Trane Technologies (NYSE:TT) & Armstrong World Industries (NYSE:AWI) Critical Contrast

Armstrong World Industries (NYSE:AWI) and Trane Technologies (NYSE:TT) are both industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, valuation, dividends and profitability.

Volatility and Risk

Armstrong World Industries has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, Trane Technologies has a beta of 1.19, meaning that its share price is 19% more volatile than the S&P 500.

Institutional and Insider Ownership

98.9% of Armstrong World Industries shares are held by institutional investors. Comparatively, 83.0% of Trane Technologies shares are held by institutional investors. 1.2% of Armstrong World Industries shares are held by insiders. Comparatively, 0.4% of Trane Technologies shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Armstrong World Industries and Trane Technologies’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Armstrong World Industries	18.38%	38.06%	17.16%
Trane Technologies	13.56%	37.26%	14.17%

Earnings and Valuation

This table compares Armstrong World Industries and Trane Technologies”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Armstrong World Industries	$1.75 billion	4.26	$308.70 million	$7.49	23.74
Trane Technologies	$21.32 billion	4.39	$2.92 billion	$14.16	30.22

Trane Technologies has higher revenue and earnings than Armstrong World Industries. Armstrong World Industries is trading at a lower price-to-earnings ratio than Trane Technologies, indicating that it is currently the more affordable of the two stocks.

Dividends

Armstrong World Industries pays an annual dividend of $1.49 per share and has a dividend yield of 0.8%. Trane Technologies pays an annual dividend of $4.20 per share and has a dividend yield of 1.0%. Armstrong World Industries pays out 19.9% of its earnings in the form of a dividend. Trane Technologies pays out 29.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Armstrong World Industries has increased its dividend for 1 consecutive years and Trane Technologies has increased its dividend for 5 consecutive years. Trane Technologies is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings for Armstrong World Industries and Trane Technologies, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Armstrong World Industries	0	2	7	0	2.78
Trane Technologies	0	4	14	2	2.90

Armstrong World Industries currently has a consensus price target of $203.12, indicating a potential upside of 14.23%. Trane Technologies has a consensus price target of $532.21, indicating a potential upside of 24.38%. Given Trane Technologies’ stronger consensus rating and higher probable upside, analysts clearly believe Trane Technologies is more favorable than Armstrong World Industries.

Summary

Trane Technologies beats Armstrong World Industries on 12 of the 18 factors compared between the two stocks.

About Armstrong World Industries

Armstrong World Industries, Inc. develops and manufactures ceiling and wall systems for commercial and residential buildings. Its products include acoustical ceiling panels and suspension systems, metal and wood ceilings, wall panels, and architectural specialty products designed for construction, renovation, and interior design projects. The company serves customers primarily in North America, including building owners, contractors, architects, and distributors. Its products are used in settings such as offices, schools, healthcare facilities, and homes.

About Trane Technologies

Trane Technologies plc is a global climate innovator that designs, manufactures, and services heating, ventilation, air conditioning, and refrigeration systems. Its products and services support commercial buildings, homes, and transportation applications, including temperature-controlled shipping. The company’s portfolio includes the Trane brand of HVAC systems and building services, as well as Thermo King equipment for transport refrigeration and climate control. It also offers building controls, energy-efficiency solutions, system maintenance, and related services.