Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Trane Technologies plc, solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
An analysis of the solvency metrics from 2018 to 2022 indicates a period of increased capital gearing followed by a significant strengthening of debt-servicing capacity.
- Leverage and Capital Structure
- Debt to equity and debt to capital ratios experienced an upward trend between 2018 and 2020, with debt to equity rising from 0.58 to 0.82. While these ratios stabilized slightly in the subsequent two years, they remained elevated compared to 2018 levels, concluding at 0.79 and 0.44 respectively in 2022. The inclusion of operating lease liabilities consistently increases these figures, with the debt to equity ratio reaching 0.87 by the end of the observed period.
- Asset Utilization and Financial Leverage
- Debt to assets ratios followed a similar trajectory, peaking at 0.31 (including lease liabilities) in 2020 before settling at 0.29 in 2022. Simultaneously, financial leverage demonstrated a consistent and uninterrupted year-over-year increase throughout the five-year period, rising from 2.55 in 2018 to 2.97 in 2022, which indicates a growing reliance on debt to finance the asset base.
- Debt Servicing Capability
- Despite the overall increase in leverage, debt-servicing metrics showed a marked recovery in the latter part of the period. Both interest coverage and fixed charge coverage ratios experienced a decline in 2020, reaching lows of 6.18 and 4.05, respectively. However, a strong upward trend followed, with interest coverage rising to 10.72 and fixed charge coverage increasing to 6.39 by December 31, 2022. This trajectory suggests a substantial improvement in the company's ability to meet its fixed financial obligations from operating earnings.
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Debt to Equity
Trane Technologies plc, debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.79 | 0.77 | 0.82 | 0.77 | 0.58 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | — | — | |
| GE Aerospace | 0.89 | 0.87 | — | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | — | — | |
| RTX Corp. | 0.44 | 0.43 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.33 | 1.26 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.42 | 1.37 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Total Trane Technologies plc shareholders’ equity
= 4,836,300 ÷ 6,088,600 = 0.79
2 Click competitor name to see calculations.
The analysis of solvency indicators between 2018 and 2022 reveals a shift in the capital structure toward increased leverage, followed by a period of relative stabilization in debt levels alongside a steady decline in shareholders' equity.
- Total Debt Trends
- A significant increase in total debt occurred between 2018 and 2019, rising from 4,091,300 thousand US$ to 5,573,400 thousand US$. Following this peak, a gradual downward trend was observed, with debt levels decreasing to 4,836,300 thousand US$ by the end of 2022.
- Shareholders' Equity Trends
- Shareholders' equity reached a peak of 7,267,600 thousand US$ in 2019. However, a consistent year-over-year decline followed, with equity falling to 6,088,600 thousand US$ by December 31, 2022, representing a contraction in the equity base over the final four years of the period.
- Debt to Equity Ratio Analysis
- The debt to equity ratio experienced an upward trajectory in the early part of the period, increasing from 0.58 in 2018 to a peak of 0.82 in 2020. Despite the reduction in total debt after 2019, the continued erosion of shareholders' equity maintained the ratio at an elevated level, fluctuating between 0.77 and 0.79 during 2021 and 2022.
Overall, the solvency profile indicates that while total debt has been reduced from its 2019 peak, the simultaneous decrease in equity has prevented the debt to equity ratio from returning to the lower levels seen in 2018.
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Debt to Equity (including Operating Lease Liability)
Trane Technologies plc, debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Operating lease current (classified in Other current liabilities) | 155,800) | 147,300) | 138,800) | 172,000) | —) | |
| Operating lease noncurrent (classified in Other noncurrent liabilities) | 313,500) | 296,000) | 276,500) | 394,400) | —) | |
| Total debt (including operating lease liability) | 5,305,600) | 5,285,400) | 5,687,400) | 6,139,800) | 4,091,300) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.87 | 0.84 | 0.89 | 0.84 | 0.58 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | — | — | |
| GE Aerospace | 0.96 | 0.94 | — | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | — | — | |
| RTX Corp. | 0.47 | 0.46 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.39 | 1.32 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.59 | 1.54 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Trane Technologies plc shareholders’ equity
= 5,305,600 ÷ 6,088,600 = 0.87
2 Click competitor name to see calculations.
The solvency profile exhibits a marked shift in leverage between 2018 and 2022, characterized by a significant initial increase in liabilities followed by a period of relative stabilization despite a consistent decline in the equity base.
