Trane Technologies plc (NYSE:TT)

The analysis of the data reveals several trends and changes in the intangible assets components over the five-year period.

Goodwill

The goodwill value increased from 5,959,500 thousand USD in 2018 to a peak of 6,783,100 thousand USD in 2019, followed by a notable decline in 2020 to 5,342,800 thousand USD. Subsequently, it stabilized around 5,504,800 and 5,503,700 thousand USD in 2021 and 2022, respectively. This indicates a possible impairment or divestiture event occurring between 2019 and 2020.

Customer Relationships

Customer relationships showed growth from 2,086,800 thousand USD in 2018 to 2,562,100 thousand USD in 2019. After that, the value decreased to 2,010,200 thousand USD in 2020 but then showed a gradual recovery, reaching 2,183,700 thousand USD by 2022. This pattern indicates some volatility but a general recovery trend in the valuation of customer relationships.

Patents

Patent values were relatively stable between 2018 and 2019 (206,600 to 207,600 thousand USD) but data from 2020 onwards is missing, indicating either a change in reporting or potential write-offs of patent assets.

Other Intangible Assets

The category labeled "Other" showed consistent growth across the period, increasing from 84,500 thousand USD in 2018 to 261,700 thousand USD in 2022, reflecting ongoing investments or acquisitions in this area.

Finite-lived Intangible Assets, Gross Carrying Amount

The gross carrying amount of finite-lived intangible assets increased from 2,377,900 thousand USD in 2018 to a high of 2,894,200 thousand USD in 2019 but then declined sharply to 2,220,900 thousand USD in 2020. It exhibited slight recovery through 2021 and 2022, reaching 2,445,400 thousand USD. This pattern parallels trends observed in customer relationships and goodwill, suggesting possible asset revaluations or amortization effects during this period.

Accumulated Amortization

Accumulated amortization steadily increased (in absolute value) from -1,412,700 thousand USD in 2018 to -1,805,500 thousand USD in 2022. This consistent rise indicates ongoing amortization expenses impacting finite-lived intangible assets over time.

Finite-lived Intangible Assets, Net Carrying Amount

Net finite-lived intangible assets dropped sharply from 1,311,700 thousand USD in 2019 to 659,100 thousand USD in 2020. Subsequently, the net value remained relatively stable in 2021 and slightly declined in 2022, indicating that amortization and impairment factors largely impacted these assets during 2020, with minimal recovery afterward.

Trademarks and Indefinite-lived Intangible Assets

Trademarks and related indefinite-lived intangible assets saw a moderate increase from 2,669,500 thousand USD in 2018 to 2,837,100 thousand USD in 2019, followed by a downward adjustment, stabilizing around 2,624,000 thousand USD in 2022. This suggests a modest revaluation or impairment effect in later years.

Total Intangible Assets

The total intangible assets value peaked in 2019 at 4,148,800 thousand USD but then decreased significantly in 2020 to 3,286,400 thousand USD. In subsequent years, the total intangible assets showed minor fluctuations but an overall stable trend around 3,300,000 thousand USD by 2022.

Goodwill and Intangible Assets Combined

The aggregate of goodwill and intangible assets followed a similar trajectory to goodwill alone, increasing notably from 9,594,200 thousand USD in 2018 to 10,931,900 thousand USD in 2019, then sharply declining to 8,629,200 thousand USD in 2020. It remained relatively steady at approximately 8,760,000 thousand USD in 2021 and 2022. This pattern underscores the significant changes occurring during 2019-2020 and relative stabilization thereafter.

Overall, the data indicates that 2019 was a peak year for intangible assets, followed by a significant reduction in 2020 likely due to impairment, divestiture, or changes in accounting estimates. Post-2020, the values remained mostly stable with minor recoveries in some components but no return to the previous peaks. Amortization consistently increased, contributing to the decline in net finite-lived intangible assets. Growth in the "Other" intangible asset category suggests selective investments or acquisitions in specific asset types despite the overall decline in goodwill and finite-lived assets.

Over the analyzed periods, total reported assets exhibited an initial increase from 17,914,900 thousand US dollars in 2018 to a peak of 20,492,300 thousand US dollars in 2019, followed by a decline that stabilized around 18,059,800 to 18,081,600 thousand US dollars through 2021 and 2022. Adjusted total assets, which likely exclude goodwill, followed a similar pattern but with lower absolute values, indicating a consistent reduction in the net asset base when adjustments are made. The adjusted assets grew from 11,955,400 thousand US dollars in 2018 to 13,709,200 thousand US dollars in 2019, then decreased steadily to approximately 12,555,000 thousand US dollars in 2021, with a slight increase to 12,577,900 thousand US dollars in 2022.

