, these markets are material driver of our overall revenue growth in 2026. And we expect that trend to continue in 2027. We have purposely built these platforms through R&D spending and new product development in our legacy businesses, as well as through targeted M&A.

Speaker #4: Our business model is unique. It allows us to pursue a variety of high-growth business opportunities across a range of secular themes, with several of our businesses participating in more than one.

Richard J. Tobin: It allows us to pursue a variety of high-growth business opportunities across a range of secular themes, with several of our businesses participating in more than one. We've been able to deliver this growth by proactively adding capacity in advance of the market, which has allowed us to capture leadership positions. This has been particularly important in energy transition and power generation, CO2 systems, data centers, and cryogenic components serving the energy and space markets. We have continued to invest in additional capacity in 2026 behind this demand strength, some of which we will detail in a subsequent slide. These organic and inorganic investments have delivered high returns on invested capital, despite the proactive upfront investments as a result of high growth rates and margin profiles of these sectors. These businesses are technically demanding mission-critical applications where Dover tends to win.

Speaker #4: We've been able to deliver this growth by proactively adding capacity advance to the market, which has allowed us to capture leadership positions this has been particularly important in energy transition and power generation, CO2 systems, data centers, and cryogenic components serving the energy and space markets.

Speaker #4: We have continued to invest in additional capacity in 2026, behind this demand strength, some of which we will detail in a subsequent slide. These organic and inorganic investments have delivered high returns on invested capital despite the proactive upfront investments as the result as a result of high growth rates and margin profiles of these sectors.

Speaker #4: These businesses are technically demanding, mission-critical applications where Dover tends to win. The vast majority of our acquisition capital over the past five years has been deployed in these markets, and they remain our top priorities from both an organic and inorganic investment standpoint.

Richard J. Tobin: The vast majority of our acquisition capital over the past five years has been deployed in these markets, and they remain our top priorities from both an organic and inorganic investment. Go to slide 6. This slide underscores the breadth and duration of our order book. Trailing 12-month bookings are up 16%, well ahead of revenue growth at 8%, and trailing book-to-bill has climbed to 1.08. Every segment has grown bookings faster than revenue over the past 12 months. That sustained order momentum has underpinned the top-line acceleration we are seeing in 2026, and it gives us confidence in our outlook going forward. Importantly, our backlog is 35% higher than it was at this point last year and is up sequentially from Q2, with roughly half scheduled to ship in 2027.

Richard J. Tobin: The vast majority of our acquisition capital over the past five years has been deployed in these markets, and they remain our top priorities from both an organic and inorganic investment. Go to slide six. This slide underscores the breadth and duration of our order book. Trailing 12-month bookings are up 16%, well ahead of revenue growth at 8%, and trailing book-to-bill has climbed to 1.08. Every segment has grown bookings faster than revenue over the past 12 months. That sustained order momentum has underpinned the top-line acceleration we are seeing in 2026, and it gives us confidence in our outlook going forward. Importantly, our backlog is 35% higher than it was at this point last year and is up sequentially from Q2, with roughly half scheduled to ship in 2027.

Speaker #4: Going to slide 6. This slide underscores the breadth and duration of our order book. Trailing 12-month bookings are up 16%, well ahead of revenue growth at 8%, and trailing book-to-bill has climbed to 1.08.

Speaker #4: Every segment has grown bookings faster than revenue over the past 12 months. That's sustained order momentum order momentum is underpinned the top line acceleration we are seeing in 2026, and it gives us confidence in our outlook going forward.

Speaker #4: Importantly, our backlog is 35% higher than it was at this point last year, and is up sequentially from Q2, with roughly half scheduled to ship in 2027.

Richard J. Tobin: That gives us a solid foundation heading into next year with revenue visibility well ahead of where we would expect to be at this point in the planning cycle. Moving to slide 7. Engineered Products was down 2% organically. Demand for aerospace and defense components remained strong, was more than offset by lower volumes in European vehicle services. Margin was stable on favorable mix and cost controls. Clean Energy & Fueling grew 12% organically, with solid shipments and new orders in clean energy components, fluid transport, and North American retail fueling, which posted its strongest quarter in years. Demand for our cryogenic components in LNG and space launch infrastructure remains healthy, with several recent high-profile project wins. Margin was roughly flat as volume leverage was offset by production ramp in cryogenic product lines. Cryo demand is running ahead of capacity.

Richard J. Tobin: That gives us a solid foundation heading into next year with revenue visibility well ahead of where we would expect to be at this point in the planning cycle. Moving to slide seven. Engineered Products was down 2% organically. Demand for aerospace and defense components remained strong, was more than offset by lower volumes in European vehicle services. Margin was stable on favorable mix and cost controls. Clean Energy & Fueling grew 12% organically, with solid shipments and new orders in clean energy components, fluid transport, and North American retail fueling, which posted its strongest quarter in years. Demand for our cryogenic components in LNG and space launch infrastructure remains healthy, with several recent high-profile project wins. Margin was roughly flat as volume leverage was offset by production ramp in cryogenic product lines. Cryo demand is running ahead of capacity.

Speaker #4: This gives us a solid foundation heading into next year, with revenue visibility well ahead of where we would expect to be at this point in the planning cycle.

Speaker #4: Moving to slide 7. Engineered Products was down 2% organically. Demand for aerospace and defense components remained strong but was more than offset by lower volumes in European vehicle services.

Speaker #4: Margin was stable on favorable mix and cost controls. Cleaner Clean Energy and Fueling grew 12% organically, with solid shipments and new orders in Clean Energy components, Fluid Transport, and North American Retail Fueling, which posted its strongest quarter in years.

Speaker #4: Demand for our cryogenic components in LNG and space launch infrastructure remains healthy. With several recent high-profile project wins. Margin was roughly flat as volume leverage was offset by production ramp and cryogenic product lines, where demand is running ahead of capacity, where actively expanding that capacity with additional output coming online in the first quarter of 2027.

Richard J. Tobin: We are actively expanding that capacity with additional output coming online in Q1 2027. Imaging & Identification grew 2% organically, led by double-digit growth in serialization software and solid performance in core marketing and coding consumables and equipment. Margins expanded 400 basis points to 33%, driven by volume leverage on largely fixed cost base and software growth in consumables, favorable geographic mix, and foreign currency translation. Pumps & Process Solutions were 1% organically with growth in AI and energy infrastructure, single-use biopharma, and industrial pumps. That was partially offset by lower volumes in polymer processing equipment, where quoting activity is high. Margin expanded 70 basis points to 34%, on solid conversion in industrial pumps and precision components, and a higher mix of biopharma revenue. Climate & Sustainability Technologies accelerated to 18% organic growth in the quarter.

Speaker #4: Imaging and ID grew 2% organically, led by double-digit growth in serialization software and solid performance in core marketing marking and coding. Consumables and equipment margins expanded 400 basis points to 33%, driven by volume leverage on largely fixed-cost base and software.

Speaker #4: Growth in consumables, favorable geographic mix, and currency translation. Pumps and process solutions grew 1% organically, with growth in AI and energy infrastructure.

Speaker #4: Single-use biopharma and industrial pumps that was partially offset by lower volumes in polymer processing equipment, where quoting activity is high. Margin expanded 7 70 basis points to 34% on solid conversion and industrial pumps and precision components and a higher mix of biopharma revenue.

Speaker #4: Climate and sustainability technology technology accelerated to 18% organic growth in the quarter. Shipments and order rates in brace plate heat exchangers remain robust across all geographies and major end markets, with notable strength in liquid cooling for data centers, which is initially concentrated in the US, but we are now seeing meaningful acceleration in Europe and Asia.