- Total Debt Dynamics
- A substantial increase in total debt, including operating lease liabilities, was observed between 2018 and 2019, where obligations rose from US$ 4.09 billion to US$ 6.14 billion. Following this peak, a gradual deleveraging trend occurred through 2021, bringing the total to US$ 5.29 billion, before a marginal increase to US$ 5.31 billion was recorded in 2022.
- Shareholders' Equity Trajectory
- Total shareholders' equity reached its highest point in 2019 at US$ 7.27 billion. From 2020 onward, a continuous downward trend is evident, with equity levels decreasing annually to reach US$ 6.09 billion by December 31, 2022.
- Debt to Equity Ratio Interpretation
- The debt to equity ratio experienced a sharp escalation from 0.58 in 2018 to a peak of 0.89 in 2020. While the ratio slightly moderated to 0.84 in 2021, it ended the period at 0.87 in 2022. The sustained elevation of this ratio relative to the 2018 baseline is driven by the confluence of a permanent step-up in total debt levels and the systemic erosion of shareholders' equity over the final three years of the analyzed period.
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Debt to Capital
Trane Technologies plc, debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Total capital | 10,924,900) | 11,098,000) | 11,679,800) | 12,841,000) | 11,114,000) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.44 | 0.44 | 0.45 | 0.43 | 0.37 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.39 | 1.35 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | — | — | |
| GE Aerospace | 0.47 | 0.47 | — | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | — | — | |
| RTX Corp. | 0.31 | 0.30 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.57 | 0.56 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.59 | 0.58 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 4,836,300 ÷ 10,924,900 = 0.44
2 Click competitor name to see calculations.
The solvency profile exhibits a period of increased leverage followed by a phase of stabilization. Between 2018 and 2020, there was a noticeable increase in the proportion of debt relative to total capital, while the subsequent two years demonstrate a consistent maintenance of this leverage level.
- Total Debt Trends
- A significant increase in total debt occurred between 2018 and 2019, rising from 4.09 billion to 5.57 billion US dollars. Following this peak, debt levels entered a gradual decline, reducing to 4.84 billion US dollars by 2021 and remaining largely stagnant through 2022.
- Total Capital Fluctuations
- Total capital followed a trajectory similar to total debt, peaking in 2019 at 12.84 billion US dollars. A steady downward trend is observed from 2020 through 2022, with total capital contracting to 10.92 billion US dollars by the end of the period.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose from 0.37 in 2018 to a peak of 0.45 in 2020, indicating a strategic shift toward a more leveraged capital structure. Since 2020, the ratio has remained stable, settling at 0.44 in both 2021 and 2022, which suggests a disciplined approach to financing and capital management.
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Debt to Capital (including Operating Lease Liability)
Trane Technologies plc, debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Operating lease current (classified in Other current liabilities) | 155,800) | 147,300) | 138,800) | 172,000) | —) | |
| Operating lease noncurrent (classified in Other noncurrent liabilities) | 313,500) | 296,000) | 276,500) | 394,400) | —) | |
| Total debt (including operating lease liability) | 5,305,600) | 5,285,400) | 5,687,400) | 6,139,800) | 4,091,300) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Total capital (including operating lease liability) | 11,394,200) | 11,541,300) | 12,095,100) | 13,407,400) | 11,114,000) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.47 | 0.46 | 0.47 | 0.46 | 0.37 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.37 | 1.34 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | — | — | |
| GE Aerospace | 0.49 | 0.49 | — | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | — | — | |
| RTX Corp. | 0.32 | 0.31 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.58 | 0.57 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.61 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 5,305,600 ÷ 11,394,200 = 0.47
2 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 indicates a structural shift in leverage, characterized by a sharp increase in debt during 2019 followed by a period of relative stabilization in the capital structure.
