Richard J. Tobin
President & Chief Executive Officer at Dover
Alright. I'm on Slide 9. We expect Engineered Products to generate moderate growth in the fourth quarter. Aerospace and defense should remain strong. Meanwhile, the auto strike will weigh on several businesses in the near term. Growth in our waste handling business, which is expected to be robust in the fourth quarter into '24, will be reduced in the near term by recent strike at a major truck OEM impacting deliveries. Shipments in vehicle aftermarket expected to be lower versus a record previous year and higher interest rates weigh on service shops' ability to finance capex. We expect margins to improve in the quarter on positive price cost tailwinds and benefits from our recent productivity capital investments. Clean Energy & Fueling is expected to remain steady. Clean energy LNG and hydrogen components should continue the robust trajectory and order trends in above-ground retail fueling point to continued post EMV recovery.
We expect channel destocking and interest rate driven headwinds in the below-ground fueling segment, LPG components, and vehicle wash to maintain through year-end. We expect stable margin performance as the $60 million in aggregate structural cost containment actions in retail fueling should offset negative mix from lower below-ground and lower car wash volumes. Imaging & ID is expected to be down organically against a difficult comparable period driven by slowing demand in Asia and a skewed outlook for textiles, serialization software should continue its growth trajectory, and our new customer conversion margin performance should remain at attractive levels in this segment. Pumps & Process is expected to remain roughly flat organically in the fourth quarter. Precision components should continue growth tailwinds from energy transition projects. Polymer processing is booked for the year.
The recovery in biopharma components has been very subdued and although channel inventory levels are now below pre-pandemic levels, end customer demand has not recovered enough to drive 2023 growth despite earlier forecasts indicating recovery. We have reduced our production and inventory levels appropriately and will remain in this posture for the balance of the year. This is generally a short cycle business and we can ramp as order rates recover in '24. We expect year-over-year margin headwinds on negative mix in biopharma. And after several years of impressive topline growth, Climate & Sustainability Technologies is expected to moderate in the fourth quarter as demand for heat exchangers abruptly slowed in Q3 due to near-term uncertainty in European heat pumps. As a result, we're reducing production levels to allow for inventory to be cleared in the fourth quarter.
Traditional refrigeration demand will retain its seasonality with reduced activity during the holiday season. But we continue to see robust demand for our CO2 refrigeration systems and are ramping up production and go-to-market efforts appropriately. We expect continued year-over-year margin improvement through year-end on productivity gains and improved mix. Going to Slide 10. Our updated EPS guide reflects the near-term changes in demand and our production posture, temporary and isolated issues in the supply chain, and cost related to acquisitions, integration, and divestment activities. We expect these headwinds to be partially offset by a lower effective tax rate in Q4 as a result of tax reorganization activities driven by upcoming regulatory changes.
As I've highlighted, we believe our changed operating and production posture focused on reducing inventories and prioritizing cash flow over volume in reaction to the dynamic operating environment is critical to setting up 2024 outlook where we can maintain and expand operating margins. Let's go to Slide 11 and take a quick look at the inorganic moves that we made during the quarter. Here we summarize the two recently announced transactions that align well with our portfolio priorities and enhance the overall quality of Dover's portfolio through margin growth and reoccurring revenue uplift, all while reducing our exposure to automotive and China. Importantly, we were able to acquire FW Murphy at a lower valuation multiple than our sale of De-Sta-Co and the after-tax proceeds from the De-Sta-Co sale more than paid for FW Murphy preserving significant balance sheet capacity for additional capital deployment options.
Slide 12 provides more color on the rationale for the acquisition of FW Murphy by our precision components operating unit, which is part of Pumps & Process Solutions segment. FW Murphy brings a highly complementary product offering to our existing position in reciprocating compression industry. FW Murphy intends to capitalize on the growing adoption of advanced remote monitoring control, real-time optimization solutions as customers seek to reduce costs, improve uptime, and lower emissions. In combination with our best-in class clean technology and our leading position in sealing and valve technology for alternative energy applications including in hydrogen, the FW Murphy acquisition offers a compelling value proposition into a global industry where we see robust demand from energy transition investments.
The FW Murphy acquisition provides a good segue into our next topic, which is to highlight the recent developments and investment in sustainability driven markets starting on Slide 13. There has been plenty of interest around hydrogen as a result of the recent announcement of $7 billion in federal funding for multiple regional hydrogen hubs that are expected to also attract $40 billion in private funding and a roster of blue-chip industry participants. Dover has established a position in hydrogen with the 2021 acquisition of Acme, which supplies flow control components for liquid hydrogen; and LIQAL, which offers turnkey hydrogen refueling sites. Additionally, we are organically invested in extending DPC's gas compression components to participate in gaseous hydrogen applications. In short, there is no hydrogen economy without compression.
We have great relationships with the industrial gas and hydrogen players and aim to participate with the whole value chain through transport and storage, through end use in collaboration with equipment OEMs. We are well-positioned to capitalize on growth in hydrogen and industry with a high focus on safety and regulatory compliance with high technological requirements for participation. Moving to Slide 14. The EPA recently finalized its rule under the AIM Act with the deadline for new installation of refrigeration systems to be compliant with lower GWP requirements by January of 2027. We believe this rule is a clear tailwind to our CO2 systems business. We have had a leading position in European CO2 market for over a decade where we enjoyed steady double-digit growth trajectory.
We were the early mover in transplanting this technology to the US where we currently enjoy a technological lead and have the largest installed base and broadest differentiated offering. We have proactively expanded our capacity in addition -- in anticipation of market growth and have been investing behind a platform based product strategy to drive standardization thereby reducing costs for ourselves and our customers, improving product quality, and simplifying the sales process. Our global CO2 business is approximately $200 million in revenue, the US market is in the early innings, and our business is on track for 30% growth in 2023 with a strong outlook. We are also excited about our new CO2 based heat pump offerings for industrial and district heating applications. It's early days, but we have an active pipeline of orders.
And finally, on Slide 15 shows our latest views on heat exchangers since it has become a battleground topic. Our heat exchanger business supplies brazed plate technology, which is currently the most sustainable commercialized heat transfer technology for fluids. We have been the clear beneficiary of the sustainability and climate tailwinds across various applications with a lot of attention drawn recently from our participation as a key supplier to hydronic heat pumps. Heat pumps have emerged in recent years as a technology of choice to decarbonize residential heating, which is responsible for a significant portion of global emissions, with hydronic heat pumps as a primary technology to retrofit houses that rely on water based heating. Legislative initiatives in the European Union and individual countries are driving the conversion of fossil fuel boiler for heat pumps.
Recent uncertainties in sub -- about subsidies in select European countries have weighed on near-term volumes as I indicated earlier. Our exposure across multiple OEMs and geographies and as such, we are not over-indexed to any product or customer concentration risk. We remain confident about the long-term growth prospects for heat pumps and our technology. It's important to note that European residential heat pumps represent only a quarter of our heat exchanger business. We see several solid growth vectors driven by sustainability tailwinds and continue to share gains from other legacy heat exchanger technologies. We have proactively expanded our capacity as we expect continued robust growth trajectory in heat exchangers albeit with slightly lower rates in the near term as various dynamics in Europe slow down. I'll close my prepared remarks by thanking our global teams for driving our strong financial performance during the quarter.
And it's time for Q&A.
