Core Viewpoint - AAON Inc's shares were previously considered overvalued, indicating a need for valuation adjustment [1] Company Analysis - AAON Inc has been monitored for an extended period, with insights shared regarding its stock pricing and valuation [1] - The company is characterized by disciplined capital allocation and exceptional returns on capital, which are key factors for long-term investment [1]

Financial Data and Key Metrics Changes - Net sales decreased by 2.9% to $297.7 million from $306.6 million, primarily due to a 16.1% decline in the AAON Oklahoma segment, partially offset by a 129.9% growth in the AAON Coil Products segment [23][24] - Gross profit decreased by 30.5% to $77.6 million, with gross profit margin dropping to 26.1% from 36.4% in the previous year [24] - Diluted earnings per share fell by 46.4% to $0.30 from $0.56 [26] Business Line Data and Key Metrics Changes - The Basics brand saw a significant increase in net sales, up 35.1%, with data center equipment sales rising approximately 85% [15] - AAON branded equipment sales experienced a modest decline in the low single digits, but bookings were up in the mid-teens, and backlog increased by approximately 20% [17] - The AAON Coil Products segment reported a remarkable growth of 129.9% in sales, driven by the new Basics branded data center liquid cooling product [36] Market Data and Key Metrics Changes - The total backlog at the end of the year increased by 70% to $867.1 million, primarily due to strong bookings of data center equipment [18] - Bookings for the fourth quarter were up approximately 62%, indicating strong demand despite some challenges in the AAON Oklahoma segment [18] Company Strategy and Development Direction - The company aims to drive sustainable and robust organic growth, targeting over $1 billion in data center equipment sales within a few years [47][85] - The strategic focus includes being an industry leader in innovation and customization, with significant investments in new technologies and facilities to enhance production capacity [42][49] - The company is reorganizing to efficiently manage growth and maintain operational efficiencies while expanding manufacturing capabilities [50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2024 was a challenging year due to regulatory impacts and a transition in refrigerants, but they expect a rebound in demand as the market stabilizes [53][54] - The outlook for 2025 anticipates sales growth in the mid to high teens, with expectations of improved margins as production ramps up [57][58] Other Important Information - Capital expenditures in the fourth quarter were $99.3 million, significantly up from the previous year, with a total of $213.2 million for 2024 [28] - The company is investing heavily in the new Memphis facility, which is expected to enhance production capabilities and efficiency [101] Q&A Session Summary Question: Outlook for Oklahoma sales in Q1 - Management indicated that flat sales are expected due to inventory of R410A affecting momentum, with a transition to R454B impacting the run rate [62][64] Question: Reasons for Basics sales decline - Management clarified that while Basics sales were down, the overall demand and backlog for Basics branded products remain strong, with capacity limitations affecting production [66][68] Question: Growth expectations for 2025 - Management explained that while strong growth is anticipated in the data center segment, softness in the Oklahoma segment is expected to offset some of that growth, leading to a cautious outlook [71][75] Question: Data center market outlook - Management reported that the data center market remains strong, with continued investments and a positive outlook despite some market noise [82] Question: Pricing strategy for R454B - Management stated that they are monitoring the market for pricing adjustments related to R454B, with a focus on strengthening bookings before implementing any increases [126][130]

