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 Q3, starting with Lennox (NYSE:LII).

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 7.6% on average since the latest earnings results.

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. This print exceeded analysts’ expectations by 5.9%. Overall, it was a stunning quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ adjusted operating income estimates.

"The Lennox team is proud to deliver another exceptional quarter driven by the effective execution of our transformation plan," said Chief Executive Officer, Alok Maskara.

Lennox scored the biggest analyst estimates beat of the whole group. Unsurprisingly, the stock is up 13.3% since reporting and currently trades at $673.80.

Is now the time to buy Lennox? Access our full analysis of the earnings results here, it’s free.

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 $327.3 million, up 4.9% year on year, outperforming analysts’ expectations by 3.6%. The business had an exceptional quarter with an impressive beat of analysts’ EBITDA and EPS estimates.

The market seems happy with the results as the stock is up 16.8% since reporting. It currently trades at $139.23.

Is now the time to buy AAON? Access our full analysis of the earnings results here, it’s free.

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, falling short of analysts’ expectations by 7.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly.

Carrier Global delivered the fastest revenue growth but had the weakest performance against analyst estimates in the group. As expected, the stock is down 1.4% since the results and currently trades at $78.87.

Read our full analysis of Carrier Global’s results here.

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 $902.6 million, down 3.7% year on year. This result met analysts’ expectations. Zooming out, it was a mixed quarter as it also produced EBITDA in line with analysts’ estimates but a slight miss of analysts’ organic revenue estimates.

A. O. Smith achieved the highest full-year guidance raise but had the slowest revenue growth among its peers. The stock is down 4% since reporting and currently trades at $75.50.

Read our full, actionable report on A. O. Smith here, it’s free.

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 print beat analysts’ expectations by 2.4%. It was a very strong quarter as it also produced a solid beat of analysts’ EBITDA estimates.

The stock is up 4.7% since reporting and currently trades at $409.01.

Read our full, actionable report on Trane Technologies here, it’s free.

Market Update

Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September, a quarter in November) have kept 2024 stock markets frothy, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there's still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.

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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