- Debt and Capital Volume Trends
- Total debt, including operating lease liabilities, experienced a significant surge between 2018 and 2019, rising from 4.09 billion USD to 6.14 billion USD. Following this peak, debt levels trended downward through 2021 before stabilizing at approximately 5.31 billion USD in 2022. Similarly, total capital peaked in 2019 at 13.41 billion USD but has since undergone a steady contraction, declining to 11.39 billion USD by the end of 2022.
- Debt to Capital Ratio Analysis
- A substantial increase in the debt to capital ratio is observed between 2018 and 2019, moving from 0.37 to 0.46. For the subsequent three years, the ratio remained remarkably stable, fluctuating minimally between 0.46 and 0.47. This pattern indicates that while the absolute volumes of debt and capital have decreased since 2019, the company has maintained a consistent proportional reliance on debt to fund its capital base.
- Solvency Observations
- The stability of the debt to capital ratio at approximately 47% from 2019 to 2022 suggests a deliberate management of the capital structure. The convergence of the ratio across the final four years of the period reflects a balanced approach to maintaining leverage despite the overall reduction in total capital.
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Debt to Assets
Trane Technologies plc, debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Total assets | 18,081,600) | 18,059,800) | 18,156,700) | 20,492,300) | 17,914,900) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.27 | 0.27 | 0.29 | 0.27 | 0.23 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | |
| GE Aerospace | 0.17 | 0.18 | — | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.31 | 0.30 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 4,836,300 ÷ 18,081,600 = 0.27
2 Click competitor name to see calculations.
The solvency profile over the five-year period from 2018 to 2022 is characterized by an initial increase in leverage followed by a period of relative stabilization. While both total debt and total assets experienced volatility between 2018 and 2020, the final two years of the analysis indicate a consistent financial structure.
- Total Debt Trends
- A significant increase in total debt was observed between 2018 and 2019, where obligations rose from 4,091,300 thousand US$ to 5,573,400 thousand US$. Following this peak, a downward trend ensued, with debt levels decreasing steadily to 4,836,300 thousand US$ by December 31, 2022.
- Total Asset Dynamics
- Total assets expanded from 17,914,900 thousand US$ in 2018 to a peak of 20,492,300 thousand US$ in 2019. A contraction occurred in 2020, bringing assets down to 18,156,700 thousand US$, after which asset values remained largely stagnant, ending the period at 18,081,600 thousand US$.
- Debt to Assets Ratio Analysis
- The debt to assets ratio climbed from 0.23 in 2018 to a peak of 0.29 in 2020, reflecting a higher reliance on borrowed funds relative to the asset base during that window. However, the ratio subsequently moderated and remained constant at 0.27 for both 2021 and 2022, suggesting a stabilized solvency position.
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Debt to Assets (including Operating Lease Liability)
Trane Technologies plc, debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Short-term borrowings and current maturities of long-term debt | 1,048,000) | 350,400) | 775,600) | 650,500) | 350,600) | |
| Long-term debt,excluding current maturities | 3,788,300) | 4,491,700) | 4,496,500) | 4,922,900) | 3,740,700) | |
| Total debt | 4,836,300) | 4,842,100) | 5,272,100) | 5,573,400) | 4,091,300) | |
| Operating lease current (classified in Other current liabilities) | 155,800) | 147,300) | 138,800) | 172,000) | —) | |
| Operating lease noncurrent (classified in Other noncurrent liabilities) | 313,500) | 296,000) | 276,500) | 394,400) | —) | |
| Total debt (including operating lease liability) | 5,305,600) | 5,285,400) | 5,687,400) | 6,139,800) | 4,091,300) | |
| Total assets | 18,081,600) | 18,059,800) | 18,156,700) | 20,492,300) | 17,914,900) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.29 | 0.29 | 0.31 | 0.30 | 0.23 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | — | — | |
| GE Aerospace | 0.19 | 0.19 | — | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.30 | 0.29 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.34 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 5,305,600 ÷ 18,081,600 = 0.29
2 Click competitor name to see calculations.
The solvency profile between 2018 and 2022 is characterized by an initial increase in leverage and asset expansion in 2019, followed by a period of consolidation and stabilization of the capital structure.