Financial Data and Key Metrics Changes - Net sales decreased by 2.9% to $297.7 million from $306.6 million, primarily driven by a 16.1% decline in the AAON Oklahoma segment, partially offset by a 129.9% growth in the AAON Coil Products segment [23][24] - Gross profit decreased by 30.5% to $77.6 million, with gross profit margin dropping to 26.1% from 36.4% in 2023, reflecting lower volumes and fixed cost deleveraging [24] - Diluted earnings per share fell by 46.4% to $0.30 from $0.56, influenced by a large excess tax benefit related to stock-based compensation [26] Business Line Data and Key Metrics Changes - The Basics brand saw a significant year, with net sales up 35.1% and data center equipment sales up approximately 85%, leading to a total backlog increase of 70% [15][18] - The AAON brand faced challenges, with sales down modestly in the low single digits, but bookings were up in the mid-teens, resulting in a backlog increase of approximately 20% [17][18] Market Data and Key Metrics Changes - Bookings in the fourth quarter were up approximately 62%, with year-end backlog reaching $867.1 million, driven by data center equipment bookings, including a large $200 million-plus order [18][19] - The AAON Oklahoma segment experienced a slowdown due to the transition to new refrigerants, impacting production and sales volumes [20][30] Company Strategy and Development Direction - The company aims to be an industry leader in innovation and customization, focusing on engineering capabilities and customized solutions [42][43] - The strategic priorities include driving sustainable organic growth, with expectations for the data center equipment business to grow to over $1 billion within a few years [47][48] - The company is reorganizing to efficiently manage growth and capacity expansion, with significant investments in new manufacturing facilities [50] Management's Comments on Operating Environment and Future Outlook - Management noted that 2024 was a year of challenges but also highlighted strong fundamentals for both AAON and Basics brands, anticipating a return to robust growth [52][54] - The outlook for 2025 includes sales growth in the mid to high teens, with expectations for gross margins similar to 2024 [57][58] Other Important Information - Capital expenditures in the fourth quarter were $99.3 million, up nearly fourfold from the previous year, primarily for the new Memphis facility [28] - The company plans to ramp up production in the Memphis facility, with expectations for significant contributions to financials by the end of 2025 [102] Q&A Session Summary Question: Outlook for Oklahoma sales in Q1 - Management indicated that flat sales are expected due to inventory of R410A affecting momentum, with a transition to R454B impacting the run rate [62][64] Question: Reasons for Basics sales decline - Management clarified that the decline is due to capacity limitations at the Redmond facility, despite strong demand and backlog for Basics branded products [66][68] Question: Growth expectations for 2025 - Management explained that while strong growth is anticipated in the data center segment, caution is warranted due to uncertainties in the Oklahoma segment [71][75] Question: Data center construction outlook - Management reported that the data center market remains strong, with capital expenditures increasing and a positive outlook for investments [82] Question: Pricing strategy for R454B - Management stated that they will monitor bookings before implementing any price increases related to R454B, focusing on strengthening demand first [126][130] Question: Capacity and efficiency at Longview and Basics - Management acknowledged inefficiencies during ramp-up phases but expects sequential improvement in margins throughout 2025 as production stabilizes [104][137]

Core Viewpoint - Aaon (AAON) reported quarterly earnings of $0.30 per share, missing the Zacks Consensus Estimate of $0.54 per share, representing an earnings surprise of -44.44% compared to $0.56 per share a year ago [1][2] Financial Performance - The company posted revenues of $297.72 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 8.79%, and down from $306.64 million year-over-year [2] - Over the last four quarters, Aaon has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Aaon shares have declined approximately 13.3% since the beginning of the year, while the S&P 500 has gained 1.3% [3] - The current Zacks Rank for Aaon is 4 (Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.52 on revenues of $305 million, and for the current fiscal year, it is $2.93 on revenues of $1.52 billion [7] - The estimate revisions trend for Aaon is currently unfavorable, which may change following the recent earnings report [6] Industry Context - The Building Products - Air Conditioner and Heating industry is currently in the top 14% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Financial Performance - Net sales for Q4 2024 decreased by 2.9% to $297.7 million compared to $306.6 million in Q4 2023, with the AAON Oklahoma segment experiencing a 16.1% decline year-over-year[3] - Gross profit for Q4 2024 decreased by 30.5% to $77.6 million, representing a gross profit margin of 26.1%, down from 36.4% in the same