Richard J. Tobin: Shipments and order rates in brazed plate heat exchangers remain robust across all geographies and major end markets, with notable strength in liquid cooling for data centers, which is initially concentrated in the US, but we are now seeing meaningful acceleration in Europe and Asia. Lead times remain extended, and we are actively investing to double our global capacity for large heat exchangers through 2027. CO2 Refrigeration Systems posted record quarterly revenue, with September reaching its highest output of the year. In refrigerated door cases, the investments that we have added in Richmond, Virginia facility are ramping up. Line rates exiting Q3 were 15% higher than Q2. We expect another sequential increase in line rates and output in Q4. We also completed the consolidation of the door frame production in Sylmar, California at the end of the quarter. Segment margin was 18%.

Speaker #4: Lead times remain extended, and we are actively investing to double our global capacity for large heat exchangers through 2027. CO2 refrigeration systems posted quarterly revenue posted record quarterly revenue with September reaching its highest output of the year in refrigerated door cases.

Speaker #4: The investments that we have added in Richmond, Virginia facility are ramping up. Line rates exiting third third quarter were 15% higher in the than the second quarter.

Speaker #4: We expect an another sequential increase in line rates and output in the fourth quarter. We also completed the consolidation of the door frame production in Sylmar, California, at the end of the quarter.

Speaker #4: Segment margin was 18%. Margins in heat exchangers were robust as volumes outrun the significant investments in capacity build, with direct labor less than 10% of its cost basis.

Richard J. Tobin: Margins in heat exchangers were robust as volumes outrun the significant investments in capacity build. With direct labor less than 10% of its cost basis, this business converts incremental volume exceptionally well. Those gains in heat exchangers were offset by cost of ramping production simultaneously across CO2 systems, specialty cases, and refrigerated door cases ahead of higher demand and shipment rates in 2027, which is reflected in our backlog. Heat exchangers should continue to benefit from volume leverage in 2027 with a good portion of Q1 revenue already in backlog. In Food Retail, we have absorbed roughly $40 million of costs year-to-date from investments in extra labor costs associated with the production ramp, along with duplicate fixed costs of running two facilities for the throughput of one.

Speaker #4: This business converts incremental volume exceptionally well. Those gains in heat exchangers were offset by the cost of ramping production simultaneously across CO₂ systems, specialty cases, and refrigerated door cases, ahead or in anticipation of higher demand and shipment rates in 2027, which is reflected in our backlog.

Speaker #4: Heat exchangers should continue to benefit from volume leverage in 2027, with a good portion of Q1 revenue already in backlog. In food retail, we have absorbed roughly $40 million of cost year to date.

Speaker #4: From investments and extra labor costs associated with the production ramp, along with duplicate fixed costs of running two facilities for the throughput of one.

Richard J. Tobin: As line rates continue to ramp and as the roll-off of fixed costs accelerates through the balance of the year, margins in Climate & Sustainability Technologies are poised to improve meaningfully in 2027. Pass it over to Chris.

Speaker #4: As line rates continue to ramp and as the rolloff of fixed costs accelerates through the balance of the year, margins and climate and sustainability technologies are poised to improve meaningfully in 2027.

Speaker #4: Pass it over to Chris.

Chris Woenker: Thanks, Rich, and good morning, everyone. Let's go to our cash flow statement on slide 8. Year-to-date free cash flow was $703 million or 11% of revenue, up $72 million over the prior year, driven primarily by increased operating cash conversion, which more than offset working capital investments to support accelerating top-line growth. Q3 free cash flow was $383 million or 17% of revenue. We've taken up our full-year CapEx guide for the year to reflect the organic investments we're making behind demand strength. Free cash flow accelerated in Q3, consistent with historical trends, and we expect a further increase in Q4, which is historically our highest cash-generating quarter. Our full-year free cash flow guidance remains on track at 14% to 16% of revenue. With that, let me turn it back to Rich.

Speaker #1: Thanks, Rich, and good morning, everyone. Let's go to our cash flow statement on slide 8. Year to date, free cash flow was $703 million or 11% of revenue, up 72 million over the prior year, driven primarily by increased operating cash conversion which more than offset working capital investments to support accelerating top line growth.

Speaker #1: Third quarter free cash flow was $383 million or 17% of revenue. We've taken up our full year capex guide for the year to reflect the organic investments we're making behind demand strength.

Speaker #1: Free cash flow accelerated in the third quarter, consistent with historical trends, and we expect a further increase in the fourth quarter, which is historically our highest cash-generating quarter.

Speaker #1: Our full-year free cash flow guidance remains on track at 14% to 16% of revenue. With that, let me turn it back to Rich.

Richard J. Tobin: Okay. I'm on slide 9. Organic investment remains our highest return use of capital. On the left are our most meaningful projects. In support of our organic revenue trajectory, we have greenfield expansions underway in below-ground retail fueling, cryogenic components, flow meters in the US, and single-use biopharma components in Asia, along with capacity investments in radio frequency equipment for space, printer ink production, and specialty cases in CO2 systems and large heat exchangers. Many of these projects will be online by the end of Q1 2027. On the productivity side, we are optimizing our vehicle services footprint, extracting synergies from our polymer processing acquisition, and have now completed the footprint consolidation in Food Retail. These actions generate substantial carryover restructuring benefits, which we will quantify when we provide full-year guidance in January.

Speaker #4: Okay. I'm on slide 9. Organic investment remains our highest-return use of capital. On the left are our most meaningful projects. In support of our organic revenue trajectory, we have greenfield expansions underway in below-ground retail fueling, cryogenic components, flow meters in the US, and single-use biopharma components in Asia, along with capacity investments in radio-frequency equipment for space, printering production, and specialty cases in CO2 systems and large heat exchangers.

Speaker #4: Many of these projects will be online by the end of the first quarter of 2027. On the productivity side, we are optimizing our vehicle services footprint, extracting synergies from our polymer processing acquisition, and have now completed the footprint consolidation in food retail.

Speaker #4: These actions generate substantial carryover restructuring benefits, which we will quantify when we provide full-year guidance in January. On the right side of the slide are the bolt-on acquisitions we announced in the quarter: Clarion, which we closed in August, adds extrusion dies and feed blocks to our MAG polymer processing platform, along with more than 300,000 square feet of U.S. manufacturing capacity close to the U.S. petrochemical and space launch infrastructure.

Richard J. Tobin: On the right side of the slide are the bolt-on acquisitions we announced in the quarter. Cloeren, which we closed in August, adds extrusion dies and feed blocks to our MAAG polymer processing platform, along with more than 300,000 square feet of US manufacturing capacity close to the US petrochemical and space launch infrastructure. Leistung, which we signed and expect to close in Q4, gives our Clean Energy & Fueling segment a low-cost, state-of-the-art cryogenics components manufacturing presence in India. Both businesses carry excess capacity that other Dover operating companies will leverage as manufacturing hubs in highly strategic locations. Moving to slide 10. Our balance sheet remains a competitive advantage and our capital allocation priorities are unchanged. Organic investment generates our highest in returns, and we are guiding full-year CapEx of $200 to $220 million, with the capacity and productivity projects I just covered delivering attractive returns into next year.

Speaker #4: Lee Stone, which we signed and expect to close in the fourth quarter, gives our clean energy segment a low-cost, state-of-the-art cryogenics components manufacturing presence in India. Both businesses carry excess capacity that other Dover operating companies will leverage as manufacturing hubs in highly strategic locations.

Speaker #4: Moving to slide 10. Our balance sheet remains a competitive advantage, and our capital allocation priorities are unchanged. Organic investment generates our highest returns, and we are guiding full-year capex of $200 to $220 million, with the capacity and productivity projects I just covered delivering attractive returns into next year.

Richard J. Tobin: We have committed approximately $80 million to our two announced acquisitions, and our pipeline remains active for bolt-on opportunities in high-priority markets. We have also repurchased approximately $400 million of shares year-to-date, including $330 million in Q3. With over $3 billion of dry powder at quarter end, we have the ample flexibility to play offense on capital allocation and a near-term bias towards returning capital to shareholders. Let's finish with slide 11. We are moving our full year guidance towards the upper end of the range. Our focus is on finishing the year strong, and our order book gives us confidence in the forecast, with momentum carrying into 2027. Alongside a constructive demand backdrop and a strong order book, we will benefit from carryover restructuring savings, contributions from completed acquisitions, a lower share count, and a roll-off of transition costs in Food Retail.

