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 A. O. Smith (NYSE: AOS) 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 Q3. As a group, revenues beat analysts’ consensus estimates by 1%.

In light of this news, share prices of the companies have held steady as they are up 4.2% on average since the latest earnings results.

A. O. Smith (NYSE: AOS)

Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE: AOS) manufactures water heating and treatment products for various industries.

A. O. Smith reported revenues of $902.6 million, down 3.7% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with EBITDA in line with analysts’ estimates but a slight miss of analysts’ organic revenue estimates.

A. O. Smith delivered the slowest revenue growth of the whole group. Unsurprisingly, the stock is down 8.3% since reporting and currently trades at $72.11.

Read our full report on A. O. Smith here, it’s free.

Best Q3: CSW (NASDAQ: CSWI)

With over two centuries of combined operations manufacturing and supplying, CSW (NASDAQ: CSWI) offers special chemicals, coatings, sealants, and lubricants for various industries.

CSW reported revenues of $227.9 million, up 11.9% year on year, outperforming analysts’ expectations by 5%. The business had a stunning quarter with a solid beat of analysts’ EBITDA estimates.

CSW pulled off the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 7.5% since reporting. It currently trades at $390.21.

Is now the time to buy CSW? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: 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, falling short of analysts’ expectations by 4.5%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.

Advanced Drainage delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 19.1% since the results and currently trades at $128.50.

Read our full analysis of Advanced Drainage’s results here.

Trane Technologies (NYSE: TT)

With low-pressure heating systems as the 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 $5.44 billion, up 11.4% year on year. This print topped analysts’ expectations by 2.4%. It was a very strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates.

The stock is up 3.1% since reporting and currently trades at $402.99.

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

Zurn Elkay (NYSE: ZWS)

Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.

Zurn Elkay reported revenues of $410 million, up 2.9% year on year. This result beat analysts’ expectations by 0.9%. Aside from that, it was a mixed quarter as it also recorded a solid beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ organic revenue estimates.

The stock is up 14.7% since reporting and currently trades at $41.20.

Read our full, actionable report on Zurn Elkay here, it’s free.

Market Update

As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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