- Debt to Assets Ratio Trend
- The ratio exhibited an upward trend in the early part of the period, rising from 0.23 in 2018 to a peak of 0.31 in 2020. This indicates a period of increased reliance on debt to finance assets. However, a corrective trend followed, with the ratio moderating to 0.29 in 2021 and remaining unchanged at 0.29 through the end of 2022, signaling a stabilized solvency position.
- Analysis of Total Debt Obligations
- A significant increase in total debt, including operating lease liabilities, occurred between 2018 and 2019, where obligations rose from 4.09 billion USD to 6.14 billion USD. From 2020 onward, a gradual deleveraging process is observed, with total debt decreasing to 5.69 billion USD in 2020 and further declining to 5.31 billion USD by December 31, 2022.
- Asset Base Fluctuations
- Total assets grew from 17.91 billion USD in 2018 to a peak of 20.49 billion USD in 2019. A contraction occurred in 2020, with assets falling to 18.16 billion USD. For the subsequent two years, the asset base remained relatively stagnant, closing 2022 at 18.08 billion USD.
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Financial Leverage
Trane Technologies plc, financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Total assets | 18,081,600) | 18,059,800) | 18,156,700) | 20,492,300) | 17,914,900) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.97 | 2.89 | 2.83 | 2.82 | 2.55 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | — | — | |
| GE Aerospace | 5.16 | 4.93 | — | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | — | — | |
| RTX Corp. | 2.19 | 2.21 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.71 | 4.55 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.65 | 4.52 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Total Trane Technologies plc shareholders’ equity
= 18,081,600 ÷ 6,088,600 = 2.97
2 Click competitor name to see calculations.
The company's solvency profile exhibits a consistent increase in financial leverage over the five-year period ending December 31, 2022. This upward trajectory indicates a shifting capital structure with an increasing reliance on debt relative to shareholders' equity to finance its asset base.
- Financial Leverage Trend
- A steady upward trend in the financial leverage ratio is observed, rising from 2.55 in 2018 to 2.97 in 2022. This incremental growth suggests a systematic increase in the company's financial gearing, which elevates the proportion of total assets funded by creditors rather than equity holders.
- Asset Base Dynamics
- Total assets experienced a significant increase in 2019, peaking at US$ 20.49 billion, followed by a contraction in 2020 to US$ 18.16 billion. For the subsequent two years, the asset base remained relatively stagnant, ending 2022 at US$ 18.08 billion.
- Equity Position and Impact
- Shareholders' equity peaked in 2019 at US$ 7.27 billion and has since undergone a consistent decline, reaching US$ 6.09 billion by December 31, 2022. The simultaneous contraction of equity and the stabilization of total assets have served as the primary catalysts for the increase in the financial leverage ratio over the analyzed period.
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Interest Coverage
Trane Technologies plc, interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net earnings attributable to Trane Technologies plc | 1,756,500) | 1,423,400) | 854,900) | 1,410,900) | 1,337,600) | |
| Add: Net income attributable to noncontrolling interest | 18,200) | 13,200) | 15,100) | 17,600) | 19,900) | |
| Less: Discontinued operations, net of tax | (21,500) | (20,600) | (121,400) | 40,600) | (21,500) | |
| Add: Income tax expense | 375,900) | 333,500) | 296,800) | 353,700) | 281,300) | |
| Add: Interest expense | 223,500) | 233,700) | 248,700) | 243,000) | 220,700) | |
| Earnings before interest and tax (EBIT) | 2,395,600) | 2,024,400) | 1,536,900) | 1,984,600) | 1,881,000) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 10.72 | 8.66 | 6.18 | 8.17 | 8.52 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.98 | -0.88 | — | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | — | — | |
| GE Aerospace | 1.88 | -0.96 | — | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | — | — | |
| RTX Corp. | 5.64 | 4.71 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 4.84 | 3.98 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 4.98 | 5.14 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 2,395,600 ÷ 223,500 = 10.72
2 Click competitor name to see calculations.
Analysis of the solvency indicators reveals a robust capacity to service interest obligations, characterized by a recovery and subsequent expansion of the interest coverage margin between 2018 and 2022.