Speaker #4: We have committed approximately $80 million to our two announced acquisitions, and our pipeline remains active for bolt-on opportunities in high-priority markets. We have also repurchased approximately $400 million of shares year-to-date, including $330 million in the third quarter.

Speaker #4: With over $3 billion of dry powder at quarter end, we have ample flexibility to play offense in capital allocation, and a near-term bias towards returning capital to shareholders.

Speaker #4: Let's finish with slide 11. We are moving our full-year guidance towards the upper end of the range. Our focus is on finishing the year strong, and our order book gives us confidence in the forecast, with momentum carrying into 2027.

Speaker #4: Alongside a constructive demand backdrop and a strong order book, we will benefit from carryover restructuring savings contributions from completed acquisitions and lower share count and a rolloff of transition costs in food retail we look forward to closing at the year strong and are confident as we enter 2027 from a position of strength.

Richard J. Tobin: We look forward to closing out the year strong and are confident as we enter 2027 from a position of strength. Over to you, Jack.

Speaker #4: Over to you, Jack.

Jack Dickens: Leslie, we can go right to the Q&A.

Speaker #1: Leslie, we can go right to the Q&A.

Operator: Thank you. If you would like to ask a question, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. We ask that participants limit themselves to one question and one clarifying question. Our first question comes from Steve Tusa with Wells Fargo. Please go ahead. Your line is now open.

Speaker #5: Thank you. If you would like to ask a question, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2.

Speaker #5: We ask that participants limit themselves to one question and one clarifying question. Our first question comes from Steve Tussa with Wells Fargo. Please go ahead.

Speaker #5: Your line is now open.

Steve Tusa: Good morning, guys.

Speaker #6: Good morning, guys.

Richard J. Tobin: Steve.

Jack Dickens: Steve.

Speaker #4: Steve.

Speaker #1: Steve.

Steve Tusa: Just on the backlog, I think it is a little bit above $3 billion now, if I go back and do the math. I think you said 50% of that is shippable for next year. Is there anything in kind of the non-backlog business that you look out to next year that you would be worried about being unsustainable or dropping off at all?

Speaker #6: Just on the backlog, I think it's a little bit above $3 billion now if I kind of go back into the math.

Speaker #6: And I think you said 50% of that is like shippable for next year. Is there anything in kind of the non-backlog business that you look out to next year that you would be worried about being unsustainable or dropping off at all?

Richard J. Tobin: I would characterize it this way, I guess. Where we have been capacity constrained is what is driving the backlog into 2027. So the duration of the demand is a good indicator because customers are basically getting in line to reserve that capacity. It is not overly influenced from some of our more traditional long cycle businesses. MAAG pretty much is a bottom, same with Belvac. So those numbers aren't influenced by those two businesses. So that is actually upside to backlog build as we go into 2027. Our traditional short cycle businesses, we don't have a lot of visibility going into next year, and we will just book and ship as we normally do between now and the end of the year.

Speaker #4: I'd characterize it this way, I guess. Where we've been capacity constrained is what's driving the backlog into 2027, so the duration of the demand is a good indicator because customers are basically getting in line to reserve that capacity.

Speaker #4: It is not overly influenced by some of our more traditional, long-cycle businesses. MOGS pretty much is at a bottom—same with Belvac. So, those numbers aren't influenced by those two businesses.

Speaker #4: So that's actually an upside to backlog build as we go into 2027. And then our traditional, short-cycle businesses—we don't have a lot of visibility going into next year, and we'll just book and ship as we normally do between now and the end of the year.

Steve Tusa: Right. Is there any reason for the growth to slow materially in Q4? I know you kind of guided that number. The midpoint is a bit of a slowing. Anything stand out? I mean, the order has been pretty good, book-to-bill above 1 seasonally.

Speaker #6: Right. And is there any reason for the growth to slow materially in Q4? I know you kind of guided that number—the midpoint is, you know, a bit of a slowing.

Speaker #6: Like anything stand out? I mean, the order's been pretty good. Book to bill above 1 seasonally.

Richard J. Tobin: Well, not really, other than the fact that Q4 is not always in our control, right? We have got the orders, we can make the orders, then it becomes a question at the end of the year whether those orders get called off by our customers or as everybody play a kind of managing the working capital game at the end of the year. So we are always a little bit cautious because December could go almost either way in any given year. But there is nothing based on the trajectory that we see that is any slowing. It is pure calendarization.

Speaker #4: Well, I mean, yeah, not really other than the fact that Q4 is not always in our control, right? We've got the orders, we can make the orders, then it becomes a question at the end of the year whether those orders get called off by our customers or is everybody play a kind of managing the working capital game at the end of the year.

Speaker #4: So we're always a little bit cautious because December could go almost either way in any given year, but there's nothing, based on the trajectory that we see, that suggests any slowing.

Speaker #4: It's pure calendarization.

Steve Tusa: All right, one more. Just on the buyback, you have done $300 million or something like that. Are you done with that, or is there still some of that? You have a ton of cash, ton of capacity. Can you chew through some of that?

Speaker #6: All right, one more. Just on the buyback—you've done $300 million or something like that. Are you done with that, or is there still some of that left? You have a ton of cash, a ton of capacity.

Speaker #6: Can you chew through some of that?

Richard J. Tobin: I think in corporate speak, what we said is that our bias was still on capital return. So take that for what it is.

Speaker #4: Yeah. I think it I think in corporate speak, what we said is that our bias was still on capital return. So take that for what it is.

Steve Tusa: Great. I do not understand all corporate speak, but that is pretty clear, so I appreciate that. Thank you.

Speaker #6: Great, I don't understand all the corporate speak, but that's pretty clear. So I appreciate that. Thank you.

Richard J. Tobin: Great. Thanks.

Speaker #4: Great. Thanks.

Operator: Thank you. Our next question comes from Nigel Coe, Wolfe Research. Please go ahead.

Speaker #5: Thank you. Our next question comes from Nigel Co at Wolf Research. Please go ahead.

Nigel Coe: Thanks. Good morning. Maybe Rich, could you just kind of give us a little kind of sense on the dual cost you called out, I think $40 million of investment and dual cost that is now behind us. Maybe give us a sense on how you see CST margins in Q4, but more importantly, going into 2027. You have said 20% margin target in the past for that segment. Are we on track for that in 2028?

Speaker #7: Thanks. Good morning. maybe Rich, can you just kind of give us a little kind of sense on the dual cost you called out, I think, $40 million of, investment and dual cost that's now behind us.

Speaker #7: maybe give us a sense on how you see CST margins in the fourth quarter, but more importantly, going into 2027. And you've said 20% margin target in the past for that segment.

Speaker #7: Are we on track for that in 2028?

Richard J. Tobin: Well, just for clarity's sake, it is the year to date headwind costs of the plant closure and the redundant labor that we have had to run as a result of that. That is year to date. So that number will actually probably go up between now and the end of the year, because as line rates come up, we will absorb that extra labor, and then we will begin to flip it over into productivity. So that is the $40 million. I think that we are well on track of meeting the targets that we put on that sector because of two things. Number one, the carryover of not having those costs of consolidation between the two years is an add back. The volume across the segment goes up, and so the incremental margin of the fixed cost goes up along with it.

Speaker #4: Yeah. Just for clarity's sake, it's the year-to-date headwind costs of the plant closure and the redundant labor that we've had to run as a result of that.

Speaker #4: And that's year-to-date, okay? So that number will actually probably go up between now and the end of the year, because as line rates come up, we'll absorb that extra labor and then we'll begin to flip it over into productivity.

Speaker #4: So that's the $40 million. Yeah, I mean, I think we're well on track to meeting the targets that we put on that sector because of two things.

Speaker #4: Number one, the carryover of not having those costs of consolidation between the two years is an add-back. The volume across the segment goes up.

