Richard Tobin : Well, you touched on them all, Julian. Yes. I mean, look, we cut production in DCF to manage inventory. So that is not just the lost products that we sell. It’s all – and we did it on the underground portion of the business, which is highly margin accretive. So we get that back and it’s reflected in Q4, and it’s reflected in the year-over-year. So we would expect as we balance production that returns. Engineered Products, really the bulk of the margin accretion in ’23 was driven by ESG, but that was more or less back half and we expect a full year of that going into 2024. And if you recall, we had a little bit of a hiccup with an implementation of ERP and VSG last year, which we don’t expect to reoccur again.
So that’s helpful. PII, what do we close at? 25% margins. That’s great. So that’s more a revenue issue for us. DPPS has had a biopharma headwind now for 2-plus years. What we’re calling here it’s no longer a headwind and whatever we get on the top side, which we’re not baking in a lot right now or hardly anything is going to be accretive. And the DCST has got – right now in our forecast would be margin down on mix because Belvac, which we knew was going to come down and our cautious stance on heat pumps. If we’re wrong about being cautious about heat pumps, then that will flex that will – the headwind will be less than we’ve got modeled into our forecast for the year.
Julian Mitchell: That’s very helpful. Thank you. And I just wanted to follow up when you were talking about sort of some of the quarterly earnings trends. So do we assume sort of Q1 earnings or EPS is flattish? And then as you said, you get into the meat of the earnings growth in Q2 and Q3?
Richard Tobin : Yes, I’m not going to go – it’s – Q1 will be more of a reflection of the carryforward of Q4. What we’ll get is some amount of production ramp, but a lot of bad comps and then we accelerate right out of there.
Julian Mitchell: That’s great. Thank you.
Richard Tobin : Welcome.
Operator: The next question comes from Nigel Coe with Wolfe Research.
Nigel Coe: Thanks. Good morning. We’ve covered a lot of ground. And Rich, you clearly don’t want to give too much cover on margins, but I just wanted to have another crack here. Clearly, margin leverage is a big driver of earnings this year. So maybe just talk about what you baked in for structural cost savings? I know we’ve got some roll forward from some of the actions you took in ’23, but maybe just itemize any other significant cost actions you’ve taken driving margins in ’24?
Richard Tobin : Yes. If we go back and look at the transcript, Nigel, we do have carryforward from actions that we took in the back half of the year. We’ve got some coming. I’m not ready to calendarize it yet because they’re not fully baked, but we do have a list of – we do have a list of cost actions, which are more of a revenue hedge. So if we take those actions and we’re right on the demand profile, those should actually be accretive to us. So they’re not necessarily baked in at this point. And the reason they’re not baked in is because we’re working on the timing in terms of the execution.
Nigel Coe: Okay. And then on pricing, we’ve been very successful in pushing price. I mean, I think we’ve all been a little bit nervous about some of the more raw material sensitive businesses, SWEP, Hillphoenix and maybe parts of ESG as well. But it sounds like your customers are forecasting inflation on their components, specifically with the HVAC end market. So just curious what you’re seeing in terms of pricing power across the portfolio in ’24, specifically within some of these more raw material sensitive end markets?
Richard Tobin : Yes, it’s interesting. I mean, if you go back and look at our realized pricing, and I’m talking about the portion of the pricing that’s fallen all the way to the bottom line, it has not been dramatic for us. And it’s a source of consternation around here of what is capable in pricing. And so if we look at some of our end market customers and what they’ve passed through on pricing, I guess that we’ve been jealous for lack of better words. So to us, it’s been – we’ve – I don’t want to be negative. I think we’ve taken some price I don’t feel that we’ve got a couple of businesses that have escalation, de-escalation clauses in terms of inputs. I think we’ve been on the front foot in those businesses of being proactive about locking in our pricing, especially going into this year.
So right now, we’ve actually got a little bit of room if we had to give back pricing, but that’s not my expectation. Our issue has always been that the way to defend pricing is not to get over your skis and inventory, and that’s why we took it into the neck to a certain extent to kind of manage that position at the end of last year going into kind of the demand environment, at least the setup as we see it today, I think that we feel good about our ability to protect price.
Nigel Coe: Right, okay. Thanks.
Operator: Our final question comes from Deane Dray with RBC Capital Markets.
Deane Dray: Thank you. Good morning, everyone. Thanks for fitting me in.
Richard Tobin : Thanks, Deane.
Deane Dray: Hey. Was there any comments puts or takes on how January started? And just a couple of minutes ago, the ISM January new orders came out at above 50 for the first time, I think, in like 1.5 years, so at 52.5. But any puts and takes from your perspective there?
