Brad Cerepak: Yes. And on those two businesses, specifically, we’re talking about SWEP [ph] and CPC. When the volume does come, they do convert and the mix is up. So that’s the good news.
Steve Tusa: Thanks. Thanks a lot.
Richard Tobin : Thanks.
Operator: The next question comes from Joe Ritchie with Goldman Sachs.
Joe Ritchie: Hey, guys. Good morning.
Richard Tobin : Joe.
Joe Ritchie: Hey. So Rich, a lot of discussion around your portfolio these days. Just curious what you’d like to share about the potential to unlock value by divesting some of the pieces of the portfolio? Any comments you’d like to share there would be great.
Richard Tobin : I mean we’re committed to managing the portfolio. I think we sold DESTACO, I think, at a pretty good price in 2023. We’ve just – we’ve closed three acquisitions over the last five months where I think are margin accretive and more growth-oriented assets. So I think we’ll do the same thing. I think that bigger portfolio moves, you need balance sheet optionality. And I think that if you look at what the knock-on effect of the really good cash flow that we have this past year is our balance sheet optionality is in a really good place. So – which we can be more prosaic about what that means, but at least the building blocks that we need to continue to shape portfolio have improved year-over-year. Let me put it to you that way.
Joe Ritchie: Okay. That’s helpful. And I missed some of the initial commentary around the guide. I know that there – organically, I think you guys talked about maybe 5% to 7% EPS growth. But just maybe kind of help me understand the low end, the high end, what kind of shapes both of those?
Richard Tobin : Well, I mean, the headline figure at one to three, you need to take into account that we know where we have cyclical headwinds going forward, right? So we had banked significant profits out of polymer processing and can-making equipment that we knew this headwind was coming. So in that one to three, we’re making all that up. We’ve got a bit of a headwind in terms of the disposal of DESTACO coming out, that the acquisitions, I think on a profit point of view, neutralizes it, but not from a top line point of view. And then I think that we’ve – unlike previous years where we’ve kind of led forecasting in terms of biopharma and HVAC components because those are battlegrounds. We’ve taken a very cautious stance on that, and we’re going to wait to see how the market develops.
Joe Ritchie: Okay, good enough. Thanks, guys.
Richard Tobin : Thanks.
Operator: The next question comes from Jeff Sprague with Vertical Research.
Jeff Sprague: Hey, thank you. Good morning, everyone.
Richard Tobin : Hi, Jeff.
Jeff Sprague: Hey, Rich, just back to capital deployment. If I think about what you’ve laid out in the guide here today, is there any prospective capital deployment on share repurchase or deleveraging or anything like that in the numbers?
Richard Tobin : Some, right. Look, if you calculate the EPS accretion on a cautious top line that you’d come with an incremental margin that is pretty high, right? So at the end of the day, what’s incorporated in there is a little bit of capital deployment, whether that be in M&A activity or share repurchase. The timing of which we’ll let you know when it happens.
Jeff Sprague: And then on your Slide 10, right? I mean, you do have two segments that are net negative M&A. I mean, does this kind of inform where we’re headed over time? There’s gems [ph] in DCST, obviously, like CO2. But should we take that chart at face value on what you’re – how you’re thinking about reshaping the portfolio?
Richard Tobin : Well, that chart actually foots to the chart that we put out in 2020 in terms of the hierarchy of capital allocation to a certain – well, I think the DPPS and DCEF kind of flipped, but that – because you can’t control in terms of closing acquisitions. Yes, I mean, overall, yes. I mean if you think that engineered products outside of defense has been an organic issue for us for some time. And DCST, Belvac and SWEP are organic and I think in refrigeration, I think that what we’ve done with the total investment, that would be an organic play also. So yes, I think that the hierarchy there, they may flip around a little bit, but it’s largely correct.
Jeff Sprague: Okay. And just on the – back on the orders, Rich, that strengthened process orders in the quarter. Was that all bio or did something else notably pick up in there?
Richard Tobin : I think it’s broad based, and I think it’s more influenced by what do we call them, the thermal connectors.
Jeff Sprague: Great. Thank you. Thank you very much.
Richard Tobin : You’re welcome.
Operator: The next question comes from Julian Mitchell with Barclays.
Julian Mitchell: Hi, good morning.
Richard Tobin : Good morning.
Julian Mitchell: Morning. Maybe I just wanted to start with the operating margins. So I realize you’re not giving a sort of firm-wide number for this year or much segment color. So maybe trying to think about some of the firm-wide drivers of margin this year. So I think there’s some positive volume leverage because those are up 1, 1.5 points. Price cost is broadly neutral. M&A and divestment seems maybe neutral, what you’ve announced so far. So I wondered if those three assumptions were right. And then mix, I guess, anything you’d characterize from all those moving parts sort of biopharma stable, heat pump down, polymer and can down, maybe fueling up, like in aggregate, is there much of a mix impact do you think on margins in your guide?