Speaker #4: And so the incremental margin of the fixed cost goes up along with it. So I think that's why I said that we can expect a material change in 2027 in the margin of that particular segment.

Richard J. Tobin: I think that is why I said that we can expect a material change in 2027 in the margin of that particular segment.

Nigel Coe: But no numbers.

Speaker #7: But no numbers.

Richard J. Tobin: Oh, come on, Nigel. We are going to give you guidance when we get to the end of the year, but it is material.

Speaker #4: Oh, come on. Nigel, we're going to give you guidance when we get to the end of the year, but it's material.

Nigel Coe: Okay. You have said 20% in the past. I was just trying to get a sense on that. Can we just talk about the PPS orders? Sorry, not PPS. CST orders. Been strong for a long time now. No sign of a slowdown. I am just wondering, maybe you can just try and give us another sort of second level detail on SWEP versus CO2 versus core refrigeration. I do want to get a sense on one number, which 3% growth in data center this year is impressive.

Speaker #7: Okay, you've said 20% of the cost. I'm just trying to get a sense of that. But maybe, can we just talk about the CST orders—sorry, not PPS, CST orders—being strong for a long time now, with no sign of a slowdown.

Speaker #7: I'm just wondering, maybe you can just try and give us another sort of second-level detail on, you know, SWEP versus CO2 versus core refrigeration.

Speaker #7: And I do want to get a sense on one number, Rich. Thirty percent growth in data center this year is impressive, but I would think it would be even more impressive given the growth in the market.

Nigel Coe: I would think it would be even more impressive just given the growth in the market. I am wondering if there is any capacity constraints within SWEP that maybe gets released in 2027.

Speaker #7: And I'm wondering if there's any capacity constraints within swep that maybe gets released in 2027.

Richard J. Tobin: Well, yeah. I think that if you go on the slide of our capital investments, and if you go back and read the transcript of what I said, yeah, we have been capacity constrained all year. It does not seem to be preventing the actual build-outs, but everybody is trying to get in front of securing the supply. So there is a lot of signaling effect in there. But we are basically ramping to double capacity into the main product line that has been growing, this is SWEP now, that has been sent into data centers. That will change over time because there will be a shift between the central cooling system demand, which we see it now, into more CDU mix into the future, and we are taking that into consideration. In terms of the backlog, I do not want to say 50/50, but it is dominated by CO2 systems demand and SWEP.

Speaker #4: Well, yeah. I mean, I think that if you go on the slide of our capital investments, and if you go back and read the transcript of what I said, yeah, we've been capacity constrained all year.

Speaker #4: It doesn't seem to be preventing the actual build-outs, but everybody's trying to get in front of securing the supply. So there's a lot of signaling effect in there.

Speaker #4: But we are basically ramping to double capacity into the main product line that's been growing. This is SWEP now that's been sent into data centers.

Speaker #4: That will change over time. Because there'll be a shift between the central cooling system demand, which we see it now, into more CDU mix into the future.

Speaker #4: And we're taking that into consideration. In terms of the backlog, I don't want to say 50/50, but it's dominated by CO2 systems demand and SWEP.

Nigel Coe: Okay. Thanks, Rich.

Speaker #7: Okay. Thanks, Rich.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question comes from Mike Halloran with Baird. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question comes from Mike Halloran with Baird. Please go ahead, your line is open.

Mike Halloran: Hey, good morning, everyone.

Speaker #8: Hey. Good morning, everyone.

Richard J. Tobin: Hi.

Speaker #7: Hi.

Mike Halloran: Hey, so back to the backlog question on some level. What is the normal conversion ratio at this point? Half your backlog is shippable next year. What does that normally look like? Maybe any thoughts on the lead times you are seeing in the industry and if those are starting to extend?

Speaker #8: Hey, so back to the backlog. Question on some level: What's the normal conversion ratio at this point? You know, half your backlog shippable next year.

Speaker #8: What does that normally look like? And maybe any thoughts on the lead times you're seeing in the industry, and if those are starting to extend?

Richard J. Tobin: It is higher than average that we would see at this time. If you go back and read the transcripts, we would expect in a, let us call it a normal year, for book-to-bill to come down in Q3 just because the order of magnitudes of shipments. Because of the secular growth nature of some of these businesses that we are in, customers in certain segments are securing supply, so trying to secure capacity. So they are ordering well in advance of what we would normally expect. That is why we gave you the backlog figures, and that is why we tried to monetize how much of that is 2027, because that, in general terms, would not look like that except for the pace of the growth rate in some of those segments.

Speaker #4: It it it is higher than average that we would see at this time. So if you go back and and read the transcripts, we would expect in a kind of let's call it a normal year for book-to-build to come down in Q3 just because the the order of magnitudes of shipments.

Speaker #4: But because of the secular growth nature of some of these businesses some of these businesses that we're in, that customers in certain segments are securing s-supply.

Speaker #4: So trying to secure capacity. And so that that their ordering well in advance of what we would normally expect. And that's why we gave you the back the backlog figures and that's why we tried to monetize how much of that is 2027 because that in general terms would not look like that except for the pace of the growth rate in some of those segments.

Mike Halloran: Well, that makes sense. On the buyback side, M&A side, obviously certainly makes sense that you are pushing more on the capital return side short term. Maybe what is just happening on the M&A side of things. Are you getting priced out of deals at this point? Has the activity slowed? Maybe just some thoughts there.

Speaker #8: Well, that makes sense. And, you know, on the buyback side and M&A side, it certainly makes sense that you're pushing more on the capital return side.

Speaker #8: Short term, but maybe what's just happening on the M&A side of things? Are you getting priced out of deals at this point? Has the activity slowed?

Speaker #8: Maybe just some thoughts there.

Richard J. Tobin: Yeah, the activity naturally slows in Q4. Very little comes to the market at the end of the year. Whatever has come to market, has come to market. Not to get into certain deals. Look, we have got return criteria that we stick to. There are some things that we did not get that we would have liked to get, but the purchase price that those assets sold for were above that criteria at the end of the day. We will see in 2027, but we have got a ton on our plate of organic investment, which is probably going to drive as much revenue growth as bolt-on acquisitions would do. We retain a posture of optionality, meaning that we will participate in M&A. We have got some interesting stuff in the pipeline.

Speaker #4: Yeah, I mean, the activity naturally slows in Q4. Very little comes to the market at the end of the year, so whatever has come to market, has come to market.

Speaker #4: Not to get into certain deals. Look, we've got return criteria that we stick to, so there are some things that we didn't get that we would have liked to get, but the purchase price that those assets sold for was above that criteria.

Speaker #4: At the end of the day, we'll see in 2027. But we've got a ton on our plate of organic investment, which is probably going to drive as much revenue growth as kind of bolt-on acquisitions would do.

Speaker #4: So we retain a posture of optionality, meaning that we'll participate in M&A. We've got some interesting stuff in the pipeline.

Richard J. Tobin: But with all the cash that we are producing, that we carried into this year, and all the cash that we are going to produce this year, that clearly our stance is now on capital return.

Speaker #4: But with all the cash that we're producing, that we carried into this year, and all the cash that we're going to produce this year, clearly our stance is now on capital return.

Mike Halloran: Thank you. Appreciate it.

Speaker #8: Thank you. Appreciate it.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question is from Joe O'Dea from Vertical Research. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question is from Joe Odei at Vertical Research. Please go ahead. Your line is open.

Joe O'Dea: Hi. Good morning. Could you talk a little bit about pricing and what might be in the pipeline just with respect to the inflationary backdrop? Looked like the price this quarter was pretty similar to Q2, maybe a little bit tougher comp. But are you out there in the market and need to do anything more on the pricing side?

Speaker #6: Hi, good morning. Could you talk a little bit about pricing, and what might be in the pipeline with respect to the inflationary backdrop?

Speaker #6: Looks like the price this quarter was pretty similar to the second quarter. maybe a little bit tougher comp. But are you out there in the market and and need to do anything more on the pricing side?

