Andre Madrid: Fair, fair. I see. I’ll leave it there. Thanks so much.
Operator: Thank you. Our next questions come from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your question.
Steve Barger: Thanks. Good morning.
Michael Hartnett: Good morning, Steve.
Steve Barger: For 3Q, if I assume your EBIT margin in Aero and your corporate expenses were pretty similar sequentially, it suggests the Industrial margin was down maybe 300 basis points versus 2Q. First of all, is that right? And second is that just from revenue being down? Or is there a mix in there? And how are you thinking about 4Q Industrial margin?
Michael Hartnett: Well, I think the Industrial margins were down and I think it’s mix driven. And based upon the way we forecast, it’s mainly a Dodge issue. And basically, the way we forecast Dodge going forward, it’s hard to tell exactly what that mix is going to be. So I suspect there will be no more deterioration than it was in the third quarter. And so worst case we have some pickup.
Robert Sullivan: Yeah. Steve, I’ll give them to you right now. So you’ll see it in the Q later, but the Aerospace margins we had a really strong quarter. The margins were 41.2%. So they continue to escalate as I’ve talked about in the last few calls. Industrial margins were 42.8% this quarter. But I kind of want to go back to what Dan said earlier in the call that for the nine months, gross margins are up 220 basis points for the full year consolidated. So we’re well ahead of what we had said earlier in the year and feeling really good about it.
Steve Barger: Got it. Thank you for that, Rob. Some other industrial companies have been guiding to a softer organic growth environment for the first half of 2024 calendar and stronger in the back half. And I know Dodge is in a backlog basis business, but how are you thinking about general cadence of industrial revenue through calendar 2024. Is there anything different from what you’d expect from your own normal seasonality?
Michael Hartnett: We’re not seeing it. I mean we’re off – since the first of January, the Industrial bookings have been very encouraging. So the economists predict one thing and it seems like the economy does something else. So I don’t think anybody expected the GDP growth that we saw in the third quarter or we’re projecting it earlier. And so I think the – I think we’re just steady as she goes. As I said earlier we’re taking it one month at a time.
Steve Barger: And so if there is weakness in industrial that you’re seeing right now it is on the Dodge side whereas legacy I think you said is more stable or was up year-over-year while Dodge was down?
Michael Hartnett: Well, the legacy business is more like the RBC aircraft business in that it’s servicing OEMs, principally on an 80-20 basis. And so there’s long-term POs and there’s contracts and there’s all that sort of thing that ties it together. And so it’s much easier to forecast it.
Steve Barger: Got it. And just one last one. As you look across the M&A landscape, are you seeing more Industrial deals than Aero? And what are the relative sizes of deals that you see across the two segments?
Michael Hartnett: I’d say, the Industrial sizes are in the $100 million to $200 million kind of range is what we’ve been seeing coming by. And some of the Aerospace businesses are larger than that. And they sort of come and go. We’re looking – we’re a little picky about exactly what we want in our space. And so I think during the third quarter we worked very hard on one and sort of missed the grade. So we’re all recovering from disappointment this quarter and looking at other potentials.
Steve Barger: And just to clarify those are deal sizes or revenue?
Michael Hartnett: Revenue.
Steve Barger: Got it. Okay. Thank you.
Operator: Thank you. Our next questions come from the line of Seth Weber with Wells Fargo. Please proceed with your questions.
Seth Weber: Hey, guys. Good morning. Sorry to just go back to the guidance question again for the fourth quarter. I guess to have Industrial revenue up a few 100 basis points sequentially, that implies on a year-over-year down kind of mid- to high single digits. I’m just trying to tie that together with your commentary about the January bookings being better. So would you expect 2025 Industrial to be less negative than the down kind of mid- to high single-digits that is kind of implied by your fourth quarter Industrial revenue? Does that make sense? Or is that how you start the year anyway?
Michael Hartnett: Yes. I think the fourth quarter Industrial revenue will be — as we said, will be up a few percentage points based upon what we’re seeing so far in the quarter. There doesn’t seem to be much difference about that. I think the — is the issue of the Aerospace projection?
Seth Weber: I’m sorry, I’m trying to just discern. Your — I think you’re talking sequential improvement but I’m just trying to think of that on a year-over-year basis, I think sequentially up a few percent translates down, I don’t know 7% or 8% year-to-year? Or is that not the right math?
Robert Sullivan: That seems very high. I don’t suspect that it’s going to be down 7% to 8% year-over-year.
Seth Weber: Okay. All right.
Michael Hartnett: I’m a year-over-year guy too, Seth. And yes, I think the Industrial revenue year-over-year is going to be up a few percent in the fourth quarter.
Seth Weber: Okay. All right. That’s super helpful clarification. Thank you. And I just wanted to go back to the comment around the Mexico capacity add. Can you just — I apologize if you’ve talked about this more in the past but is that replacing — are you moving capacity from high-cost markets to Mexico? Or is that just incremental capacity? And what will that be serving? Thank you.
