Baird has maintained a Neutral rating on AAON Inc (NASDAQ: AAON), but increased the price target to $114 from $105.
The adjustment comes as the firm refines its estimates, taking into account a slightly slower near-term growth in Oklahoma, which is expected to be fully offset by stronger contributions from data center operations.
The updated estimates reflect minimal overall changes, despite the slower growth anticipated in the company's core Oklahoma market. Baird highlighted AAON as a premium provider with an improving value proposition, particularly noting the company's exposure to the data center segment.
AAON has been recognized for its robust performance in the HVAC industry, and its recent pivot towards data center clients has provided an additional avenue for growth. The company's strategic positioning allows it to capitalize on the increasing demand for data center infrastructure.
In other recent news, AAON Inc. reported record-breaking sales, earnings, and backlog in its second quarter, with significant growth in its BasX segment due to the thriving data center market.
Net sales rose by 10.4% year-over-year to $313.6 million, gross profit increased by 20.3% to $113.1 million, and diluted earnings per share grew by 12.7% year-over-year to $0.62. The company's backlog reached a record $650 million, marking a 23.5% increase year-over-year.
Despite challenges from softening macroeconomic conditions and disruptions related to the refrigerant transition, AAON remains confident in its strategic positioning and forecasts growth acceleration in the upcoming year. The company anticipates flat to modestly increasing sales growth in the third quarter, with the gross margin expected to be up year-over-year. Capital expenditure guidance remains at $125 million for the year.
However, AAON's Oklahoma segment growth moderated and the BasX segment's growth rate is expected to slow in the third quarter. The company also noted that its rooftop business might face headwinds in the upcoming quarters.
InvestingPro Insights
AAON's recent performance aligns with Baird's positive outlook, as evidenced by InvestingPro data. The company's market cap stands at $9.11 billion, reflecting its strong position in the HVAC industry. AAON's revenue growth of 14.05% over the last twelve months and a robust EBITDA growth of 36.34% underscore its ability to capitalize on market opportunities, particularly in the data center segment as highlighted by Baird.
InvestingPro Tips suggest that AAON is trading near its 52-week high, with a strong return of 101.09% over the last year. This performance supports Baird's decision to raise the price target. However, investors should note that the stock's RSI indicates it may be in overbought territory, which could explain Baird's maintained Neutral rating.
It's worth mentioning that AAON has maintained dividend payments for 19 consecutive years, demonstrating financial stability. For those interested in a deeper analysis, InvestingPro offers 20 additional tips for AAON, providing a comprehensive view of the company's financial health and market position.
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