Richard J. Tobin: It depends, Joe.

Speaker #6: I mean.

Joe O'Dea: I mean, to carry over into next year?

Speaker #4: It depends, Joe. Yeah. It depends, Joe. I mean, we are actually have moved up pricing decisions this year. and have been introducing pricing which in a kind of a stable year of a a low inflation environment, we'd kind of wait to the beginning of the year.

Richard J. Tobin: Yeah, it depends, Joe. We actually have moved up pricing decisions this year, and have been introducing pricing, which in a kind of a stable year of a low inflation environment, we would wait until the beginning of the year. We have actually accelerated that in certain instances, depending on exposure to a variety of different things, whether it is commodity grade metals or other things. So, I think we are on the front foot of getting ahead of what anybody's view about price cost is going into 2027. I think we are actually probably a full quarter in front of getting in front of that.

Speaker #4: We've actually accelerated that in certain instances, depending on exposure to a variety of different things—whether it's commodity group metals or other things.

Speaker #4: So I think we're on the front foot of getting ahead of what anybody's view about price-cost is going into '27. I think we're actually probably a full quarter in front of getting in front of that.

Joe O'Dea: Just another one on the Food Retail and the production ramp costs. As we think about full year being somewhere above 40, how much of that we can think about as being non-repeat? Is there carryover associated with it, or do you think that those are all kind of contained costs that you will be able to leverage next year?

Speaker #6: And then, just another one on the food retail and production ramp costs as we think about the full year being somewhere above 40.

Speaker #6: How much of that can we think about as being non-repeat? Is there carryover associated with it, or do you think those are all kind of contained costs?

Speaker #6: that you'll be able to leverage next year.

Speaker #4: It will it will it will so the the the the the speed is coming down as the as the volumes go up. Right? You get the fixed court fixed cost absorption benefit.

Richard J. Tobin: The speed is coming down as the volumes go up, right? You get the fixed cost absorption benefit. The balance of it is productivity, so it is just winding out kind of extra labor costs as you stabilize the line rates. So we would expect that to progressively get better over the balance of the year, and then probably finish up by the end of Q1. But I do not expect the 40 or whatever it ends up being at the end of this year flows through in total going into next year unless volume drops, and based on our backlog right now, we see no indication of volume dropping in 2027.

Speaker #4: The balance of it is productivity. So it's just winding out kind of extra labor costs as you stabilize the line rates. So we would expect that to progressively get better over the balance of the year.

Speaker #4: And then probably finish up by the end of Q1. But I don't expect, you know, the $40 million—whatever it ends up being at the end of this year—flows through in total going into next year.

Speaker #4: Unless volume drops—and based on our backlog right now—we see no indication of volume dropping in 2027.

Joe O'Dea: Got it. Thank you.

Speaker #6: Got it. Thank you.

Richard J. Tobin: You are welcome.

Speaker #4: You're welcome.

Operator: Thank you. Our next question comes from Scott Davis with Melius Research. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question comes from Scott Davis with Melias Research. Please go ahead. Your line is open.

Scott Davis: Hey, good morning, guys.

Speaker #7: Hey. Good morning, guys.

Richard J. Tobin: Scott?

Speaker #8: Scott.

Speaker #7: what Rich, what what happens in retail fueling when prices when fuel prices are up this much? Does that create a little bit more cash flow for these for these guys to invest in their businesses?

Scott Davis: Rich, what happens in retail fueling when fuel prices are up this much? Does that create a little bit more cash flow for these guys to invest in their businesses? It seems like that it has been a while since we have had a big jump like this, but what does $6 diesel and $4 gas do for these folks?

Speaker #7: It seems like that you know, it's been a while since we've had a a big jump like this. But what does what does $6 diesel and $4 gas do for the for these folks?

Richard J. Tobin: Yeah. Not to talk about our customers' profitability, which many of which are publicly traded. At the end of the day, earnings spread on fueling products have been up substantially over the past 18 to 24 months, and I do not expect that to narrow. The better news, so that is great. We like healthy customers that are making a lot of money, number one. Number two, the good part of what we have seen about the CapEx is there is supply constraints in that particular market, and that is just lengthening the duration of what we believe the demand cycle is. We knew we were coming into a CapEx cycle for a variety of different reasons. We now believe that that is going to extend. I think we called it out a year and a half ago as a three-year cycle.

Speaker #4: Yeah. not to talk about our customers' profitability, which many of which are publicly traded. I you know, at the end of the day, earnings spread on fueling products have been up substantially over the past 18 to 24 months.

Speaker #4: And I don't expect that to narrow. The better news—so that's great. We like healthy customers that are making a lot of money.

Speaker #4: Number one. And number two, the good part of what we've seen about the CapEx is there are supply constraints in that particular market, and that is just lengthening the duration of what we believe the demand cycle is.

Speaker #4: So, you know, we knew we were coming into a CapEx cycle for a variety of different reasons. We now believe that that is going to extend. I think we called it out a year and a half ago as a three-year cycle.

Richard J. Tobin: We could probably argue it is going to be at least four.

Speaker #4: We could probably argue that it's going to be at least four.

Scott Davis: Is that an area where you are able to get price because of that supply chain dislocation?

Speaker #7: And is that an area where you're able to get price because of that supply chain dislocation?

Richard J. Tobin: In terms of the amount of market participants, it is a market that we like.

Speaker #4: It's it's it in in in terms of the amount of market participants, it is a market that we like.

Scott Davis: Yeah, makes sense. All right. Thank you. Best of luck.

Speaker #7: Yeah, makes sense. All right. Thank you. Best of luck.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question comes from Andy Kaplowitz, Citigroup. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question comes from Andy Capowitz at CitiGroup. Please go ahead—your line is open.

Andy Kaplowitz: Good morning, everyone.

Speaker #6: Hey. Good morning, everyone.

Richard J. Tobin: Hi, Andy.

Speaker #4: Hey.

Speaker #7: Hi, Andy.

Andy Kaplowitz: Rich, so DI&I margin, I think was the best margin that segment has recorded. I know you mentioned mix productivity FX, but I think you've been working on structural cost actions in that segment. Should we think about DI&I's margins even more sustainable, closer to Q3 rates, or maybe it was more of a one-time bump?

Speaker #6: Rich, so DII margin I think was the best margin that segment has recorded. I I know you mentioned mixed productivity effects. But I think you've been working on structural cost actions in that segment.

Speaker #6: So, should we think about DII's margins as even more sustainable? You know, closer to Q3 rates, or maybe was that more of a one-time bump?

Richard J. Tobin: Well, I'd look at year to date at the end of the day, because it's our most global business. There's a lot running through that some of our other business don't have to deal with, especially FX. Then mix because of the disproportionate difference in margin between the consumables and the equipment. So it will move around for that. Having said that, if you go back and take a look over a three to five-year period, we've steadily marched up the margin in that business through a variety of different measures. We're making some pretty significant investments. We built a brand new plant in Poland this past year, and we're going to finish up on basically rebuilding our printer ink production in 2027. So we expect some productivity to come out of that.

Speaker #4: Look, I'd look at year-to-date. At the end of the day, because it's our most global business, there's a lot running through that that some of our other businesses don't have to deal with, especially FX.

Speaker #4: And then mix, because of the disproportionate difference in margin between the consumables and the equipment, it will move around for that. Having said that, if you go back and take a look over a three- to five-year period, we've steadily marched up the margin in that business.

Speaker #4: Through a variety of different measures, we're making some pretty significant investments. We built a brand new plant in Poland this past year.

Speaker #4: And we're going to finish up on basically rebuilding our ink production in 2027. So we expect some productivity to come out of that, so yeah.

Richard J. Tobin: I would not get all excited about this quarter's margin, but if you look on a year-to-date basis, that is entirely sustainable.

Speaker #4: I mean, I wouldn't get all excited about the quarter's margin. But if you look on a year-to-date basis, that's entirely sustainable.

