Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Lennox (NYSE: LII) and the best and worst performers in the hvac and water systems industry.
Many HVAC and water systems companies sell essential, non-discretionary infrastructure for buildings. Since the useful lives of these water heaters and vents are fairly standard, these companies have a portion of predictable replacement revenue. In the last decade, trends in energy efficiency and clean water are driving innovation that is leading to incremental demand. On the other hand, new installations for these companies are at the whim of residential and commercial construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.
The 9 hvac and water systems stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 2.1% while next quarter’s revenue guidance was 0.7% below.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Lennox (NYSE: LII)
Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
Lennox reported revenues of $1.07 billion, up 2.4% year on year. This print exceeded analysts’ expectations by 4.6%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ organic revenue estimates and a decent beat of analysts’ EPS estimates.
"Our results this quarter highlight the strength of our replacement-driven business model and the value of our North American-focused strategy. We are navigating the shifting trade dynamics with flexibility, supported by a more resilient supply chain built through past disruptions," said CEO, Alok Maskara.
Unsurprisingly, the stock is down 3.8% since reporting and currently trades at $537.47.
Is now the time to buy Lennox? Access our full analysis of the earnings results here, it’s free.
Best Q1: AAON (NASDAQ: AAON)
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
AAON reported revenues of $322.1 million, up 22.9% year on year, outperforming analysts’ expectations by 10.9%. The business had an incredible quarter with a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
AAON delivered the biggest analyst estimates beat and fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 19.2% since reporting. It currently trades at $73.61.
Is now the time to buy AAON? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Advanced Drainage (NYSE: WMS)
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.
Advanced Drainage reported revenues of $615.8 million, down 5.8% year on year, falling short of analysts’ expectations by 6.8%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
Advanced Drainage delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 6.7% since the results and currently trades at $113.58.
Read our full analysis of Advanced Drainage’s results here.
Trane Technologies (NYSE: TT)
With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
Trane Technologies reported revenues of $4.69 billion, up 11.2% year on year. This print topped analysts’ expectations by 5%. Overall, it was an exceptional quarter as it also put up an impressive beat of analysts’ EBITDA estimates.
The stock is up 19.3% since reporting and currently trades at $421.95.
Read our full, actionable report on Trane Technologies here, it’s free.
Carrier Global (NYSE: CARR)
Founded by the inventor of air conditioning, Carrier Global (NYSE: CARR) manufactures heating, ventilation, air conditioning, and refrigeration products.
Carrier Global reported revenues of $5.22 billion, down 3.7% year on year. This number met analysts’ expectations. It was a very strong quarter as it also produced a solid beat of analysts’ EBITDA estimates.
Carrier Global achieved the highest full-year guidance raise among its peers. The stock is up 12% since reporting and currently trades at $69.96.
Read our full, actionable report on Carrier Global here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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