What Happened?

A number of stocks fell in the afternoon session after an unexpectedly sharp rise in wholesale inflation fueled concerns about rising costs and their impact on corporate profits. The primary catalyst was the July 2025 Producer Price Index (PPI), a measure of inflation at the wholesale level, which jumped 0.9% against forecasts of a 0.2% rise. This represents the most significant monthly increase in over three years, pointing to mounting cost pressures for manufacturers, with tariffs cited as a key factor. This data complicates the Federal Reserve's upcoming interest rate decisions, as persistent inflation may prevent rate cuts, creating a headwind for cyclical sectors like Industrials.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Renewable Energy company SolarEdge (NASDAQ: SEDG) fell 5.7%. Is now the time to buy SolarEdge? Access our full analysis report here, it’s free.
• Ground Transportation company Saia (NASDAQ: SAIA) fell 4.2%. Is now the time to buy Saia? Access our full analysis report here, it’s free.
• Electrical Systems company Vertiv (NYSE: VRT) fell 3.9%. Is now the time to buy Vertiv? Access our full analysis report here, it’s free.
• HVAC and Water Systems company AAON (NASDAQ: AAON) fell 5.9%. Is now the time to buy AAON? Access our full analysis report here, it’s free.
• Maintenance and Repair Distributors company Transcat (NASDAQ: TRNS) fell 5.1%. Is now the time to buy Transcat? Access our full analysis report here, it’s free.

Zooming In On AAON (AAON)

AAON’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 3 days ago when the stock dropped 15.3% on the news that the company reported disappointing second-quarter 2025 results that missed analyst expectations for revenue and profit, and provided a weak outlook for the upcoming quarter. The heating and cooling solutions company reported revenue of $311.6 million and adjusted earnings of $0.22 per share, falling short of Wall Street's estimates of $325 million and $0.33 per share, respectively. Furthermore, its revenue guidance for the third quarter came in 14.3% below analyst expectations, signaling continued headwinds. Profitability was a major concern, as the company’s operating margin collapsed to 7.6% from 21.7% in the same quarter last year. The company also burned through $57.62 million in free cash flow, a sharp reversal from a positive figure a year ago. Overall, the combination of missed expectations, weak guidance, and sharply deteriorating profitability led to a negative reaction from investors.

AAON is down 29.7% since the beginning of the year, and at $82.97 per share, it is trading 41.1% below its 52-week high of $140.75 from November 2024. Investors who bought $1,000 worth of AAON’s shares 5 years ago would now be looking at an investment worth $2,153.

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