Nigel Coe: No, that’s right. Yes. And then my follow-up question, I think this is a quick one. I thought Slide 14 was a good slide showing the variability in revenue growth, but ultimately, around a mid-single-digit type of growth rate. And 2024 was sort of to that. So I’m just curious, does the same thing, as we frame 2024, does the same apply to incremental margins? And the spirit of the question is you’re coming off a really big year for incrementals. So I think we’re north of 60%. Does that mean that 2024 might be sort of below natural levels? Or are you confident you can build on 2023 margins in the 40%, 50% range, perhaps?
Charles McLaughlin: Nigel, a couple of things to think about as 2023 margins are very good. And normally, we’d think about 40% incrementals and I think it’s been 60%. That has to do with more with the productivity things that we did early in the year and then you saw us do some more. So no, we would always expect 40% incrementals moving forward. And then it will be a little bit more elevated because of the actions that we’re taking right now. So we will build on what we’ve done here, and we would expect them to be elevated from what they would be because of the actions that we’re taking here in the second half.
James Lico: And Nigel, relative to core growth, I think hopefully, that slide is helpful because what we were trying to articulate is what we really said is mid-single digits through the cycle. So after a couple of years of 10% like growth, we would anticipate having a little bit of normal — we’ve been talking about this for three quarters. We have a little bit of normalization. We talked about that consistently about that in the second half of the year. We’re seeing that mostly very, very consistent with what we talked about. I think a little bit of difference in Sensing, a little bit of difference in China relative to what we talked about. But again, I think we’re seeing that normalization here in the second half of the year.
And I think that’s very consistent with how we would look at a mid-single-digit grower through the cycle. And as Chuck just mentioned, the fact that we’ve been prepared for things means we’ve been able to drive really good margin expansion even with some slowing in the second half of the year because of our preparation and because of how we run the business.
Nigel Coe: That’s great. Thank you.
James Lico: Thank you.
Operator: Your next question comes from the line of Andy Kaplowitz from Citigroup. Please go ahead.
Andrew Kaplowitz: Good morning everyone.
James Lico: Hey Andy.
Andrew Kaplowitz: So I think one of the keys for ASP as you go into Q4 2023 and 2024 is consumables coming back and being relatively strong. I think you’ve talked about underlying elective procedures improving. I would surmise that’s the case in the U.S. and I guess in China at this point. But what is your visibility into the consumables ramp-up, and if anything, would stop ASP from recording the stronger consumables demand?
Charles McLaughlin: So Andy, a couple of things just from elective procedures, generally in Q2, we thought we were 95% around the world. A little bit slowed in China because of the anticorruption stuff probably did 90%. But definitely improving around the world. We do have this inventory adjustment transition in North America. But when you look through that, the actual consumables growth is already there. It’s there in Q2 and Q3 when you understand how the customers are using our products. And that’s where when Jim talks about the 2-year stack, we’re up 8%, 9% from Q2, Q3, Q4 rather consistently when you just take that one thing out. So we think we’re already seeing that and what’s actually going to use at the. Let me stop there and see if that made sense.
Andrew Kaplowitz: Yes. No, that totally makes sense. And then maybe just shifting gears, Jim, could you talk a little bit more how you’re thinking about M&A now? After the announcement of VA and you had the three small bolt-ons, how are you balancing thinking about the higher rates environment in terms of your own M&A strategy? And should we expect a higher tempo of M&A from Fortive over the short to medium term?
James Lico: Well, I think it’s really — when we were in our — when we had our Investor Day in May, what we tried to outline was the opportunities in front of us. And I think what I tried to really try to communicate that and consistently is really around the fact that we were active, that we — I think I said in the second quarter call, I thought we’d get some things done in the second half. But maybe — I probably had four of the five parts already drawn at that point. But I think we’ve been busy. We’ve been active. We’ve been looking for unique situations. I think everybody was looking for a step down in massive price differences. We’ve seen a number of peer companies pay robust prices. I think what we’ve been able to do is find those unique situations.
Those three bolt-ons were unique situations, places like Azima, where we’ve had a long-term relationship with them and a little bit of a partnership. Solmetric, which is a tool solar tool company. These are unique things that we’re able to do that are really product extensions with high ROICs. And as I was mentioning earlier in the call, EA is really very similar. It’s a business we’ve known for a while. We’ve known it in the market. They actually are well known amongst all test and measurement players for their technology and their ability to sort of play in the really good high-growth applications. And so I think we’ll continue to look for those opportunities that are there, and we think they are. We’ll continue to do that. But we’ll also do that within the context of looking for strong returns, and that’s what you’ll see.
And I think what makes us — I think what we’ve been trying to talk about is that we would demonstrate these things, they’re hard to plan out. So sometimes they come in bunches like they did this quarter. But we will remain active, but we’ll be looking for those opportunities that are, I think, very similar to what we’ve seen this quarter, which is unique situations where we really have an opportunity to get higher returns.
Andrew Kaplowitz: That’s great, Jim. And Chuck, just to sort of follow up on my first question. You don’t need a consumables ramp up to make your Q4 margin, right? You already have it. It’s just the other thing getting better?
Charles McLaughlin: Yes, that’s exactly right.
