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 Advanced Drainage (NYSE: WMS) 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 mixed Q4. As a group, revenues were in line with analysts’ consensus estimates.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 13.7% 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 $690.5 million, up 4.3% year on year. This print exceeded analysts’ expectations by 2.2%. Despite the top-line beat, it was still a mixed quarter for the company with an impressive beat of analysts’ Pipe revenue estimates but a significant miss of analysts’ EPS estimates.
Scott Barbour, President and Chief Executive Officer of ADS commented, "The fiscal third quarter financial results were in line with expectations. The ADS business progressed on plan while the Infiltrator business modestly outperformed driven by double digit growth in both tanks and advanced treatment products. The construction market demand, pricing environment, material cost and operating performance played out like we thought they would going into the quarter."
Advanced Drainage pulled off the highest full-year guidance raise of the whole group. Still, the market seems discontent with the results. The stock is down 16.1% since reporting and currently trades at $104.39.
Read our full report on Advanced Drainage here, it’s free.
Best Q4: 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 $1.35 billion, up 16.5% year on year, outperforming analysts’ expectations by 8.9%. The business had an exceptional quarter with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EPS estimates.
Lennox delivered the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 16.1% since reporting. It currently trades at $556.15.
Is now the time to buy Lennox? Access our full analysis of the earnings results here, it’s free.
Weakest Q4: 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 $297.7 million, down 2.9% year on year, falling short of analysts’ expectations by 7.1%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates.
AAON delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 18.7% since the results and currently trades at $82.94.
Read our full analysis of AAON’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 $4.87 billion, up 10.2% year on year. This number surpassed analysts’ expectations by 1.9%. Overall, it was a strong quarter as it also logged a solid beat of analysts’ EBITDA estimates and full-year EPS guidance slightly topping analysts’ expectations.
The stock is down 8.5% since reporting and currently trades at $333.16.
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 $193.6 million, up 10.7% year on year. This result topped analysts’ expectations by 0.9%. It was a strong quarter as it also recorded a solid beat of analysts’ EPS estimates and EBITDA in line with analysts’ estimates.
The stock is down 13.5% since reporting and currently trades at $298.43.
Read our full, actionable report on CSW here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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