Power and Energy backlog and demand
Q: What is the update on Prime Power projects and how is the backlog being managed?
A: Joe Creed noted that Prime Power demand is trending higher. Large reciprocating engines and turbines are booked into 2029, while some 2028 capacity remains for diesel backup.
Q: Are orders primarily for out-years and when will the backlog decrease?
A: Joe Creed explained that lead times vary by product, with large equipment extended further than smaller units. Kyle Epley added that 58% of the backlog is expected to be sold within the next 12 months.
Q: How is the data center demand mix evolving between turbines, gas, and diesel?
A: Joe Creed stated that standby diesel backup momentum continues, and the company's capacity is fungible enough to support various applications including oil and gas compression.
Q: What is the status of the 10-megawatt MAC engine restart?
A: Joe Creed confirmed that the first units will ship in the fourth quarter, with production ramping throughout 2027.
Margins and capacity
Q: When will margins return to the mid-to-high end of the target range?
A: Joe Creed stated the company aims to operate near the middle of the range and expects to move off the bottom of that target in 2027 as volume increases.
Revenue growth and sequential performance
Q: Why is sequential revenue growth modest in the fourth quarter despite capacity additions?
A: Joe Creed explained that Power and Energy is paced by capacity and delivery timing, with no slack in the system, while Construction Industries faces a seasonal inventory drawdown.
Q: What is the setup for 2027 revenue growth relative to the 6% to 9% CAGR target?
A: Joe Creed expressed confidence in the 2027 outlook, noting that capacity increases are not a cliff event and the company is finishing the year with strong momentum.
Q: How should investors view book-to-bill and potential slippage given capacity constraints?
A: Joe Creed noted that book-to-bill will fluctuate as production ramps up, and the company relies on frame agreements and pipeline visibility beyond the backlog to plan.
Mining and Construction segment performance
Q: What is driving the mining business and are there resolution plans for ramping challenges?
A: Joe Creed reported three consecutive strong quarters for Resource Industries, driven by mining and heavy construction. He described current production issues as normal growing pains that the team is working to resolve.
Q: Have there been timing shifts in the backlog due to permitting or credit concerns?
A: Joe Creed stated there have been no significant changes in customer behavior, and the company maintains line of sight to project timelines while adjusting production slots as needed.
Q: What is the underlying demand trend in the construction segment?
A: Joe Creed highlighted strong order rates and noted that the Major Projects joint venture is helping to supplement local dealer capacity for large infrastructure and data center projects.