Andy Kaplowitz: That is great. Maybe a similar question on Clean Energy & Fueling. If I look at Q3, year-over-year margin is a little bit more difficult than the H1. I know you talked about cryo space production ramp impacting margin, but maybe update us on the platform you created in that business, that journey. I think you talked about the 25% margin. Where is that?

Speaker #6: That's great. And maybe a similar question on clean energy and fueling. If if I look at, you know, Q3, year over year margin is a little bit more difficult than the first half.

Speaker #6: I know you talked about Cryospace production ramp impacting margin, but maybe update us on the platform you created in that business, that journey.

Speaker #6: I think you talked about the 25% margin. where where is that?

Speaker #4: Yeah. Look, we're tracking there, but the opportunities we've found on the cryo side over the past 18 months, which are driving the top line, are requiring a lot of investment on our part.

Richard J. Tobin: Look, we are tracking there. The opportunities that we found on the cryo side over the past 18 months, which is driving the top line, is requiring a lot of investment on our part. So that has got a little bit of a dilutive effect, but we will take that trade-off any day, right, because it is driving the top line, and these are businesses with secular growth that once we go through the build phase, we can expect what we saw in SWEP over the last couple of years, where we had margins that were down because investment was running forward, then the revenue. Now we have got the revenue in SWEP, and so the incremental margin is robust.

Speaker #4: so that has got a little bit of a dilutive effect. But we'll take that trade off any day. Right? Because it's driving the top line.

Speaker #4: And there are these are businesses with secular growth that once we go through the build phase, we can expect what we saw in swep over the last couple years where we had margins that were down because investment was running forward, then the revenue now we've got the revenue in swep.

Speaker #4: And so the incremental margin is robust. We'd expect that same kind of trajectory. And that's the reason that we put that slide in about all the organic investments that we're making is it's not only to kind of explain what we think about the durability of the revenue increase, but it's to give you a signal of, you know, we're going to invest here.

Richard J. Tobin: We would expect that same kind of trajectory, and that is the reason that we put that slide in about all the organic investments that we are making is, it is not only to kind of explain what we think about the durability of the revenue increase, but it is to give you a signal of, we are going to invest here. There is some cost of making those investments, but we believe over time, the return on invested capital there will be excellent.

Speaker #4: There's some cost of making those investments. But we believe over time the r the return on invested capital there will be excellent.

Andy Kaplowitz: Appreciate all the color, Rich.

Speaker #6: Appreciate all the color, Rich.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question comes from Brett Linzey, Mizuho. Please go ahead. Your line is open. Brett, your line is open.

Speaker #5: Thank you. Our next question comes from Brett Lindsay at Mizuho. Please go ahead. Your line is open. Brett, your line is open.

Richard J. Tobin: I think we have to move on.

Speaker #4: I think we have to move on.

Operator: We will move to our next question. Our next question comes from Amit Mehrotra with UBS. Please go ahead. Your line is open.

Speaker #5: We will move to our next question. Our next question comes from Amit Mehratru with UBS. Please go ahead. Your line is open.

[Analyst] (UBS): Thank you, operator. Hi, Rich.

Amit Mehrotra: Thank you, operator. Hi, Rich.

Speaker #2: Thank you, operator. hi Rich. I just may maybe one one quick one. swep lead times last time I checked in, they were like 25 weeks.

Richard J. Tobin: Hey, Nick.

[Analyst] (UBS): Just maybe one quick one. SWEP lead times. Last time I checked in, they were like 25 weeks. Is that still the case? I think that is where most of your copper exposure is. Obviously, copper has come off a little bit, but sort of hit all-time highs in September. I think you have a material pass-through on that, so no issue on price cost. Maybe you can enlighten me on that, but maybe there is a margin issue as copper rises in that business. Maybe you can talk about those two things.

Amit Mehrotra: Just maybe one quick one. SWEP lead times. Last time I checked in, they were like 25 weeks. Is that still the case? I think that is where most of your copper exposure is. Obviously, copper has come off a little bit, but sort of hit all-time highs in September. I think you have a material pass-through on that, so no issue on price cost. Maybe you can enlighten me on that, but maybe there is a margin issue as copper rises in that business. Maybe you can talk about those two things.

Speaker #2: Is that still the case? And I think that's where most of your copper exposure is. Obviously, copper's come off a little bit, but sort of hit all-time highs in September.

Speaker #2: I think you have material passed on that, so no issue on price cost. Maybe you can enlighten me on that. But maybe there's a margin issue as copper rises in that business.

Speaker #2: Maybe you can talk about those two things.

Richard J. Tobin: Well, let us deal with copper first. I think that we do have copper exposure there, but it is built into the pricing mechanism with our supplier contracts in SWEP. I do not know what lead times are off the top of my head. We are bringing on additional capacity sequentially through the year, but with a pretty big jump this quarter going into Q1. Then it becomes a big debate of, well, but the lead times keep going out because the orders keep coming in advance of that capacity build. Does that wind down in 2027? Hard to say. Right now, we do not see it, but we are bringing on more capacity because the fact that we believe in the durability of the demand.

Speaker #4: yeah. All right. Let's deal with copper first. I think that it is we do have copper exposure there, but it is built into the pricing mechanism.

Speaker #4: ...with our supplier contracts in SWEP. I don't know what lead times are off the top of my head. I mean, we're bringing on additional capacity.

Speaker #4: Sequentially through the year, but with a with a pretty big jump. this quarter going into Q1, then it becomes a big debate of, well, but the lead times keep going out because the orders keep coming in advance of that capacity build.

Speaker #4: Does that wind down in '27? Hard to say. Right now, we don't see it. But we are bringing on more capacity because the fact that we've we believe in the durability of the demand.

[Analyst] (UBS): But it is not measured in years, it is measured in quarters, right?

Amit Mehrotra: But it is not measured in years, it is measured in quarters, right?

Speaker #2: But but it's not measured in years. It's measured in quarters. Right?

Richard J. Tobin: Yeah. No, it is not in years.

Speaker #4: Yeah, yeah. No, no. We're not—it's not, it's not, it's not in years.

[Analyst] (UBS): I guess just my follow-up question, my clarifying question then. If I think about quarterly order in dollar terms over the last three quarters, so this year sort of average $2.3 billion to $2.4 billion, depending on the quarter. That is about 9% to 10% higher than the average quarterly revenue of this year. I am sure you are going to tell me to curb my enthusiasm, but is that the wrong way to think about maybe the organic growth opportunity next year?

Amit Mehrotra: I guess just my follow-up question, my clarifying question then. If I think about quarterly order in dollar terms over the last three quarters, so this year sort of average $2.3 billion to $2.4 billion, depending on the quarter. That is about 9% to 10% higher than the average quarterly revenue of this year. I am sure you are going to tell me to curb my enthusiasm, but is that the wrong way to think about maybe the organic growth opportunity next year?

Speaker #2: Okay, so I guess just my follow-up question, my clarifying question then: if I think about quarterly order do in dollar terms over the last three quarters, so this year, it sort of averaged $2.3 to $2.4 billion depending on the quarter.

Speaker #2: that's about 9, 10 percent higher than the average quarterly revenue. Of this year. I I'm sure you're going to tell me to curb my enthusiasm.

Speaker #2: But is that the wrong way to think about maybe the organic growth opportunity next year?

Richard J. Tobin: Let me answer it this way. We have given you book-to-bill against my own advice. We gave you the number of the backlog increase. To get into the high-level math when you do not know what the duration is of the timing of those orders-

Speaker #4: let me answer it this way. We've given you book to bill against my own advice. We gave you the number of the backlog increase we to get into the high-level math when you don't know the duration is of the timing of those orders.

[Analyst] (UBS): Yeah

Amit Mehrotra: Yeah

Richard J. Tobin: is a fool's game. I am sure Jack Dickens can give you all kinds of clarifying questions, but I cannot go there right now.

Speaker #4: Is a fool's game. I'm sure Jack can give you all kinds of clarifying questions. But I can't go there right now. Right.

