Q3 Earnings Highs And Lows: Zurn Elkay (NYSE:ZWS) Vs The Rest Of The HVAC and Water Systems Stocks

January 15, 2025 at 04:01 AM EST

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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 Zurn Elkay (NYSE: ZWS) 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 0.9%.

While some hvac and water systems stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3% since the latest earnings results.

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 print exceeded analysts’ expectations by 0.9%. Despite the top-line beat, it was still a mixed quarter for the company with a solid beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ organic revenue estimates.

Todd A. Adams, Chairman and Chief Executive Officer, commented, “We delivered a solid quarter as both sales and margins exceeded the guidance we provided 90 days ago. Despite pockets of challenging end markets, our third quarter pro forma core sales(1) growth was 4% and adjusted EBITDA margins(1) grew by 150 basis points year over year to 25.6%. Free cash flow(1) continues to be exceptional as we generated $87 million of free cash flow(1) in the third quarter bringing our year to date total to $217 million. We continue to leverage our robust cash flow to invest in our business and return capital to shareholders as we cultivate the right M&A opportunities. In the quarter we deployed an additional $50 million of capital to repurchase 1.6 million shares, while increasing our quarterly dividend by 13% and reducing our net debt leverage(1) to an all-time low of 0.8x.”

Interestingly, the stock is up 3.9% since reporting and currently trades at $37.31.

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

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 and adjusted operating income estimates.

Lennox delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 6.2% since reporting. It currently trades at $632.

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.

Carrier Global delivered the fastest revenue growth but had the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 14.7% since the results and currently trades at $68.20.

Read our full analysis of Carrier Global’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 number beat analysts’ expectations by 2.4%. It was a very strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates.

The stock is flat since reporting and currently trades at $386.99.

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

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. This result topped analysts’ expectations by 5%. Overall, it was an exceptional quarter as it also produced a solid beat of analysts’ EBITDA estimates and a decent beat of analysts’ EPS estimates.

The stock is down 3.5% since reporting and currently trades at $350.01.

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

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

Want to invest in winners with rock-solid fundamentals? Check out our 9 Best Market-Beating Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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