- Earnings Before Interest and Tax (EBIT) Trends
- EBIT demonstrated volatility over the five-year period, increasing from US$ 1,881,000 thousand in 2018 to US$ 2,395,600 thousand by 2022. A notable contraction occurred in 2020, where earnings fell to US$ 1,536,900 thousand, representing the lowest point in the sequence before a strong two-year upward trajectory.
- Interest Expense Stability
- Interest expenses remained relatively stable throughout the analyzed period, fluctuating within a narrow range. A peak was observed in 2020 at US$ 248,700 thousand, followed by a gradual decline to US$ 223,500 thousand by 2022, indicating efficient management of borrowing costs.
- Interest Coverage Ratio Performance
- The interest coverage ratio exhibits a V-shaped pattern, closely mirroring the fluctuations in EBIT. The ratio decreased from 8.52 in 2018 to a period low of 6.18 in 2020. A significant recovery followed, with the ratio rising to 8.66 in 2021 and reaching a peak of 10.72 in 2022. This progression indicates a substantial increase in the margin of safety for debt servicing and a strengthened overall solvency profile.
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Fixed Charge Coverage
Trane Technologies plc, fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net earnings attributable to Trane Technologies plc | 1,756,500) | 1,423,400) | 854,900) | 1,410,900) | 1,337,600) | |
| Add: Net income attributable to noncontrolling interest | 18,200) | 13,200) | 15,100) | 17,600) | 19,900) | |
| Less: Discontinued operations, net of tax | (21,500) | (20,600) | (121,400) | 40,600) | (21,500) | |
| Add: Income tax expense | 375,900) | 333,500) | 296,800) | 353,700) | 281,300) | |
| Add: Interest expense | 223,500) | 233,700) | 248,700) | 243,000) | 220,700) | |
| Earnings before interest and tax (EBIT) | 2,395,600) | 2,024,400) | 1,536,900) | 1,984,600) | 1,881,000) | |
| Add: Operating lease expense | 179,400) | 168,300) | 173,000) | 206,100) | 261,300) | |
| Earnings before fixed charges and tax | 2,575,000) | 2,192,700) | 1,709,900) | 2,190,700) | 2,142,300) | |
| Interest expense | 223,500) | 233,700) | 248,700) | 243,000) | 220,700) | |
| Operating lease expense | 179,400) | 168,300) | 173,000) | 206,100) | 261,300) | |
| Fixed charges | 402,900) | 402,000) | 421,700) | 449,100) | 482,000) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 6.39 | 5.45 | 4.05 | 4.88 | 4.44 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.70 | -0.64 | — | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | — | — | |
| GE Aerospace | 1.35 | -0.22 | — | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | — | — | |
| RTX Corp. | 4.40 | 3.66 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.61 | 3.06 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.30 | 3.44 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 2,575,000 ÷ 402,900 = 6.39
2 Click competitor name to see calculations.
The solvency profile demonstrates a strengthening capacity to meet fixed obligations over the five-year period ending December 31, 2022. While a temporary contraction in earnings occurred in 2020, the overall trajectory reflects a significant improvement in the margin of safety regarding fixed charge coverage.
- Earnings before fixed charges and tax
- Operating performance exhibited volatility, starting at 2,142,300 thousand USD in 2018 and peaking at 2,575,000 thousand USD in 2022. A notable decline occurred in 2020, where earnings fell to 1,709,900 thousand USD, representing the lowest point in the period analyzed. A robust recovery followed in 2021 and 2022, with the latter year achieving a significant increase over the 2020 trough.
- Fixed charges
- A consistent downward trend in fixed charges is observed from 2018 through 2021, decreasing from 482,000 thousand USD to 402,000 thousand USD. This reduction in fixed obligations remained stable into 2022, with charges ending the period at 402,900 thousand USD, effectively lowering the recurring financial burden.
- Fixed charge coverage ratio
- The coverage ratio improved from 4.44 in 2018 to 6.39 by 2022. The decline in the ratio to 4.05 in 2020 was a direct result of the contraction in earnings, which outweighed the simultaneous reduction in fixed charges. The subsequent rise to 5.45 in 2021 and 6.39 in 2022 indicates an enhanced solvency position, driven by the dual impact of increasing earnings and stabilized, lower fixed costs.
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