[Analyst] (UBS): I guess that was my question. That was my question about lead times, right? I mean, lead times,

Amit Mehrotra: I guess that was my question. That was my question about lead times, right? I mean, lead times,

Speaker #2: I guess that was my question. That was my question about lead times. Right? So I mean, lead times.

Richard J. Tobin: Yeah. Look, we are not losing share because of lead times, right?

Speaker #4: Yeah. Yeah. Look, I mean, we're we're not losing share because of lead times. Right? Because we generally speaking, we're in very concentrated markets from a supply base.

[Analyst] (UBS): Right.

Amit Mehrotra: Right.

Richard J. Tobin: Because generally speaking, we are in very concentrated markets from a supply base. So those who bring on the capacity proactively tend to win, and that is why we have been investing in advance of some of this demand to the detriment of margins, by the way. But they end up being good investments once they roll over and absorb the fixed costs. So we can see that

Speaker #4: So th those who bring on the capacity proactively tend to win. And that's why we've been investing in advance of some of this demand.

Speaker #4: To the detriment of margins, by the way. But it's but they end up being good investments once they roll over and absorb the fixed costs.

[Analyst] (UBS): Right

Amit Mehrotra: Right

Richard J. Tobin: in SWEP right now.

Speaker #4: So we can see that in SWEp right now.

[Analyst] (UBS): Excellent. Okay, thank you for answering my questions. Appreciate it.

Amit Mehrotra: Excellent. Okay, thank you for answering my questions. Appreciate it.

Speaker #2: Excellent. Okay. Thank you for answering my questions. Appreciate it.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question is from Andrew Obin, Bank of America. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question is from Andrew Oben, Bank of America. Please go ahead. Your line is open.

David Ridley-Lane: This is David Ridley-Lane laying on for Andrew. Clean Energy & Fueling. There is a comment that you are planning a greenfield expansion and below-ground retail fueling. Know that there is a regulatory or replacement cycle there for underground tanks. But adding capacity expansion suggests that you think this is a kind of a multiyear durable cycle. Is that the right interpretation?

Speaker #2: I mean, this is, David Ridley Lane on for Andrew. clean energy and fueling, there's a comment that you're planning a greenfield expansion and below-ground retail fueling.

Speaker #2: know that there is a regulatory or or replacement cycle there for underground tanks. but adding capacity expansion suggests that you think this is a kind of a multi-year durable cycle.

Speaker #2: Is that the right interpretation?

Richard J. Tobin: Yeah, I think I answered it a minute ago to Scott. There is capacity constraints and underground equipment to come into compliance on tanks. Because there is capacity, which by the way, we do not supply. What that is doing is lengthening the duration of the demand because you cannot get the tanks to do the work, right? What we are expanding in is all of the products that are around that, where we see robust demand and our margins are quite good. That is the way I would answer it.

Speaker #4: yeah. I think I answered it a minute ago to Scott. the the there is capacity constraints and underground equipment to become into compliance on tanks.

Speaker #4: And that and because there's capacity which by the way, we don't supply. But what that is doing is lengthening the duration of the demand because you can't get the tanks to do the work.

Speaker #4: Right? What we're expanding in is all of the products that are around that. where we see robust demand and a and our and our margins are quite good.

Speaker #4: So that's the way I would answer it.

David Ridley-Lane: Thank you. Just a quick follow-up. Have you been hearing any impact from higher interest rates from any of your more capital planning type businesses? Is that something that has bubbled up to your level?

Speaker #2: Thank you. And just a quick follow-up—have you been hearing any impact from higher interest rates from any of your more capital planning-type businesses?

Speaker #2: Is that something that's bubbled up to your your level?

Richard J. Tobin: None.

Speaker #4: None.

David Ridley-Lane: That is very clear. Thank you very much.

Speaker #2: That's that's very clear. Thank you very much.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question is from Joe Ritchie with Goldman Sachs. Please go ahead. Your line is open.

Speaker #5: Thank you. Our next question is from Joe Ritchie with Goldman Sachs. Please go ahead. Your line is open.

Joe Ritchie: Hey, guys. Good morning.

Speaker #6: Hey, guys. Good morning.

Jack Dickens: Joe.

Richard J. Tobin: Joe.

Jack Dickens: Hey, Joe.

Chris Woenker: Hey, Joe.

Speaker #7: Joe.

Speaker #2: Thank you, Joe.

Joe Ritchie: Rich, look, slide 9 is great, right? Gives you a lot of detail on your capacity expansions, organic investments, et cetera. I guess the question I have is, as we are getting closer and closer to 2027, how much does this set you up for growth beyond 2027 based on what you know today? Or do you think there is going to possibly be additional capacity expansion beyond what you have already announced?

Speaker #6: So, Rich, look, slide nine is great, right? It gives you a lot of detail on your capacity expansions, organic investments, etc.

Speaker #6: I guess the question I have is as you as you as we're getting closer and closer to 2027, like, how how much does this set you up for growth beyond '27 based on what you know today?

Speaker #6: Or do you think there's gonna pro possibly be additional capacity expansion beyond what you've already announced?

Richard J. Tobin: Well, I hope we have additional capacity expansion. But the capacities that we are laying in are for multi-year, especially the greenfields, right? Greenfield is building a new site, and we would never capacitize a new site for the next 12 months, because you never get the return on capital there. So they all have been sized on the initial investment for a multi-year duration. So in a way, if we have the same slide again next year and there are additional capacity on top of it is a great sign because it is just more demand than we have sized the initial investment. So right now

Speaker #4: Well, I hope we have additional capacity expansion. But the capacities that we are laying in are for multi-year, especially the greenfields. Right?

Speaker #4: I mean, we're building greenfield, which is building a new site. And we would never capacitize a new site for the next 12 months, because you never get the return on capital.

Speaker #4: There. So they're all have been sized on the initial investment for multi-year duration. So in a way, if we have the same slide again next year, and there are additional capacity on top of it, it's a great sign because it's just more demand than we've sized the initial investment.

Speaker #4: So right now. These investments, we believe that we can capture our share of the market of the growth rates that I think that we showed you on slide five.

Joe Ritchie: Yeah

Richard J. Tobin: these investments, we believe that we can capture our share of the market of the growth rates that I think that we showed you on slide 5.

Joe Ritchie: Got it. Okay. That is super helpful. Going back to the question earlier about the $40 million and the $40 million potentially going higher as the year progresses, I guess, quick math, right? Taking a look at your revenue year to date in CST, that equates to roughly 300 basis points, if I am doing the math right.

Speaker #6: Got it. Okay. That's that's super helpful. And then going back to the question earlier about the 40 million and the 40 million potentially going higher as the year progresses.

Speaker #6: I guess quick math. Right? Taking a look at your revenue year to date and CST, like, that equates like roughly 300 basis points if I'm doing the math right.

Joe Ritchie: I guess the question I have as you get into 2027, when would you expect to see a turn in CST margins? Obviously, you have been taking on these extra costs throughout the year and will continue, but I am just curious when you would expect to see a turn based on what you know today.

Speaker #6: So I guess the the question I ha the question I have is you get into 2027. Like, when would you expect to see a turn in CST margins?

Speaker #6: and starting to obviously, you know, you've been taking on these extra costs throughout the year. And we'll continue. But I'm just curious when you would expect to see a turn based on what you know today.

Richard J. Tobin: I think that we will beat our comp in Q1.

Speaker #4: I think that we will beat our comp in Q1. It's that.

Joe Ritchie: Okay. That is absolute. Okay, great. Thank you.

Speaker #6: That's that's absolute. Okay. Great. Thank you.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our next question is from Andrew Buscaglia with BNP Paribas. Please go ahead, your line is now open.

Speaker #5: Thank you. Our next question is from Andrew Buscaglia, with PNB Parabus. Please go ahead. Your line is now open.

Andrew Buscaglia: Hey, guys. Thanks for taking my question.

