Wrapping up Q1 earnings, we look at the numbers and key takeaways for the hvac and water systems stocks, including Carrier Global (NYSE: CARR) and its peers.

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 0.6% below.

In light of this news, share prices of the companies have held steady as they are up 4.3% on average since the latest earnings results.

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 print was in line with analysts’ expectations, and overall, it was a very strong quarter for the company with a solid beat of analysts’ EBITDA estimates.

"We delivered another quarter of strong financial performance," said Carrier Chairman & CEO David Gitlin.

Carrier Global scored the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 20.7% since reporting and currently trades at $75.43.

Is now the time to buy Carrier Global? 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 pulled off 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 18.1% since reporting. It currently trades at $74.66.

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 a miss of analysts’ Infiltrators revenue estimates.

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 8.9% since the results and currently trades at $110.89.

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 result surpassed analysts’ expectations by 5%. It was an exceptional quarter as it also logged an impressive beat of analysts’ EBITDA estimates.

The stock is up 23.5% since reporting and currently trades at $436.98.

Read our full, actionable report on Trane Technologies here, it’s free.

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 topped analysts’ expectations by 4.6%. Overall, it was a very strong quarter as it also put up a solid beat of analysts’ organic revenue estimates and a decent beat of analysts’ EPS estimates.

The stock is up 6.9% since reporting and currently trades at $597.16.

Read our full, actionable report on Lennox 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.

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