Reported shareholders' equity showed a declining trend after 2019, decreasing from 7,267,600 thousand US dollars to 6,408,700 thousand US dollars in 2020, and further to 6,085,600 thousand US dollars by 2022. This decline suggests pressure on retained earnings or equity capital during these years. Adjusted shareholders’ equity, significantly lower than the reported figures, showed substantial volatility. Starting at 1,063,200 thousand US dollars in 2018, it dropped sharply to 484,500 thousand US dollars in 2019, rebounded to 1,064,900 thousand US dollars in 2020, and decreased again to 584,900 thousand US dollars by 2022. The wide fluctuations in adjusted equity indicate varying impacts from goodwill adjustments or other intangible asset revaluations over the period.

The disparity between reported and adjusted figures highlights the significance of goodwill and other intangible assets on the balance sheet. The stability of reported total assets contrasts with the more pronounced variability in adjusted assets and equity, implying that goodwill and similar adjustments materially affect the reported financial position. Overall, the data suggests careful consideration is warranted when evaluating the company’s net asset base and equity, especially in relation to intangible asset valuations and their effects on adjusted financial metrics.

The analysis of the financial ratios over the five-year period reveals several notable trends and variations in the company's performance metrics, with distinctions between reported and goodwill-adjusted figures.

Total Asset Turnover

The reported total asset turnover demonstrates a declining trend from 0.87 in 2018 to a low of 0.69 in 2020, before recovering to 0.88 by 2022. The adjusted total asset turnover exhibits a similar pattern but at higher levels, starting at 1.31 in 2018, dropping to 0.97 in 2020, and rebounding to 1.27 in 2022. This indicates that when adjusting for goodwill, the company's efficiency in utilizing assets to generate sales is appreciably higher, although both metrics portray a dip in 2020 with subsequent recovery.

Financial Leverage

Reported financial leverage steadily increased over the period from 2.55 in 2018 to 2.97 in 2022, signifying a gradual rise in the use of debt relative to equity. In contrast, the adjusted financial leverage shows significant volatility and higher values, starting very high at 11.24 in 2018, peaking dramatically to 28.3 in 2019, then fluctuating downward to 12.03 in 2020, and rising again to 21.5 in 2022. These adjusted figures suggest a more leveraged capital structure when the impact of goodwill is excluded, with particularly pronounced spikes in certain years.

Return on Equity (ROE)

Reported ROE displays moderate variation, initially increasing from 19.05% in 2018 to a peak of 28.85% in 2022, with a notable dip to 13.34% in 2020. The adjusted ROE values are substantially higher, reflecting the exclusion of goodwill; the metric starts at an extreme 125.81% in 2018, spikes to 291.21% in 2019, declines to 80.28% in 2020, and surges again to 300.31% in 2022. This pronounced volatility and elevated level highlight the significant impact of goodwill adjustments on shareholder returns, possibly indicating varying capital base effects on profitability ratios.

Return on Assets (ROA)

The reported ROA follows a pattern similar to the reported ROE but at lower percentage levels, declining from 7.47% in 2018 to 4.71% in 2020, then climbing to 9.71% in 2022. Adjusted ROA also declines in 2020 but maintains higher values overall, ranging from 11.19% in 2018 to 13.96% in 2022. The adjustment for goodwill consistently results in higher ROA figures, indicating greater asset profitability when intangible assets are excluded from the asset base.

Overall, adjusted financial ratios exhibit more pronounced variability and generally higher magnitudes than their reported counterparts, underscoring the substantial influence of goodwill on the financial structure and performance measurements. The year 2020 stands out as a period of weakened operational efficiency and profitability across almost all metrics, likely reflecting external challenges, followed by a recovery trend through to 2022. The increases in financial leverage alongside improved returns in later years suggest a potentially aggressive financing approach supporting profitability.

The reported total assets of the company exhibit an overall upward trend from the end of 2018 through 2019, increasing from approximately 17.9 billion US dollars to about 20.5 billion US dollars. This peak in 2019 is followed by a decline in 2020, and then a period of relative stability through 2021 and 2022, with reported total assets remaining close to 18 billion US dollars.

