AAON's Second Quarter 2025: A Cooling Breeze Amidst Hot Expectations

TULSA, Okla., August 11, 2025 - AAON, INC. (NASDAQ: AAON) reports a second quarter that leaves investors wondering if the HVAC leader’s summer heat is fizzling out.

Q2 Earnings Overview

In a quarter that many had hoped would showcase robust growth, AAON reported net sales of $311.6 million, a slight dip of 0.6% from the previous year. The EPS consensus had anticipated a more favorable outcome, but what we got was an earnings surprise that fell flat, with GAAP diluted earnings per share (EPS) plummeting 69.4% to $0.19. Non-GAAP adjusted diluted EPS also took a hit, falling 64.5% to $0.22.

Supply Chain Snags and ERP Woes

As the company navigates the complexities of an Enterprise Resource Planning (ERP) rollout, it appears that supply chain constraints have put a damper on production. AAON’s Oklahoma segment reported an 18.0% decrease in sales, which raises eyebrows given the strong backlog entering the quarter. Meanwhile, the BASX and AAON Coil Products segments managed to report growth, thanks in part to soaring demand for data center equipment. But with the ERP implementation causing operational hiccups, one can't help but wonder: is AAON caught in a self-inflicted whirlwind?

Margins and Expenses: A Tight Squeeze

The gross profit margin for the quarter stood at 26.6%, a stark contrast to the 36.1% seen in Q2 2024. The decline can be attributed to reduced production volumes and operational inefficiencies stemming from the new ERP system. Additionally, selling, general and administrative (SG&A) expenses ballooned to $59.1 million, accounting for 19.0% of sales, up from 14.6% last year. Clearly, investments in technology and personnel are necessary for future growth, but at what immediate cost?

Looking Ahead: Cautious Optimism?

CEO Matt Tobolski candidly expressed disappointment over the quarter's results, emphasizing that they do not reflect the high standards the company strives for. The immediate actions to rectify these operational issues could pave the way for a more promising future. However, as the company reduces its full-year revenue forecast, investors will be watching closely to see if AAON can regain its footing and restore confidence in its long-term growth trajectory.

Sector Implications

As AAON grapples with its challenges, what does this mean for the HVAC sector at large? If AAON's struggles are indicative of broader supply chain issues or operational pitfalls faced by its peers, we may be in for a rocky ride. Investors should keep a keen eye on competitors who might capitalize on AAON's missteps, especially if they can maintain production efficiency and profit margins.