Looking back on hvac and water systems stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including Zurn Elkay (NYSE: ZWS) and its peers.

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 Q3. As a group, revenues beat analysts’ consensus estimates by 3.6% while next quarter’s revenue guidance was 0.7% below.

Thankfully, share prices of the companies have been resilient as they are up 8% on average since the latest earnings results.

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 $455.4 million, up 11.1% year on year. This print exceeded analysts’ expectations by 3%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ adjusted operating income estimates and a solid beat of analysts’ revenue estimates.

Todd A. Adams, Chairman and Chief Executive Officer, commented, “We delivered a solid quarter as our sales and adjusted EBITDA(1) both exceeded the guidance we provided 90 days ago and will again raise our expectations for the full year. Third quarter core sales(1) growth was 11% compared to the prior year and adjusted EBITDA margin(1) was 26.8%, an increase of 120 basis points over the prior year third quarter. Free cash flow(1) in the quarter was $94 million which reduced our leverage to a record low of 0.6x. Our exceptional cash generation and strong balance sheet have us well positioned and provides optionality to execute our balanced capital allocation approach including cultivating the right M&A opportunities and continued return of capital to shareholders. We have increased our annual dividend 22% to $0.44 per share and also increased the share repurchase authorization to $500 million.”

Interestingly, the stock is up 2.6% since reporting and currently trades at $47.27.

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

Best Q3: 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 $151.1 million, up 16% year on year, outperforming analysts’ expectations by 14.4%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

Northwest Pipe scored the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 24.6% since reporting. It currently trades at $69.37.

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

Weakest 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 $1.43 billion, down 4.8% year on year, falling short of analysts’ expectations by 3.9%. It was a slower quarter as it posted a significant miss of analysts’ revenue estimates and a significant miss of analysts’ organic revenue estimates.

Lennox delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 4.2% since the results and currently trades at $525.87.

Read our full analysis of Lennox’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 $942.5 million, up 4.4% year on year. This number was in line with analysts’ expectations. Taking a step back, it was a slower quarter as it produced full-year revenue guidance missing analysts’ expectations and full-year EPS guidance missing analysts’ expectations.

The stock is up 5.3% since reporting and currently trades at $72.25.

Read our full, actionable report on A. O. Smith 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 $5.74 billion, up 5.5% year on year. This print missed analysts’ expectations by 0.9%. Taking a step back, it was a satisfactory quarter as it also logged an impressive beat of analysts’ adjusted operating income estimates but a slight miss of analysts’ revenue estimates.

The stock is down 8.9% since reporting and currently trades at $389.40.

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

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