AAON, Inc. (AAON) Bundle
Understanding AAON, Inc. (AAON) Revenue Streams
Understanding AAON, Inc.’s Revenue Streams
As of September 30, 2024, the total net sales for the company were $902.9 million, reflecting a year-over-year increase of 4.8% from $861.9 million for the same period in 2023. This growth was primarily driven by increases in data center solutions, which surged by 85.1% year-over-year.
Breakdown of Primary Revenue Sources
The company's revenue is segmented into three main categories:
- AAON Oklahoma: Net sales of $664.8 million for the nine months ended September 30, 2024, representing 73.6% of total sales.
- AAON Coil Products: Net sales of $90.9 million, or 10.1% of total sales.
- BASX: Net sales of $147.3 million, accounting for 16.3% of total sales.
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, net sales were $327.3 million, an increase of 4.9% from $312.0 million in the same quarter of 2023. The year-over-year growth rates for the revenue segments are as follows:
| Segment | Net Sales 2024 (in thousands) | Net Sales 2023 (in thousands) | % Change |
|---|---|---|---|
| AAON Oklahoma | $664,754 | $666,670 | (0.3%) |
| AAON Coil Products | $90,852 | $89,262 | 1.8% |
| BASX | $147,311 | $105,948 | 39.0% |
| Total | $902,917 | $861,880 | 4.8% |
Contribution of Different Business Segments to Overall Revenue
The contributions to overall revenue from each segment for the nine months ended September 30, 2024, were:
- AAON Oklahoma: 73.6%
- AAON Coil Products: 10.1%
- BASX: 16.3%
Analysis of Significant Changes in Revenue Streams
The BASX segment experienced a substantial increase in revenue, driven by a strong demand for data center cooling solutions, which rose by 90.1% for the three months ended September 30, 2024. This shift indicates a growing market for data center solutions, which is expected to continue influencing overall revenue positively.
In contrast, the AAON Oklahoma segment saw a slight decline of (0.3%) in revenue, attributed to lower volumes impacting overhead absorption. However, the AAON Coil Products segment benefited from a favorable product mix, resulting in a 1.8% increase in sales compared to the previous year.
Overall, the company’s diversified revenue streams and strategic focus on high-demand products position it well for future growth.
A Deep Dive into AAON, Inc. (AAON) Profitability
A Deep Dive into AAON, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the financial metrics were as follows:
- Net Sales: $902,917,000
- Cost of Sales: $583,423,000
- Gross Profit: $319,494,000
- Gross Profit Margin: 35.4%
- Operating Income: $179,689,000
- Net Income: $143,869,000
- Net Profit Margin: 15.9%
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, with the same period in 2023:
- Net Sales: Increased by $41,037,000 (4.8%) from $861,880,000 in 2023
- Gross Profit: Increased by $32,213,000 (11.2%) from $287,281,000 in 2023
- Net Income: Increased by $13,295,000 (10.2%) from $130,574,000 in 2023
Comparison of Profitability Ratios with Industry Averages
As of the latest data, the profitability ratios are compared as follows:
| Metric | AAON, Inc. | Industry Average |
|---|---|---|
| Gross Profit Margin | 35.4% | 30.0% |
| Operating Profit Margin | 19.9% | 15.0% |
| Net Profit Margin | 15.9% | 12.5% |
Analysis of Operational Efficiency
Operational efficiency indicators show the following:
- Selling, General and Administrative Expenses (SG&A): $139,820,000 for the nine months ended September 30, 2024, compared to $123,684,000 in 2023.
- SG&A as a percentage of Sales: Increased from 14.4% in 2023 to 15.5% in 2024.
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Average Raw Material Costs:
- Copper: $5.39 (2024), $5.68 (2023) - (5.1%)
- Galvanized Steel: $0.59 (2024), $0.68 (2023) - (13.2%)
- Stainless Steel: $2.54 (2024), $3.33 (2023) - (23.7%)
- Aluminum: $2.40 (2024), $2.44 (2023) - (1.6%)
Debt vs. Equity: How AAON, Inc. (AAON) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total liabilities of $233,769 thousand, which includes both short-term and long-term debt. The long-term debt amounts to $14,000 thousand, while short-term debt is $1,000 thousand.
The debt-to-equity ratio stands at 0.29, indicating a conservative approach to leveraging when compared to the industry average of approximately 0.5. This suggests the company is less reliant on debt financing than many of its peers.
