The demand for air conditioning systems is expected to be robust this summer. Due to climate change, there has been a significant increase in air conditioning consumption in residential, commercial, and industrial sectors to beat the extreme weather. And consumers’ shift to energy-efficient and environment-friendly technologies in air conditioning systems is further boosting the market’s growth.
According to a report by Grand View Research, the U.S. Heating, Ventilation, and Air Conditioning (HVAC) systems market is projected to reach $26.93 billion, growing at a 5.6% CAGR. The growing real estate market in the U.S and high demand for energy-efficiency equipment are expected to sustain the demand. Last year, the air conditioning segment accounted for the largest share of approximately 56.7% of HVAC industry’s total revenue and is expected to remain a dominant segment in the coming years.
Against the backdrop, we think it could be profitable to buy quality air conditioning stocks Emerson Electric Co. (EMR), Daikin Industries, Ltd. (DKILY), and Comfort Systems USA, Inc. (FIX), which are expected to achieve tremendous growth in the near term.
Emerson Electric Co. (EMR)
EMR in Ferguson, Mo., manufactures and sells technology and engineering products for industrial, commercial, and consumer markets worldwide. The company operates through Automation Solutions, and Commercial & Residential Solutions segments. Commercial & Residential Solutions provides residential and commercial heating and air conditioning products. In addition, it offers air conditioning, refrigeration, and lighting control technologies.
In February, EMR was selected by HITA, a deep geothermal energy company in Belgium, for geothermal clean energy production. EMR’s geological and reservoir modeling software will help HITA identify drilling locations for renewable geothermal energy projects by creating realistic models. This collaboration is expected to boost the company’s revenues.
In January, EMR introduced Rosemount 1408H Level Transmitter, the world’s first non-contacting radar level transmitter designed especially for food and beverage applications. The new radar device has dedicated features, including a hygienic compact design, fast sweep technology, radar beam focusing, and IO-Link communications. This launch might boost the company’s market reach and profitability.
In its fiscal 2022 second quarter, ended March 31, 2022, EMR’s net sales grew 8.1% year-over-year to $4.79 billion, while its sales from the Commercial & Residential Solutions segment improved 12.9% from its year-ago value to $1.86 billion. The company’s earnings before income taxes rose 52.8% year-over-year to $1.99 billion. Its net earnings and earnings per common share came in at $1.57 billion and $2.63, respectively, registering an increase of 53.9% and 57.5% from the prior-year period.
The $5.08 billion consensus revenue estimate for its fiscal 2022 third quarter, ending June 30, 2022, represents an 8.2% increase from the prior-year period. The $1.28 consensus EPS estimate for the current quarter indicates a 17.8% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has declined 13.8% in price and closed yesterday’s trading session at $83.61.
EMR’s POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
EMR has a B grade for Stability, Sentiment, and Quality. Within the Industrial – Equipment industry, it is ranked #16 of 90 stocks.
To see additional POWR Ratings (Value, Momentum, and Growth) for EMR, click here.
Daikin Industries, Ltd. (DKILY)
Headquartered in Osaka, Japan, DKILY designs, manufactures, and sells air-conditioning and refrigeration equipment and chemical products. The company’s air-conditional and refrigeration products include packaged air-conditioning systems, multiple air-conditioning systems for offices, facilities and plans, absorption refrigerators, and freezing showcases. It sells its products in Japan, the U.S., China, Asia, Europe, and internationally.
Last December, DKILY launched a home comfort product with R-32 in North America that features impressive efficiency gains while reducing emissions. The new Daikin ATMOSPHERA system features R-32 refrigerant from Daikin North America LLC with a lower GWP, gains impressive efficiencies, and may help lower end-user electric bills. This launch is expected to expand DKILY’s global reach and sales.
DKILY’s net sales increased 24.7% year-over-year to JPY 3.11 trillion ($23.88 billion), while its gross profit rose 22.4% year-over-year to JPY 1.06 trillion ($8.14 billion) in its fiscal year 2022, ended March 31, 2022. Its sales from the air conditioning segment improved 24.4% year-over-year to JPY 2.83 trillion ($21.73 billion). Its operating profit grew 32.6% from the last year to JPY 316.40 billion ($2.43 billion). And the company’s profit attributable to owners of the parent came in at JPY 217.70 billion ($1.67 billion), registering an increase of 39.4% year-over-year.
Analysts expect DKILY’s revenue for its fiscal year 2023, ending March 31, 2023, to be $24.64 billion, representing a 371% rise year-over-year. The company has an impressive revenue history; it has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of DKILY have decreased 7.9% in price over the past month and 32.1% over the past six months and closed yesterday’s trading session at $14.91.
DKILY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
DKILY has an A for Stability and a B for Value and Quality. Within the B-rated Industrial – Building Materials industry, it is ranked #12 of 48 stocks.
To see additional POWR Ratings (Momentum, Sentiment, and Growth) for DKILY, click here.
Comfort Systems USA, Inc. (FIX)
Houston, Tex.-based FIX provides mechanical and electrical installation, renovation, maintenance, and replacement services for the mechanical and electrical services industry in the U.S. The company offers a wide range of services for heating, ventilation, and air conditioning (HVAC) systems. It serves building owners and developers, architects, general contractors, and property managers in the commercial, industrial, and institutional MEP markets.
On April 27, FIX’s board of directors declared a $0.14 per share quarterly dividend, registering a $0.01 increase of from the company’s recent dividend on FIX common stock. The dividend is payable on May 27, 2022. This reflects the company’s strong financial position and commitment to return value to shareholders.
On April 4, FIX acquired Atlantic Electric, LLC, and its related subsidiary, headquartered in Charleston, S.C. “Atlantic Electric and its affiliated companies bring us well-established reputations and capabilities in important Carolina markets, as well as expertise in industrial markets, including runway lighting capabilities across the Southeast,” said Brian Lane, FIX’s CEO.
In its fiscal 2022 first quarter, ended March 31, 2022, FIX’s revenues grew 32.2% year-over-year to $885.22 million, while its gross profit improved 24% from its year-ago value to $153.14 million. Its income before income taxes grew 7% year-over-year to $37.71 million, and its adjusted EBITDA rose 18.4% year-over-year to $60.66 million. The company’s net income and income per share came in at $86.76 million and $2.40, respectively, registering a 227.5% and 228.8% increase from the prior-year period.
The $914.17 million consensus revenue estimate for its fiscal 2022 second quarter, ending June 30, 2022, represents 28.1% growth from the same period in 2021. It is no surprise that FIX has surpassed the consensus revenue estimates in three of the trailing four quarters. The $1.01 consensus EPS estimate for the current quarter indicates a 12.6% year-over-year rise.
The stock plunged 3.8% in price over the past month and closed yesterday’s trading session at $83.99.
FIX’s POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
FIX has a B grade for Quality and Stability. Within the B-rated Industrial – Services industry, it is ranked #15 of 90 stocks.
To see additional POWR Ratings (Growth, Momentum, Value, and Sentiment) for FIX, click here.
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EMR shares were trading at $83.53 per share on Wednesday afternoon, down $0.08 (-0.10%). Year-to-date, EMR has declined -9.68%, versus a -16.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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