period last year[4] - Earnings per diluted share in Q4 2024 fell by 46.4% to $0.30, down from $0.56 in Q4 2023[5] - Operating income for Q4 2024 decreased by 53.9% to $29.4 million, with an operating margin of 9.9% compared to 20.8% in Q4 2023[7] - Net income for 2024 was $168,559, a decrease of 5% compared to $177,623 in 2023[18] - Adjusted EBITDA for 2024 was $272,231, down 3% from $281,215 in 2023, with an adjusted EBITDA margin of 22.7%[25] Backlog and Demand - The company's total backlog increased by 70.0% year-over-year to $867.1 million, driven by strong demand for BASX-branded data center liquid cooling solutions[8] - The AAON Coil Products segment saw a sales increase of 129.9%, benefiting from the production of BASX-branded liquid cooling equipment[3] Capital Expenditures and Investments - Capital expenditures in Q4 2024 increased nearly four-fold to $63.4 million due to investments in the new Memphis facility[8] - Capital expenditures for 2024 were $195,660, significantly higher than $104,294 in 2023, indicating aggressive investment[18] Cash Flow and Working Capital - Cash flows from operating activities in Q4 2024 were impacted by lower net income and increased working capital investments[8] - The company reported net cash provided by operating activities of $192,532, an increase of 21% from $158,895 in 2023[18] Balance Sheet and Financial Ratios - The company has a current ratio of 2.8 and a leverage ratio of 0.57, indicating a strong balance sheet[8] - Total assets increased to $1,175,234, up 25% from $941,436 in 2023[16] - Total current liabilities increased to $174,905, up 38% from $126,749 in 2023[16] - Long-term debt rose to $138,891, compared to $38,328 in 2023, indicating increased leverage[16] - Stockholders' equity increased to $824,582, up 12% from $735,224 in 2023[16] Inventory and Cash Management - Cash and cash equivalents decreased to $14,000 from $287,000 in 2023, reflecting a significant reduction[16] - Inventories decreased by 12% to $187,420 from $213,532 in 2023[16] Future Outlook - The company anticipates a significant improvement in margins throughout 2025 as production volumes increase and operational efficiencies are realized[8]

Business Segments and Operations - The company operates through three business segments: AAON Oklahoma, AAON Coil Products, and BASX[19] - The company employs a sales staff of 81 individuals and utilizes approximately 55 independent representatives with 132 offices primarily in the U.S. and Canada[60] - The company has entered into cancellable and non-cancellable contracts with major suppliers for raw materials, mitigating the impact of price fluctuations[72] Product Offerings and Innovation - AAON's flagship products include rooftop units (RTUs) with cooling capacities ranging from 2 to 261 tons and heating capacities from 24,000 to 4,500,000 BTUs[41] - The company utilizes a mass semi-customization strategy to produce highly configurable HVAC equipment[25] - AAON's packaged RTUs achieve an AHRI Certified performance of up to 18.0 SEER2 and 22.8 IEER[43] - The company has developed cutting-edge communication systems for its products, integrating IoT solutions and machine learning to enhance operational efficiencies[81] - The company is developing new controls leveraging machine learning to enhance product efficiency and innovation in the HVAC industry[81] Research and Development - The company emphasizes energy performance, durability, efficiency, and indoor air quality in its R&D efforts[28] - The company has a world-class research and development laboratory, the Norman Asbjornson Innovation Center, to continuously test and improve its products[21] - Research and development expenses were approximately $47.3 million, $43.7 million, and $46.8 million in 2024, 2023, and 2022, respectively, highlighting ongoing investment in product innovation[82] - The NAIC research and development facility includes unique capabilities for testing HVAC systems, which positions the company as a technological leader in the industry[76] Market Focus and Customer Base - The company focuses on the commercial, industrial, data center, and cleanroom markets within the HVAC equipment industry[25] - Major customer Texas AirSystems accounted for approximately 16.4% of sales in 2024, up from 12.4% in 2022, showing a growing reliance on key customers[66] - Texas AirSystems accounted for approximately 16.4%, 13.8%, and 12.4% of sales for the years ended December 31, 2024, 2023, and 2022 respectively[66] Sustainability and Environmental Responsibility - Approximately 36% of the company's energy portfolio is