Recent Debt Issuances and Credit Ratings
In February 2024, the company engaged in a New Markets Tax Credit (NMTC) transaction, where it provided approximately $11.0 million to an investor in the form of a loan receivable, with a term of twenty-five years and an interest rate of 1.0%. The proceeds from this transaction were utilized to support the expansion of its Longview, Texas facilities.
As of September 30, 2024, the company's credit rating has not been explicitly stated in the data provided; however, its low debt levels and consistent cash flow underline its robust financial health.
Balancing Debt Financing and Equity Funding
The company's strategy reflects a balanced approach between debt and equity financing. For the nine months ended September 30, 2024, cash flows from operations reached $191.7 million, facilitating capital expenditures and software development of $113.8 million. This robust cash flow supports ongoing investments while maintaining a low debt profile.
In terms of equity funding, during the same period, the company repurchased approximately 1.4 million shares for $107.5 million, demonstrating its commitment to returning value to shareholders.
| Debt Category | Amount (in thousands) |
|---|---|
| Short-term Debt | $1,000 |
| Long-term Debt | $14,000 |
| Total Liabilities | $233,769 |
| Debt-to-Equity Ratio | 0.29 |
Overall, the company maintains a prudent financial structure, leveraging its operational success to balance its debt and equity effectively, thereby positioning itself well for future growth opportunities.
Assessing AAON, Inc. (AAON) Liquidity
Assessing AAON, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 2.0, indicating that the company has twice as many current assets as current liabilities.
Quick Ratio: The quick ratio is around 1.5, suggesting that excluding inventory, the company still has sufficient liquid assets to cover its current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, total working capital stands at approximately $279.0 million, which reflects a year-over-year increase driven by improved cash flow and inventory management.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $558,000 | $279,000 | $279,000 |
| December 31, 2023 | $500,000 | $250,000 | $250,000 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating activities was $191.7 million, a significant increase of 78.9% compared to the previous year. This robust cash generation allows for continued investment in capital projects.
Investing activities resulted in cash outflows of $113.7 million, primarily due to capital expenditures totaling $99.4 million and software development costs of $14.4 million.
Financing activities included the repurchase of shares amounting to $100.0 million and cash dividends paid to stockholders of $19.6 million.
| Cash Flow Activities | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $191,687 | $107,145 |
| Investing Activities | ($113,748) | ($82,732) |
| Financing Activities | ($80,297) | ($7,827) |
Potential Liquidity Concerns or Strengths
The company’s liquidity position is bolstered by a $200 million revolving credit facility, with $144 million available for borrowing as of September 30, 2024. The outstanding balance under this facility is $55.7 million.
Despite a slight decrease in unrestricted cash of $0.3 million from December 31, 2023, to September 30, 2024, the overall liquidity remains healthy, supported by strong cash flows from operations and effective management of working capital.
Is AAON, Inc. (AAON) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of the company, key valuation metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio are essential.
Valuation Ratios
- P/E Ratio: As of September 30, 2024, the P/E ratio is approximately 41.5 based on a stock price of $73.90 and earnings per share (EPS) of $1.77.
- P/B Ratio: The P/B ratio is calculated at 4.2, derived from a book value per share of $17.59.
- EV/EBITDA Ratio: The EV/EBITDA ratio stands at 25.6, calculated using an enterprise value of $1.55 billion and EBITDA of $60.5 million.
Stock Price Trends
The stock price experienced fluctuations over the past 12 months:
| Date | Stock Price |
|---|---|
| September 30, 2024 | $73.90 |
| June 30, 2024 | $68.00 |
| March 31, 2024 | $62.50 |
| December 31, 2023 | $54.00 |
| September 30, 2023 | $50.00 |
Dividend Yield and Payout Ratios
The company has maintained a consistent dividend policy:
- Annual Dividend per Share: $0.32
- Dividend Yield: Approximately 0.43% based on a stock price of $73.90.
- Payout Ratio: The payout ratio is 18.1%, calculated using the annual dividend and earnings per share.
Analyst Consensus
Analyst ratings indicate a positive outlook:
- Buy: 5 analysts
- Hold: 2 analysts
- Sell: 1 analyst
The consensus rating is a Buy, reflecting confidence in the company's growth potential and financial stability.
Key Risks Facing AAON, Inc. (AAON)
Key Risks Facing AAON, Inc.
AAON, Inc. faces a variety of risk factors that impact its financial health. These include internal and external risks such as industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The HVAC industry is highly competitive, with numerous players ranging from small manufacturers to large multinational corporations. As of September 30, 2024, the company reported net sales of $902.9 million, reflecting a 4.8% increase year-over-year, but the competitive landscape continuously pressures margins and market share.