Adjusted total assets, which exclude goodwill, follow a similar pattern but on a lower magnitude scale. They increase from around 11.96 billion US dollars in 2018 to approximately 13.71 billion US dollars in 2019, then decline in 2020 and continue a slight downward trend through 2022, settling near 12.58 billion US dollars. This suggests some reduction or impairment related to goodwill or intangible assets between 2019 and 2022.

Regarding efficiency in asset use, the reported total asset turnover ratio shows a declining trajectory from 0.87 in 2018 to a low of 0.69 in 2020. This indicates a reduced ability to generate revenue per unit of asset during that period. However, the ratio recovers in subsequent years, rising to 0.78 in 2021 and further to 0.88 in 2022, suggesting an improvement in operational efficiency or revenue generation relative to reported assets.

The adjusted total asset turnover, which considers assets excluding goodwill, starts at a higher level of 1.31 in 2018 and declines steadily to 0.97 in 2020, reflecting similar efficiency challenges. Following this trough, the ratio rebounds to 1.13 in 2021 and continues its recovery to 1.27 in 2022. The adjusted turnover ratio maintains a consistently higher level compared to the reported figure, highlighting the significant impact of goodwill on asset valuation and turnover metrics.

In summary, the data indicate a peak and subsequent decline in total assets around 2019 to 2020, followed by a period of stability. Asset turnover ratios declined in 2020 but displayed signs of improvement in the following years. The adjusted metrics reveal a generally higher efficiency in asset utilization when goodwill is excluded, while the overall trends point to a temporary impact on asset effectiveness during the 2020 period.

Reported Total Assets

Increased from 2018 to 2019, peaked in 2019, followed by a decline and stability through 2022.

Adjusted Total Assets

Increased through 2019, then gradually decreased through 2022, reflecting reduced goodwill or intangible asset values.

Reported Total Asset Turnover

Declined significantly in 2020 but recovered in 2021 and 2022, indicating initial efficiency challenges with subsequent improvement.

Adjusted Total Asset Turnover

Consistently higher than reported turnover, declined to a low in 2020, then improved through 2022, showing better asset utilization when goodwill is excluded.

The financial data indicates several notable trends over the five-year period.

Total Assets

Reported total assets increased from 17,914,900 thousand USD in 2018 to 20,492,300 thousand USD in 2019, then declined to approximately 18,058,000 thousand USD in 2021 and remained relatively stable through 2022 at 18,081,600 thousand USD. In contrast, the adjusted total assets (excluding goodwill) exhibited a similar pattern but at lower absolute values, rising to 13,709,200 thousand USD in 2019 before decreasing gradually to 12,577,900 thousand USD by 2022. This suggests some reduction or impairment in goodwill or other intangible assets over the years following 2019.

Shareholders’ Equity

Reported total shareholders’ equity showed a declining trend from 7,022,700 thousand USD in 2018 to 6,088,600 thousand USD in 2022. After a slight increase in 2019, equity decreased notably in the subsequent years, indicating potential pressures on net assets or accumulation of losses. The adjusted shareholders’ equity fluctuates substantially at much lower levels, starting at 1,063,200 thousand USD in 2018, dropping dramatically to 484,500 thousand USD in 2019, then rising again in 2020 before declining steadily to 584,900 thousand USD in 2022. This volatility may be driven by the goodwill adjustments significantly impacting the equity base.

Financial Leverage

Reported financial leverage steadily increased from 2.55 in 2018 to 2.97 in 2022, indicating a gradual rise in the ratio of total assets to shareholders’ equity, which may reflect increased borrowing or reduced equity capitalization. The adjusted financial leverage is markedly higher and more volatile, escalating sharply from 11.24 in 2018 to an extreme of 28.3 in 2019, then falling to 12.03 in 2020 and rising again to 21.5 by 2022. Such fluctuations suggest significant impact of goodwill adjustments on the leverage ratio, highlighting a considerable level of financial risk when excluding intangible assets in the capital structure assessment.

Overall, the analysis points to a company experiencing peak asset levels in 2019, followed by a contraction driven partly by goodwill write-downs or impairments. Simultaneously, the declining shareholders’ equity and increasing financial leverage metrics, especially on an adjusted basis, emphasize an increasing risk profile and potentially weaker capital defense relative to total assets when goodwill is excluded. These trends may merit further investigation into asset quality and capital management strategies.

