As I’ve written before, I think the global HVAC market (particularly the commercial/institutional market) is one of the more attractive markets today, as global ESG concerns are likely to put a premium on energy-efficient HVAC systems and controls, not to mention the recent pandemic driving more interest in indoor air quality systems. On top of that, the transportation refrigeration market looks poised for a strong rebound after some rough quarters.
Those positives aside, I’ve also written that I thought most HVAC stocks were ahead of where they should be on valuation, making them relatively less attractive. Since my last update on Trane Technologies (TT), the shares have continued to chug along well relative to the S&P 500 (basically tracking the S&P at 13% growth), but they’ve lagged the broader industrial space by a few percentage points. Trane has outperformed Carrier (CARR), Lennox (LII), and Daikin (OTCPK:DKILF) (OTCPK:DKILY). Meanwhile, Johnson Controls (JCI), which I did see as undervalued until relatively recently, is up more than a third over that time.
My view now is pretty much what it has been. I’m still pretty bullish on the near-term prospects for residential and transportation, but resi HVAC comps are going to get a lot more challenging in the second half. I’m not so bullish on the near-term commercial HVAC opportunity, but opportunities in indoor air quality are still relevant. Longer-term, I’m intrigued by management’s R&D and M&A focus on emerging technology. I’m still not excited about the share price/valuation today, though I could see some sources of upside across the business.
To read the full article, click the link below:
Trane Technologies Needs Some Beat-And-Raise Quarters To Restoke Investor Enthusiasm
No comments:
Post a Comment