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Q3 Earnings Highlights: Advanced Drainage (NYSE:WMS) Vs The Rest Of The HVAC and Water Systems Stocks

By: StockStory

January 27, 2025 at 04:04 AM EST

WMS Cover Image

As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the hvac and water systems industry, including Advanced Drainage (NYSE: WMS) 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 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. On average, they are relatively unchanged since the latest earnings results.

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 fell short of analysts’ expectations by 4.5%. Overall, it was a disappointing quarter for the company with full-year EBITDA guidance missing analysts’ expectations.

Scott Barbour, President and Chief Executive Officer of ADS commented, "The second quarter results reflect strong demand at Infiltrator as well as the ADS residential and infrastructure end markets. Continued choppiness in the non-residential end market impacted revenue from both pipe and allied products which, combined with significant storm events, resulted in revenue flat to the prior year. Importantly, we were able to manage through demand fluctuations and unfavorable price/cost to maintain a robust Adjusted EBITDA margin of 31.4%, underscoring the resiliency of the ADS business model. "

Unsurprisingly, the stock is down 22.3% since reporting and currently trades at $123.50.

Is now the time to buy Advanced Drainage? 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 scored the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 9.6% since reporting. It currently trades at $651.98.

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 and EPS 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 12.5% since the results and currently trades at $69.99.

Read our full analysis of Carrier Global’s results here.

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 surpassed analysts’ expectations by 3.6%. It was an exceptional quarter as it also produced a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ EPS estimates.

The stock is up 9.8% since reporting and currently trades at $130.95.

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

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%. Overall, it was a very strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates.

The stock is up 1.6% since reporting and currently trades at $396.90.

Read our full, actionable report on Trane Technologies 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 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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