The financial data reveals distinct trends in both the reported and goodwill-adjusted figures for shareholders’ equity and return on equity (ROE) over the five-year period.

Reported Total Shareholders’ Equity

The reported total shareholders’ equity demonstrates a declining trend from 2018 through 2022. It peaked at approximately $7.27 billion in 2019, followed by a steady decrease each subsequent year, reaching about $6.09 billion in 2022. This decline suggests a reduction in net assets attributable to shareholders over the period, which may indicate factors such as share buybacks, dividend payments exceeding net income, or asset write-downs.

Adjusted Total Shareholders’ Equity

The adjusted total shareholders’ equity, which excludes goodwill, shows more volatility and generally much lower values compared to the reported figures. It started at approximately $1.06 billion in 2018, dropped significantly to around $484.5 million in 2019, then increased sharply in 2020 to about $1.06 billion again. Afterwards, it declined over 2021 and 2022, reaching roughly $585 million by the end of 2022. This fluctuation reflects notable changes in the goodwill component of equity, which significantly impacts the adjusted equity base.

Reported ROE

The reported return on equity (ROE) shows a variable but generally upward trend from 19.05% in 2018 to 28.85% in 2022, with a dip in 2020 to 13.34%, likely corresponding to the broader economic impacts during that year. The rise in ROE in 2021 and 2022 is pronounced, indicating improved profitability or efficient use of equity capital despite the declining equity base.

Adjusted ROE

The adjusted ROE, calculated using equity excluding goodwill, exhibits significantly higher and more volatile values compared to the reported ROE. It reached a peak of over 291% in 2019, dropped to 80.28% in 2020, increased again to 189.51% in 2021, and reached the highest value of 300.31% in 2022. These extreme fluctuations suggest that the adjusted equity base is much smaller and varies considerably from year to year, which magnifies the return ratios and could reflect sensitivity to underlying goodwill adjustments or impairment charges.

Overall, the analysis shows that while the reported equity base is gradually declining, indicative of possible net reductions in assets or capital structure changes, the profitability measured by ROE is improving, signaling effective earnings generation relative to equity. The adjusted figures highlight the substantial impact of goodwill on the equity base and reveal much more pronounced volatility in returns, emphasizing the need to consider goodwill adjustments when assessing the company's financial performance and equity quality.

Total Assets

The reported total assets increased significantly from 17.91 billion US dollars at the end of 2018 to a peak of 20.49 billion in 2019, followed by a decrease to approximately 18.06 billion in 2021 and remaining relatively stable through 2022. Adjusted total assets, which exclude the impact of goodwill, followed a similar pattern with an increase from 11.96 billion in 2018 to 13.71 billion in 2019, then declining steadily to 12.58 billion by 2022. This indicates that while the company's asset base expanded notably in the early period, there was a contraction or revaluation in subsequent years, particularly when goodwill is excluded.

Return on Assets (ROA)

The reported ROA began at 7.47% in 2018, experienced a slight decline to 6.89% in 2019, then dropped further to 4.71% in 2020. Following this decrease, it recovered strongly to 7.88% in 2021 and continued upward reaching 9.71% in 2022. The adjusted ROA, which excludes goodwill effects, exhibited a higher baseline, starting at 11.19% in 2018, declining moderately to 10.29% in 2019 and further to 6.67% in 2020. Similar to reported ROA, the adjusted ROA rebounded noticeably to 11.34% in 2021 and improved further to 13.96% in 2022. This trend suggests that the company’s core asset profitability was somewhat challenged around 2019 and 2020 but improved substantially thereafter.

Summary of Trends

Overall, the financial analysis reveals that the company expanded its asset base significantly between 2018 and 2019, but this was followed by asset base reductions or adjustments in the subsequent years up to 2022 when considering adjusted total assets. The return on assets, both reported and adjusted, followed a downward trajectory in 2019 and 2020, potentially reflecting operational challenges or external economic conditions impacting asset efficiency. However, a clear recovery phase is evident from 2021 onwards, with profitability metrics surpassing prior levels by 2022. The consistently higher adjusted ROA compared to reported ROA indicates that goodwill has a dilutive effect on return calculations, and the core operations demonstrate stronger performance when goodwill is excluded from the asset base.