Looking back on hvac and water systems stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including Carrier Global (NYSE:CARR) 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 8 hvac and water systems stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.3%.
The Fed cut its policy rate by 50bps (half a percent) in September 2024, the first in roughly four years. This marks the end of its most pointed inflation-busting campaign since the 1980s. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be assessing whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Luckily, hvac and water systems stocks have performed well with share prices up 14.2% on average since the latest earnings results.
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 $6.69 billion, up 11.6% year on year. This print fell short of analysts’ expectations by 5.4%. Overall, it was a slower quarter for the company with a miss of analysts’ organic revenue estimates and full-year revenue guidance missing analysts’ expectations.
"Carrier delivered another quarter of strong financial performance, while making great progress with our portfolio transformation," said Carrier Chairman & CEO David Gitlin.
Carrier Global scored the fastest revenue growth but had the weakest performance against analyst estimates of the whole group. The stock is up 24.7% since reporting and currently trades at $82.28.
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Best Q2: Northwest Pipe (NASDAQ:NWPX)
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.Northwest Pipe reported revenues of $129.5 million, up 11.3% year on year, outperforming analysts’ expectations by 8.7%. The business had an incredible quarter with an impressive beat of analysts’ earnings estimates.
The market seems happy with the results as the stock is up 13.9% since reporting. It currently trades at $43.47.
Weakest Q2: 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 $815.3 million, up 4.8% year on year, falling short of analysts’ expectations by 2%. It was a slower quarter as it posted a miss of analysts’ Pipe revenue estimates and full-year revenue guidance missing analysts’ expectations.
Advanced Drainage delivered the weakest full-year guidance update in the group. Interestingly, the stock is up 3% since the results and currently trades at $153.65.
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 $412 million, up 2.2% year on year. This number was in line with analysts’ expectations. Taking a step back, it was a slower quarter as it produced a miss of analysts’ organic revenue estimates.
Zurn Elkay had the slowest revenue growth among its peers. The stock is up 12.7% since reporting and currently trades at $36.30.
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 $1.02 billion, up 6.6% year on year. This print topped analysts’ expectations by 2.5%. It was a strong quarter as it also produced an impressive beat of analysts’ organic revenue estimates and full-year revenue guidance slightly topping analysts’ expectations.
A. O. Smith achieved the highest full-year guidance raise among its peers. The stock is down 1.3% since reporting and currently trades at $87.68.
This content was originally published on Stock Story
