In a recent investor update, AAON (AAON, Financial) reaffirmed its optimistic sales forecast for 2025, anticipating an increase in the mid to high teens percentage range. The company also expects its gross margin to remain steady compared to 2024 levels.
Specifically addressing the second quarter, AAON discussed the rollout of a new enterprise resource planning (ERP) system, highlighting its phased implementation approach. The ERP was first launched at the Longview, Texas site on April 1 as part of a broader strategy. This location was chosen for its representation of multiple company brands, including Aon and Basics, as well as coil production.
While the technical deployment of the ERP has been successful, the transition has resulted in temporary disruptions and slowed production at Longview. Consequently, AAON anticipates a softer-than-expected performance for the second quarter.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for AAON Inc (AAON, Financial) is $107.25 with a high estimate of $125.00 and a low estimate of $91.27. The average target implies an upside of 32.27% from the current price of $81.09. More detailed estimate data can be found on the AAON Inc (AAON) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, AAON Inc's (AAON, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for AAON Inc (AAON, Financial) in one year is $101.80, suggesting a upside of 25.54% from the current price of $81.09. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the AAON Inc (AAON) Summary page.
AAON Key Business Developments
Release Date: May 01, 2025
- Net Sales: Increased 22.9% to $322.1 million from $262.1 million in Q1 2024.
- Basics Branded Equipment Sales: Grew 374.8% year-over-year.
- AAON Branded Equipment Sales: Declined 19.1% year-over-year.
- Gross Profit: Decreased 6.4% to $86.4 million; gross margin was 26.8% compared to 35.2% in Q1 2024.
- SG&A Expenses: Increased 13.3% to $51.3 million; as a percent of sales, decreased to 15.9% from 17.3%.
- Diluted Earnings Per Share: $0.35, down 23.9% from a year ago; adjusted earnings were $0.37, down 20%.
- Backlog: Reached a record level of $1 billion, up 83.9% year-over-year.
- Cash Equivalents and Restricted Cash: Totaled $2.4 million as of March 31, 2025.
- Debt: $252.4 million at the end of the quarter.
- Leverage Ratio: 0.95.
- Cash Flow from Operations: Used $9.2 million year-to-date compared to $92.4 million provided in the prior year.
- Capital Expenditures: Increased 30.2% to $50.4 million; anticipated to be $220 million for 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AAON Inc (AAON, Financial) reported a 22.9% year-over-year increase in net sales, driven by a significant 374.8% growth in Basics branded equipment sales.
- The company's total backlog reached a record level of $1 billion, up 83.9% year-over-year, indicating strong future demand.
- Operational efficiency improvements at AAON's Oregon and Texas facilities contributed to improved segment margins.
- AAON Inc (AAON) is seeing strong demand for its heat pump configured rooftop units, with plans to expand this product line further.
- The company is making progress with its national account strategy, which is expected to have a meaningful impact on growth, particularly with its Alpha Class air source heat pumps.
Negative Points
- Sales of AAON branded equipment declined by 19.1% year-over-year, primarily due to weak bookings and supply chain issues related to new refrigerant components.
- Total gross margin contracted by 840 basis points compared to the same quarter last year, reflecting lower production volumes and operating leverage effects.
- The AAON Oklahoma segment experienced a significant gross margin decline of 1,380 basis points year-over-year.
- Diluted earnings per share decreased by 23.9% from the previous year, reflecting lower production volumes and profits of AAON branded equipment.
- The macroeconomic environment remains uncertain, creating potential challenges for the second half of the year, particularly in terms of bookings and production.
