Winners And Losers Of Q2: CSW (NASDAQ:CSW) Vs The Rest Of The HVAC and Water Systems Stocks

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how CSW (NASDAQ:CSW) and the rest of the hvac and water systems stocks fared in Q2.

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.

Thankfully, share prices of the companies have been resilient as they are up 6.1% on average since the latest earnings results.

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. This print fell short of analysts’ expectations by 5.2%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ EBITDA and EPS estimates.

CSW scored the fastest revenue growth but had the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is up 1.5% since reporting and currently trades at $272.67.

Is now the time to buy CSW? 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 estimates and a solid beat of analysts’ EBITDA estimates.

Northwest Pipe achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 23.1% since reporting. It currently trades at $52.69.

Is now the time to buy Northwest Pipe? 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 $311.6 million, flat year on year, falling short of analysts’ expectations by 4.1%. It was a disappointing quarter as it posted revenue guidance for next quarter missing analysts’ expectations significantly and a significant miss of analysts’ EBITDA estimates.

Interestingly, the stock is up 6.9% since the results and currently trades at $86.10.

Read our full analysis of AAON’s results here.

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 number beat analysts’ expectations by 4.5%. It was a stunning quarter as it also logged an impressive beat of analysts’ adjusted operating income estimates and a solid beat of analysts’ EBITDA estimates.

The stock is up 20.5% since reporting and currently trades at $46.17.

Read our full, actionable report on Zurn Elkay here, it’s free.

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 result met analysts’ expectations. It was a satisfactory quarter as it also put up a decent beat of analysts’ adjusted operating income estimates.

The stock is down 9.8% since reporting and currently trades at $424.90.

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

Market Update

The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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