Andrew Bonfield: Yeah, David, thank you. So, obviously, we’re slightly different. So if you got to think about it from a sequential basis and also year-over-year, so we try to give a little bit of color on both. On a sequential basis, we do expect, obviously, both CI and RI margins to decline. If you think normally, there’s a seasonality for both of those. What exacerbates that probably above the normal level of seasonality, particularly in CI, is the expectation for volume to impact — be impacted by dealer inventory. So that will have a slightly bigger impact than normal on CI. On E&T, as I said, we expect them to be broadly flat compared to the third quarter. Some of that is due to product mix, and timing of international rail deliveries, which are low-margin business.
Then, on top of that — so that’s sequential, quarter-over-quarter driving that. And then if you look year-over-year, obviously, yes, we do expect both CI and RI and E&T to show margin improvement year-over-year. What will slightly offset that will be some increase in corporate items as a result of the true up of incentive comp that I talked about a moment ago. On a PPS basis, offsetting that will be some favorability in other income and expense because last year, if you remember, we did have a big one-time charge for currency translation losses, which impacted the fourth quarter. So hopefully, that gives you a little bit more color overall, but that’s sort of trying to get the way we can guide you from a margin perspective. Hopefully, that’s helpful.
Operator: We will take our next question from Steven Fisher with UBS. Your line is open.
Steven Fisher: Thanks. Good morning. So clearly, terrific margins this year. Pricing is such a strong driver at the moment, but year-over-year, as you said, it’s moderating a bit. I’m just curious about your strategy on how to manage in a lower pricing growth environment going forward. I mean, to what extent do you think you can ramp up the cost focus there, and if that’s a key part of the plan, kind of what are the biggest opportunities for cost savings next year, or do you think the sort of a narrow — narrower price versus cost is really just the base case from here?
Jim Umpleby: Well, thank you, Steven. And as we mentioned, we do expect pricing to moderate just based on lapping the price increase that — increases that we had last year. We’re continually focused on having a lower cost structure. We’re looking for ways to reduce structural cost. A lot of things there back office now being performed in lower-cost countries, more engineering done in lower-cost countries, looking at ways to become more efficient. I also mentioned the fact that we — supply chain has improved, but we still have some challenges, and some surprises there that create some incremental cost due to inefficiencies based on having shortages. So, I do believe there’s still an opportunity for us moving forward to operate more efficiently in our manufacturing operations, and also to find ways to reduce structural costs. We really try to make that a way of life going forward as always finding ways to reduce structural costs.
Operator: And we will take our next question from Tim Thein with Citigroup. Your line is open.
Tim Thein: Hi. Good morning. Thanks for the time. Yeah, maybe just continuing on that thread there in terms of pricing, and just thinking about kind of the outlook into ’24, I’m interested from a competitive dynamic, if you look historically, especially focused in CI in a market with a lot of global competitors, and just looking at the dollar-yen relationship where it is at near decade-high levels, just maybe talk about what you’re seeing — what your dealers are seeing from a competitive dynamics, and your thoughts into ’24 in terms, and how that interplays with pricing. Thank you.
Jim Umpleby: Yeah. A lot of dynamics there. One, of course, is the strength of the market. So if you think about the strength of the market in North America for the reasons we’ve described, infrastructure spending and continued growth in residential, and certainly we feel good about market conditions. Competition, we’ve always had competition. We always will. We make pricing decisions based on a whole variety of factors. Certainly, we look at input cost, we look at our competitors, we look at other factors in the market, and we make decisions. There’s no one big decision. We make a whole variety of decisions based on what we’re seeing in the market at any one time. We’re always focused on remaining competitive pricing for value.
No one likes to raise prices. But of course, in the last couple of years, we’ve been in an inflationary cost environment, but we’re always looking to add more value to our customers, adding technology, things to make our customers more efficient. And you stop and think about the labor shortage that we have now. Some of the technology that we’re putting into our Construction Industries products allows less experienced operators to be more effective more quickly. And so all those kinds of things help add value to our customers. And of course, we’re investing in our digital capabilities and our services capabilities as well to help reduce downtime — unplanned downtime, increase productivity. So that all goes into it. But certainly, we recognize it’s a competitive world out there, always has been and always will be.
But we feel confident about our ability to continue to compete effectively.
Operator: And we will take our next question from Nicole DeBlase with Deutsche Bank. Your line is open.
Nicole DeBlase: Yeah, thanks. Good morning, guys.
Jim Umpleby: Good morning, Nicole.
Andrew Bonfield: Good morning, Nicole.
Nicole DeBlase: Just on the parts demand, noticed that you guys caught out a decline in aftermarket parts in resource as a driver of volume decline there. If you could talk a little bit about that? And then any color on parts demand in construction or E&T? Thank you.
Andrew Bonfield: Yeah, Nicole, thank you. Within Resource Industries, the volume did decline. It doesn’t necessarily mean the absolute dollar value declined, but the volume decline was partly due to dealer buying patterns. And so that was a factor within resources. Overall, we’re still very comfortable with the growth rate of aftermarket parts volumes. And we’ll give you the update as per normal, as I said in my remarks, in January. But overall, services revenues still continue to grow and are a very good factor for us, as you know, given our drive to double services revenue to $28 billion by 2026.
Jim Umpleby: And dealer sales to customers were up in the quarter.
Andrew Bonfield: Yeah.
Operator: And we will take our next question from Chad Dillard with Bernstein. Your line is open.
Chad Dillard: Hi, good morning, guys.
Jim Umpleby: Hi, Chad.
Chad Dillard: More of a bigger picture question. So I was hoping you could give us an update on your approach to rental. So to what extent are you looking to expand your footprint through dealers in this channel? And if you can share how much of the sales today come through this channel today? And then if we do see any near-term air pocket, do you think any expansion could provide an offset?
