The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how AAON (NASDAQ: AAON) and the rest of the hvac and water systems stocks fared in Q3.
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 Q3. As a group, revenues beat analysts’ consensus estimates by 0.9%.
In light of this news, share prices of the companies have held steady as they are up 3.1% on average since the latest earnings results.
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 $327.3 million, up 4.9% year on year. This print exceeded analysts’ expectations by 3.6%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ EPS estimates.
Gary Fields, CEO, stated, "The third quarter marked another quarter of strong results. Net sales for the quarter were a Company record, driven by robust growth at the BASX and AAON Coil Products segments."
Interestingly, the stock is up 13.3% since reporting and currently trades at $135.09.
Best Q3: 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 $1.50 billion, up 9.6% year on year, outperforming analysts’ expectations by 5.9%. The business had a stunning quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ adjusted operating income estimates.
Lennox delivered the biggest analyst estimates beat among its peers. The market seems content with the results as the stock is up 2.9% since reporting. It currently trades at $612.01.
Is now the time to buy Lennox? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: 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 $5.98 billion, up 21.3% year on year, falling short of analysts’ expectations by 7.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly.
Carrier Global delivered the fastest revenue growth but had the weakest performance against analyst estimates and weakest performance against analyst estimates in the group. As expected, the stock is down 6.2% since the results and currently trades at $74.97.
Read our full analysis of Carrier Global’s results here.
Northwest Pipe (NASDAQ: NWPX)
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.
Northwest Pipe reported revenues of $130.2 million, up 9.7% year on year. This print beat analysts’ expectations by 2.4%. Overall, it was an exceptional quarter as it also produced an impressive beat of analysts’ EPS estimates.
The stock is up 20.1% since reporting and currently trades at $53.67.
Read our full, actionable report on Northwest Pipe here, it’s free.
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 $782.6 million, flat year on year. This print missed analysts’ expectations by 4.5%. Overall, it was a disappointing quarter as it also produced a significant miss of analysts’ EBITDA estimates.
The stock is down 17.5% since reporting and currently trades at $131.09.
Read our full, actionable report on Advanced Drainage here, it’s free.
Market Update
In response to the Fed's rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed's 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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