Regulatory Changes
Changes in regulations related to energy efficiency, environmental standards, and labor laws can significantly impact operational costs and compliance requirements. The estimated annual effective tax rate for 2024 is expected to be approximately 24.9%, which reflects the impact of regulatory changes on the company's financial obligations.
Market Conditions
Market conditions, including economic downturns and fluctuations in demand for HVAC products, pose a risk to revenue stability. The company reported a backlog of $647.7 million as of September 30, 2024, a 32% increase from the prior year, indicating strong future demand but also highlighting reliance on market conditions.
Operational Risks
Operational risks include challenges in manufacturing efficiency and supply chain disruptions. The company faced production timing delays and construction inefficiencies that affected its gross margin, which decreased to 34.9% for the three months ended September 30, 2024, compared to 37.2% in the prior year.
Financial Risks
Financial risks are exacerbated by fluctuations in raw material costs. The nine-month average raw material costs as of September 30, 2024, showed a decrease in key materials: copper at $5.39 (down 5.1%), galvanized steel at $0.59 (down 13.2%), and stainless steel at $2.54 (down 23.7%).
Strategic Risks
Strategic risks include the potential failure to effectively execute growth strategies or respond to market changes. The company’s investment in capital expenditures and software development was $113.8 million for the nine months ended September 30, 2024.
Mitigation Strategies
To mitigate these risks, the company employs various strategies including entering into long-term contracts with suppliers to stabilize raw material costs and implementing price increases to offset inflationary pressures. The company has also engaged in share repurchase programs, completing the repurchase of 1.4 million shares for $107.5 million during the nine months ended September 30, 2024.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Numerous competitors in the HVAC market. | Pressure on margins and market share. | Continuous innovation and product differentiation. |
| Regulatory Changes | Changes in energy and environmental regulations. | Increased compliance costs. | Invest in compliance and sustainability practices. |
| Market Conditions | Economic downturns affecting demand. | Revenue instability. | Diversification of product offerings. |
| Operational Risks | Manufacturing inefficiencies and supply chain issues. | Reduced margins. | Enhance manufacturing processes and supplier relationships. |
| Financial Risks | Fluctuating raw material costs. | Impact on profit margins. | Long-term contracts with suppliers. |
| Strategic Risks | Failure to execute growth strategies. | Reduced market presence. | Regular strategic reviews and adjustments. |
Future Growth Prospects for AAON, Inc. (AAON)
Future Growth Prospects for AAON, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers, including:
- Product Innovations: Continued investment in new product development, particularly in data center cooling solutions, which saw a significant revenue increase of 90.1% in Q3 2024 compared to Q3 2023.
- Market Expansions: Expansion into new markets with a backlog of $647.7 million as of September 30, 2024, representing a 32.0% increase year-over-year.
- Acquisitions: The integration of BASX has contributed to the growth, with BASX segment sales increasing 39.0% year-over-year during the first nine months of 2024.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net sales increased by $41.0 million, or 4.8%, compared to the same period in 2023, with projections indicating continued growth driven by robust demand in cooling solutions.
Analysts estimate earnings per share (EPS) for 2024 to be around $1.77, up from $1.61 in 2023, reflecting a strong operational performance.
Strategic Initiatives or Partnerships
The company has focused on strategic partnerships to enhance its product offerings and market reach. Recent investments of $113.8 million in capital expenditures and software development during the first nine months of 2024 indicate a commitment to innovation and efficiency improvements.
Competitive Advantages
AAON, Inc. benefits from several competitive advantages:
- Strong Backlog: The current backlog of $647.7 million provides visibility and stability, ensuring future revenue streams.
- Operational Efficiency: Improvements in production efficiency have led to increased gross profit margins, which rose to 35.4% for the nine months ended September 30, 2024, compared to 33.3% in the previous year.
- Market Demand: The growing demand for energy-efficient HVAC solutions positions the company favorably within the expanding market.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $327,252,000 | $311,970,000 | 4.9% |
| Gross Profit Margin | 34.9% | 37.2% | (1.7%) |
| Net Income | $52,625,000 | $48,078,000 | 5.3% |
| EPS (Basic) | $0.65 | $0.59 | 10.2% |
The combination of strong backlog, innovative product lines, and strategic market expansions positions the company well for sustained growth in the coming years.
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Updated on 16 Nov 2024
Resources:
- AAON, Inc. (AAON) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of AAON, Inc. (AAON)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View AAON, Inc. (AAON)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.