derived from renewable sources, with ongoing efforts to reduce greenhouse gas emissions and increase the production of non-fossil fuel-powered units[90] - The company recycled over 15,715 tons of metal in 2024, compared to 13,678 tons in 2023 and 14,928 tons in 2022, indicating a commitment to material management and sustainability[93] - The company achieved Platinum level in the Sustainability Alliance Scor3card for both 2024 and 2023, highlighting its commitment to environmental responsibility[89] - The company has maintained a commitment to sustainability, publishing its sixth annual Sustainability report in 2024, which includes long-term targets related to greenhouse gas emissions and material recycling[89] - The company has transitioned to nearly 100% LED lighting in its Tulsa and Longview facilities, leading to significant cost savings and reduced energy consumption[91] Financial Performance and Backlog - The company's backlog as of February 1, 2025, was approximately $842.3 million, indicating firm commitments with minimal risk of cancellation[68] - The backlog as of February 1, 2025, was approximately $842.3 million, with lead times for AAON branded products generally around 10-12 weeks[68] - The company has reported a growing backlog of orders, leading to more constant sales throughout the year rather than being seasonally driven[86] - The company has increased its backlog due to rising demand, leading to more constant sales throughout the year rather than the previous seasonal peaks[86] Workforce and Employment - The company reported a total of 4,812 employees as of February 24, 2025, an increase from 3,856 in 2024 and 3,666 in 2023, reflecting a growth of approximately 24% year-over-year[94] - The company employs 4,812 individuals as of February 24, 2025, an increase from 3,856 in 2024 and 3,666 in 2023, reflecting growth in workforce[94] Regulatory Compliance and Standards - The company’s products are designed to meet regulatory and certification standards from various standard-setting bodies, including AHRI and ISO[29] - The company’s products are designed to comply with various regulatory and certification standards, including AHRI and ISO[29] - The company perceives the new DOE regulations on dedicated outdoor air units as an advantage due to its focus on energy efficiency and superior performance[57] - The company’s products exceed DOE minimum efficiency standards, with some achieving up to 18.0 SEER2 and 22.8 IEER[43] - The company’s products are designed to meet ASHRAE's recommended ambient relative humidity levels of 40%-60%, which are critical for virus inactivation[53] Energy Efficiency Initiatives - The company has increased its focus on high-performance HVAC solutions in response to market trends related to indoor air quality and energy efficiency[61] - The company is actively involved in energy efficiency programs, including a demand response program to reduce energy consumption during peak hours[91] - The company has shifted focus to a wider spectrum of the nonresidential HVAC equipment industry due to market trends related to COVID-19 and energy efficiency[61]

Core Viewpoint - AAON, Inc. has appointed Dr. Matt J. Tobolski as the new CEO effective May 13, 2025, succeeding Gary D. Fields, who will transition to a special advisor role on the Board of Directors [1][3][4] Company Leadership Transition - Dr. Tobolski, currently the president and COO, has been instrumental in the company's reorganization and growth strategy, particularly in data center cooling production capacity [3][5] - Gary D. Fields has led AAON since May 2020, during which time the company's sales have more than tripled and its market capitalization has increased over 500% [7] Strategic Focus - The company aims to strengthen its market position through significant investments in data center cooling, positioning itself for sustained growth [3][4] - Dr. Tobolski emphasizes leveraging the innovative capabilities of both AAON and BASX to enhance the company's industry prominence [4][5] Background of New CEO - Dr. Tobolski co-founded BASX Solutions in 2013, which was acquired by AAON in December 2021, and has a strong background in engineering and manufacturing of HVAC systems [3][5] - His educational qualifications include a bachelor's degree in civil engineering and advanced degrees in structural engineering [5] Background of Outgoing CEO - Gary D. Fields has over 40 years of industry experience and has been pivotal in transforming AAON into a leading enterprise in the HVAC sector [6][7] - He will continue to support the company as a mentor and advisor during the transition period [4][7] Company Overview - AAON, founded in 1988, specializes in high-performance, energy-efficient HVAC solutions for commercial and industrial environments [8] - The company is headquartered in Tulsa, Oklahoma, and focuses on continuous innovation and sustainability in its product offerings [8]

