The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how hvac and water systems stocks fared in Q1, starting with Advanced Drainage (NYSE:WMS).
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, but hvac and water systems stocks have shown resilience, with share prices up 9.7% on average since the previous earnings results.
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, exceeding analysts' expectations by 6.9%. Overall, it was a stunning quarter for the company with a solid beat of analysts' earnings estimates.
Scott Barbour, President and Chief Executive Officer of ADS commented, "Fiscal 2024 was ADS' ninth consecutive year of record profitability. Adjusted EBITDA increased 2% to $923 million due to the effective management of price/cost and strong operational execution. In addition, Adjusted EBITDA margin increased 270 basis points to 32.1%, the highest annual profit margin in the Company’s history. The profitability results for the year are especially impressive given the weaker demand environment in the first half of the year, which drove a 6% overall decrease in net sales to $2.9 billion. We are proud of this year’s results and remain committed to driving above market performance as we advance the stormwater and onsite septic wastewater industries. Our focus on highly engineered solutions positions us as a pivotal player in successfully managing water – the world’s most precious resource."
Advanced Drainage scored the biggest analyst estimates beat of the whole group. The stock is down 6% since reporting and currently trades at $165.65.
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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. It performed better than its peers, but it was unfortunately an ok quarter for the company with a decent beat of analysts' earnings estimates.
The market seems happy with the results as the stock is up 18.5% since reporting. It currently trades at $564.06.
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%. It was a weak quarter for the company with a miss of analysts' earnings estimates.
AAON had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is flat since the results and currently trades at $91.24.
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 $6.18 billion, up 17.2% year on year, falling short of analysts' expectations by 2.4%. Overall, it was a slower quarter for the company with a miss of analysts' organic revenue estimates.
Carrier Global delivered the fastest revenue growth among its peers. The stock is up 27.8% since reporting and currently trades at $70.
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%. Overall, it was a weaker quarter for the company with a miss of analysts' organic revenue estimates.
The stock is down 6.1% since reporting and currently trades at $30.72.
This content was originally published on Stock Story
