AAON's Q1 Earnings: Cooling Off or Heating Up?

In a world where HVAC solutions are as essential as coffee on a Monday morning, AAON, Inc. (NASDAQ: AAON) has reported its first-quarter earnings for 2025, and let’s just say—things are heating up. The company announced a robust revenue forecast, with net sales climbing to $322.1 million, a 22.9% increase from $262.1 million in Q1 2024. This surge is largely attributed to the impressive performance of their BASX-branded products, which saw a staggering year-over-year growth of 374.8%.

Breaking Down the Numbers

Gary Fields, AAON's CEO, expressed optimism, stating, “We had a strong first quarter.” The EPS consensus this period was $0.35, reflecting a 23.9% decline compared to last year’s figures. While it might seem like an earnings surprise in the wrong direction, it’s crucial to look beyond the surface. The dip in earnings per share (EPS) can be partially attributed to supply chain troubles surrounding the new R454B refrigerant components, which have been a thorn in the side of many manufacturers in the sector.

Supply Chains and Backlogs

Despite the hiccups, AAON has navigated these turbulent waters impressively. Fields noted that bookings for BASX-branded equipment remained strong, with a total backlog rising 83.9% year-over-year. This backlog, now at a record total of $1.0 billion, suggests that demand is alive and well. It’s a classic case of “what doesn’t kill you makes you stronger”—or in this case, what slows you down can lead to a backlog that’s hotter than a summer day in Oklahoma.

Margins and Expenses

However, it's not all sunshine and HVAC solutions. Gross profit margin took a hit, dropping to 26.8% from 35.2% in the same quarter last year. The decline stemmed from lower production volumes at the AAON Oklahoma segment, somewhat offset by improved efficiencies at their Coil Products and BASX segments. The increase in SG&A expenses—reflecting higher depreciation and technology-related consulting costs—suggests that while AAON is investing in growth, it comes at a price.

Looking Forward

The question now is: will AAON manage to keep the momentum going? The HVAC sector is notoriously fickle, influenced by everything from economic cycles to weather patterns. However, with the rebound in bookings for AAON-branded equipment, there’s reason to believe that this company is well-positioned to ride the wave of recovery. As supply chains stabilize and production ramps up, we may see a return to form for margins and an improvement in EPS in subsequent quarters.