Earnings results often indicate what direction a company will take in the months ahead. With Q1 now behind us, let’s have a look at AAON (NASDAQ:AAON) and its peers.
Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.
The 6 hvac and water systems stocks we track reported a slower Q1; on average, revenues missed analyst consensus estimates by 0.8%. Inflation progressed towards the Fed's 2% goal at the end of 2023, leading to strong stock market performance. The start of 2024 has been a bumpier ride, as the market switches between optimism and pessimism around rate cuts due to mixed inflation data, and hvac and water systems stocks have held roughly steady amidst all this, with share prices up 3.3% on average since the previous earnings results.
Weakest 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 $262.1 million, down 1.4% year on year, falling short of analysts' expectations by 8%. Overall, it was a weak quarter for the company with a miss of analysts' earnings estimates.
Gary Fields, CEO, stated, "First quarter performance was mixed relative to our expectations. Bookings remain strong across all business segments with quarter-over-quarter increases in backlog. This is especially true for AAON Coil Products and BASX segments which began the quarter with strong backlogs and continued to strengthen backlogs through the end of the first quarter, even as timing of production resulted in a softer than expected first quarter. Even at these lower production levels, total gross margin was better than expected and SG&A was in line with our expectations. We continue to manage pricing and costs well, and while it was not fully reflected in the first quarter results with lower volumes, operations across the facilities are poised to deliver even stronger results as production increases to deliver on our growing backlog."
AAON delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. The stock is down 6.8% since reporting and currently trades at $84.86.
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Best 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 $653.8 million, up 5.9% year on year, outperforming analysts' expectations by 6.9%. It was a stunning quarter for the company with a solid beat of analysts' earnings estimates.
Advanced Drainage achieved the biggest analyst estimates beat among its peers. Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 11.2% since reporting. It currently trades at $156.47.
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 $978.8 million, up 1.3% year on year, falling short of analysts' expectations by 1.7%. It was a weak quarter for the company with a miss of analysts' organic revenue estimates.
The stock is flat since the results and currently trades at $86.57.
Zurn Elkay (NYSE:ZWS) Claiming to have saved more than 34 billion gallons of water due to its systems, Zurn Elkay (NYSE:ZWS) provides water management solutions to various industries.
Zurn Elkay reported revenues of $373.8 million, flat year on year, surpassing analysts' expectations by 1.3%. Taking a step back, it was a strong quarter for the company with a decent beat of analysts' earnings estimates.
The stock is down 10.8% since reporting and currently trades at $29.18.
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 goods.
Lennox reported revenues of $1.05 billion, flat year on year, in line with analysts' expectations. Zooming out, it was an ok quarter for the company with a decent beat of analysts' earnings estimates.
The stock is up 14.1% since reporting and currently trades at $543.23.
This content was originally published on Stock Story
