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 Q2, starting with Trane Technologies (NYSE: TT).
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 strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.4% while next quarter’s revenue guidance was 14.3% below.
In light of this news, share prices of the companies have held steady as they are up 1.8% on average since the latest earnings results.
Trane Technologies (NYSE: TT)
With low-pressure heating systems as its 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 $5.75 billion, up 8.3% year on year. This print was in line with analysts’ expectations, and overall, it was a satisfactory quarter for the company with a decent beat of analysts’ adjusted operating income estimates.
Unsurprisingly, the stock is down 12% since reporting and currently trades at $414.77.
Is now the time to buy Trane Technologies? Access our full analysis of the earnings results here, it’s free.
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 $133.2 million, up 2.8% year on year, outperforming analysts’ expectations by 10.1%. The business had an incredible quarter with a beat of analysts’ EPS and EBITDA estimates.
Northwest Pipe pulled off the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 21.8% since reporting. It currently trades at $52.12.
Is now the time to buy Northwest Pipe? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: CSW (NASDAQ: CSW)
With over two centuries of combined operations manufacturing and supplying, CSW (NASDAQ: CSW) offers special chemicals, coatings, sealants, and lubricants for various industries.
CSW reported revenues of $263.6 million, up 16.6% year on year, falling short of analysts’ expectations by 5.2%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates.
CSW delivered the fastest revenue growth but had the weakest performance against analyst estimates in the group. As expected, the stock is down 10.5% since the results and currently trades at $240.43.
Read our full analysis of CSW’s results here.
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 $829.9 million, up 1.8% year on year. This number topped analysts’ expectations by 3.7%. Overall, it was a very strong quarter as it also recorded an impressive beat of analysts’ EBITDA estimates.
The stock is up 21.3% since reporting and currently trades at $138.
Read our full, actionable report on Advanced Drainage 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 $444.5 million, up 7.9% year on year. This print beat analysts’ expectations by 4.5%. It was a stunning quarter as it also produced an impressive beat of analysts’ adjusted operating income estimates.
The stock is up 22.3% since reporting and currently trades at $46.89.
Read our full, actionable report on Zurn Elkay here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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