Continued strong demand from consumers and improving demand from commercial clients resulted in most publicly traded HVAC-related businesses reporting strong results in the second quarter, with some setting new records. Both company executives and Wall Street analysts expect this performance to continue for the near future, driven by trends in both lifestyle and customer concerns.

HVAC distributor Watsco Inc. reported record second quarter operating results, establishing new records for sales, operating income, operating margin, and net income. Company executives attribute much of this strength to the distributor’s investment in e-commerce. Watsco also acquired two businesses in the second quarter — Temperature Equipment Corp. and Acme Refrigeration of Baton Rouge — to expand its geographic reach.

Aaon Inc. reported that net sales for the second quarter increased to an all-time record high of $143.9 million. That’s up from $125.6 million in the same period a year ago. Company executives attribute the growth to demand in the nonresidential building market as more employees returned to their workplaces. The strength should continue. New bookings in the quarter increased approximately 70% compared to the same period one year ago.

Emerson reported that underlying sales for commercial and residential solutions were up 29% in the latest quarter, reflecting ongoing strength in residential markets, bolstered by cold chain and professional tools momentum. Revenue was up by 18%. Going forward, Emerson CEO Lal Karsanbhai expects continued demand, but also continued challenges from operations and supply chain issues, as well as higher material costs.

“Despite a challenging operating environment — material costs, availability, logistics, and labor constraints all required diligent management — I am extremely proud of our operations team, which has worked tirelessly to limit the impact of these issues as the world reopens and demand rebounds across our customer base,” Karsanbhai said.

Long-Term Trends Favor HVAC Industry

Lennox International Inc. reported record revenue of $1.24 billion in the second quarter, up 32%. Total segment profit was a record $222 million, up 45%. The company’s residential business set new highs for revenue, margin, and profit.

Carrier Corp. reported strong revenue growth in the secord quarter over the second quarters of both 2020 and 2019. Carrier also announced in the second quarter it is selling its Chubb fire and security business to APi Group Corp. CEO David Gitlin said he expects to reinvest the capital generated by this move in acquisitions, stock buybacks, and debt payments.

“Key secular trends are likely to propel sustained growth in our industry,” Gitlin said. “With people spending 90% of their time indoors and people returning to their offices and recreation spaces, we see more spend being dedicated to the health, safety, comfort, and intelligence of the indoor environment from homes to schools to hospitals to commercial offices.”

Wall Street analysts agree, according to a recent article in investment weekly Barron’s. These analysts expect continued strong performance from HVAC manufacturers as part of the ongoing action on climate change. Trane Technologies CEO David Regnery stressed this point during the company’s earnings call.

“The long-term sustainability megatrends that underpin our strategy have only intensified and our innovation leadership is transforming the climate industry as the world decarbonizes,” Regnery said. “This is more critical every day, as the clock is ticking on climate change. Our aggressive goals and bold actions can dramatically reduce carbon emissions and accelerate the world's progress.”

One company benefitting from the increased concern about environmental impact is The Chemours Co. The chemical manufacturer reported segment volume for its thermal and specialized solutions segment improved 48% year-over-year. Company executives said this was driven by demand recovery in all markets and all regions. Results were boosted by increased adoption of Opteon, Chemours’ low-GWP refrigerant.