As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q3. Today, we are looking at hvac and water systems stocks, starting with Carrier Global (NYSE:CARR).
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%.
Thankfully, share prices of the companies have been resilient as they are up 6.6% on average since the latest earnings results.
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. This print fell short of analysts’ expectations by 7.9%. Overall, it was a disappointing quarter for the company with full-year revenue guidance missing analysts’ expectations.
"We delivered another quarter of strong financial performance while making significant progress on our portfolio transformation," said Carrier Chair & CEO David Gitlin.
Carrier Global scored the fastest revenue growth but had the weakest performance against analyst estimates. Still, the market seems discontent with the results. The stock is down 12.2% since reporting and currently trades at $76.94.
Read our full report on Carrier Global 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 an impressive beat of analysts’ organic revenue estimates.
Lennox achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 12.2% since reporting. It currently trades at $667.46.
Is now the time to buy Lennox? Access our full analysis of the earnings results here, it’s free.
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, falling short of analysts’ expectations by 4.5%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
As expected, the stock is down 15.6% since the results and currently trades at $134.
Read our full analysis of Advanced Drainage’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 $5.44 billion, up 11.4% year on year. This number topped analysts’ expectations by 2.4%. It was a very strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates.
The stock is up 7.4% since reporting and currently trades at $419.51.
Read our full, actionable report on Trane Technologies here, it’s free.
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 $410 million, up 2.9% year on year. This result beat analysts’ expectations by 0.9%. Aside from that, it was a mixed quarter as it also logged a solid beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ organic revenue estimates.
The stock is up 12.1% since reporting and currently trades at $40.28.
Read our full, actionable report on Zurn Elkay here, it’s free.
Market Update
As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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