Core Viewpoint - AAON, Inc. is set to announce its fourth quarter and full year 2024 financial results on February 27, 2025, during a scheduled conference call and webcast [1] Group 1: Financial Results Announcement - The quarterly conference call and webcast will take place at 9:00 a.m. EST on February 27, 2025 [1] - Financial results will be released earlier on the same day [1] Group 2: Participation Details - The conference call will be accessible via dial-in for Q&A participation at 1-800-836-8184 [2] - A listen-only webcast is available, requiring registration at the AAON website [2] - A replay of the call will be available on the Company's website the following business day [2] Group 3: Company Overview - AAON, founded in 1988, is a global leader in HVAC solutions for commercial and industrial indoor environments [3] - The Company focuses on designing and manufacturing highly configurable equipment to enhance efficiency, performance, and long-term value [3] - AAON is headquartered in Tulsa, Oklahoma, featuring an innovation center and testing lab for continuous advancement in the industry [3]

Company Overview - Aaon (AAON) shares increased by 5.6% to close at $116.60, following a period of 6.2% loss over the past four weeks, indicating a significant recovery in investor sentiment [1] - The company specializes in commercial and industrial HVAC solutions, benefiting from favorable demand trends for data center equipment and a focus on engineered solutions [2] Financial Performance - Aaon is expected to report quarterly earnings of $0.54 per share, reflecting a year-over-year decrease of 3.6%, while revenues are projected to be $326.4 million, an increase of 6.4% from the previous year [3] - The consensus EPS estimate for Aaon has remained unchanged over the last 30 days, suggesting stability in earnings expectations [4] Industry Context - Aaon operates within the Zacks Building Products - Air Conditioner and Heating industry, where another company, Watsco (WSO), reported a 0.5% increase in shares, closing at $484.31, with a 1.7% return over the past month [4] - Watsco's consensus EPS estimate has increased by 0.2% to $2.13, representing a year-over-year change of 3.4%, and it currently holds a Zacks Rank of 2 (Buy) [5]

Core Viewpoint - The Zacks Building Products - Air Conditioner & Heating industry is poised for growth due to the energy transition and increasing demand for renewable energy solutions, despite inflationary pressures [1] Industry Overview - The industry includes designers, manufacturers, and marketers of products for heating, ventilation, air conditioning, and refrigeration, covering a wide range of equipment and services [2] Trends Influencing the Industry - U.S. administration's pro-environmental initiatives are driving demand for clean energy systems, benefiting companies in the industry [3] - Continuous investments in technology and e-commerce are enhancing customer experience and expanding market reach [4] - Rising costs and regulatory pressures are challenges, but the demand for maintenance and repair services provides stable revenue [5] Industry Performance - The industry ranks 54 in the Zacks Industry Rank, placing it in the top 22% of over 250 Zacks industries, indicating positive near-term prospects [6][7] - Aggregate earnings estimates for the industry have increased, reflecting growing analyst confidence in earnings growth potential [8] Stock Market Performance - The industry has outperformed the broader Zacks Construction sector and the S&P 500, with a 57.4% gain over the past year compared to 24% and 28.5% respectively [10] Current Valuation - The industry is trading at a forward P/E ratio of 33.45X, significantly higher than the S&P 500's 22.69X and the sector's 18.17X [12] Company Highlights - **Comfort Systems USA, Inc. (FIX)**: Experienced a 127.7% stock gain over the past year, with a projected earnings growth of 20.8% for 2025 [15] - **AAON, Inc. (AAON)**: Stock gained 85.6% over the past year, with a strong focus on expanding production capacity and a projected earnings growth of 32.2% for 2025 [19] - **The AZEK Company Inc. (AZEK)**: Achieved a 41.9% stock gain over the past year, with expected earnings growth of 20.8% for fiscal 2025, driven by strong residential demand [22]