Speaker #8: Hey, guys. Thanks for taking my question. If you could, you know, just kinda tying this all together, I get I sort of get the sense you know, you're our outlook for '27 and or your confidence in '27 is proved and improved in the last few months.

Richard J. Tobin: Sure.

Andrew Buscaglia: If you could, just kind of tying this all together, I sort of get the sense, your outlook for 2027 or your confidence in 2027 has improved in the last few months. Just based on some of these higher growth markets and the visibility you have. Am I right in that that is the core reason you are kind of sounding better on 2027 or sounding positive on 2027? Or slide 6 sort of suggests your underlying, just kind of core markets are seeing some improvements cyclically. I guess where is more of the confidence coming from? Is that high growth stuff or that core business?

Speaker #8: I mean, just based on some of these higher growth markets and, like, the the visibility you have. But is am I am I right in that that's the core reason you're kind of, sounding better on '27 or sounding positive on '27?

Speaker #8: Or or slide six sort of suggests, like, your underlying just kinda core markets are seeing some improvements cyclically. So I guess where is where is more of the confidence coming from?

Speaker #8: Is that higher growth stuff or, like, that core business?

Richard J. Tobin: Well, the slides are put in there for a reason, and it is the trajectory growth rates on where we have been investing have. We are looking at, I do not know, what did we say? 500 basis points of improvement over the past 24, or not even 24 months. 20 months?

Speaker #4: Yeah. Well, I mean, the the the the the slides are are put in there for a reason. And it's the trajectory it's the trajectory growth rates on where we've been investing.

Speaker #4: Have I mean, we're looking at I don't know. What did we say? 500 basis points of of improvement over the over the past 24 or not even 24 months?

Chris Woenker: Yep.

Speaker #4: 20 months?

Speaker #8: Yep.

Richard J. Tobin: So that we are good there. We have a data point in terms of orders and backlog earlier this year than we would have in a normal year. So growth, where we have chosen to participate, those markets are performing well, and the customers that we have across the broader portfolio are beginning to order into 2027 for a variety of reasons that we usually are kind of cautious until we get into giving full year guidance, because usually we do not have that kind of visibility.

Speaker #4: so that we're good there. And we have a data point in terms of orders and backlog earlier this year. Then we would have an a normal year.

Speaker #4: So growth—you know, where we've chosen to participate, those markets are performing well. And the customers that we have across the broader portfolio are beginning to order into 2027 for a variety of reasons.

Speaker #4: that we usually are kind of cautious until we get into you know, giving full-year guidance because usually we don't have that kind of visibility.

Andrew Buscaglia: That is the sense I get. Okay, and then just on the heat exchanger side, you talked about, you sort of said you hope you have more capacity investments because that means things are probably going well. What are capacity requirements like on heat exchangers, in your opinion? Then just given the really strong growth we are seeing in that data center cooling side, what is the competitive dynamics there? That has always been sort of a risk that you are not alone in identifying this growth in

Speaker #8: Yeah. That's the sense I get. Okay. And then, just on the heat exchanger side, you know, you talked about you sort of said you know, you hope you have more capacity investments because that means things are probably going well.

Speaker #8: What are what are capacity requirements like on heat exchangers in your opinion? and then just given the really strong growth we're seeing in that data center cooling side, what's the competitive dynamics there?

Speaker #8: That's that's always been sort of a risk that that's you know, you're not alone in in in identifying this growth in in. Yeah. Can you kinda comment on that too, please?

Richard J. Tobin: Sure

Andrew Buscaglia: Can you comment on that too, please?

Richard J. Tobin: Yeah. Everybody wants to be in data centers. I see the M&A presentations all the time. Look, that is a highly automated process. You need to make capacity decisions 18 months in advance before they are coming online. So this is not hire a bunch of people and get bigger throughput. It is actually very little people in the process, and so it is a very highly engineered, probably one of the most highly engineered products that we have in the entire portfolio. It is a very concentrated market, but those competitors that we have, if you went and looked, are also announcing capacity expansion. So I think that we have done a very good job of proactively investing in capacity in advance of the market to the detriment of margins in the past. So we will get our fair share here. But I cannot disagree with you.

Speaker #4: Yeah. Everybody wants to be in data centers. I see the M&A presentations all the time. look, this is a that's a highly automated process.

Speaker #4: You need to make capacity decisions 18 months in advance before them coming online. So y this is not a this is not kind of hire a bunch of people and get bigger throughput.

Speaker #4: it's actually very little people in the process. And so it's a very highly engineered pro probably one of the most highly engineered products that we have in the entire portfolio.

Speaker #4: it's a very concentrated market. But those competitors that we have if you went and looked are also announcing capacity expansion. So you know, I don't you know, I think that we've done a very good job of proactively investing.

Speaker #4: In capacity in advance of the market to the detriment of margins in the past. so we'll get our fair share here. but I I can't disagree with you.

Richard J. Tobin: Everybody wants to be in data centers, so we are going to find out altogether about the duration of the demand. Right now, I do not think we are getting over our skis just because our backlog says what it is, and we believe there is going to be a conversion into more CDU mix than we see now. But I think that we are positioned competitively and from a capacity point of view appropriately.

Speaker #4: I mean, everybody wants to be in data center. So you gotta be you know, we're gonna find out altogether about the duration of the demand right now.

Speaker #4: I don't think we're getting over our skis just because our backlog says what it is. And we believe there is gonna be a conversion into more CDU mix than we see now.

Speaker #4: But you know, I think that we're positioned competitively, and from a capacity point of view, appropriately.

Andrew Buscaglia: Fair enough. Thank you.

Speaker #8: Fair enough. Thank you.

Richard J. Tobin: Thanks.

Speaker #4: Thanks.

Operator: Thank you. Our final question comes from Brandon Knutson, Morgan Stanley. Please go ahead. Your line is open.

Speaker #5: Thank you. Our final question comes from Brandon, Gnussen, Morgan Stanley. Please go ahead. Your line is open.

Brandon Knutson: Hey. Good morning, everybody.

Speaker #7: Hey. Good morning, everybody.

Richard J. Tobin: Brandon, morning.

Speaker #4: Brendan.

Speaker #8: Morning.

Brandon Knutson: Just a quick follow-up on CST margins. I know you said it is going to be stronger growth, but more flat. I think a lot of the-

Speaker #7: Just a quick follow-up on CST margins. I know you said it's gonna be stronger. Growth. But more flat. A lot of the.

Jack Dickens: Hey, Brandon. We are having a hard time hearing you. Are you far away from the microphone?

Speaker #8: Thanks, Brandon. Brandon, we're having a hard time hearing you. Are are you far away from the microphone?

Brandon Knutson: Hello?

Speaker #7: Hello?

Jack Dickens: Hey, can you hear us, Brandon?

Speaker #8: Hey. Can you hear us, Brandon?

Brandon Knutson: Yeah, can you hear me?

Speaker #7: Yeah. Can you hear me?

Jack Dickens: Yes, we can hear you now. All right, go ahead.

Speaker #8: Yes. We can hear you now. All right. Go ahead.

Brandon Knutson: On CST, you saw strong growth accelerate there. Margins went

Speaker #7: Okay. Okay. On CST CST you saw strong growth. accelerate there. Margins went as you saw.

Richard J. Tobin: Hey, Brandon, you are cutting out. You know what? Give Jack a call. He will get to you, but you are cutting in and out.

Speaker #4: And Brandon hey, Brandon, you're cutting hey, Brandon, you're cutting out. you know what? Give Jack a call. He'll he'll get to you. But you're cutting in and out.

Jack Dickens: Okay. I think we can wrap up the call, Leslie.

Speaker #8: Okay. I think we can wrap up the call, Leslie.

Operator: Thank you. That concludes our question and answer period and Dover’s Q3 2026 earnings conference call. You may now disconnect your line at this time, and have a wonderful day.

Speaker #5: Thank you. That concludes our question and answer period. And Dover's third quarter 2026 earnings conference call. You may now disconnect. Your line at this time and have a wonderful day.