AAON, Inc.: Initiation of Research Coverage

William Blair initiated research coverage of AAON, Inc. (AAON $89.90), a manufacturer of semi-custom and custom commercial HVAC systems.

Analyst Ryan Merkel estimated that the company would generate adjusted earnings per share of $2.40 in 2024 and $3.15 in 2025, rising from $2.20 in 2023. Long term, he forecast AAON to increase sales in the low to midteens, leading to 15%-plus EBITDA growth.

"AAON manufactures best-in-class commercial HVAC equipment," Merkel said. "In its core segment-the $7.5 billion packaged commercial rooftop systems market-AAON is rapidly growing share beyond its current 11%. Through a nationwide independent sales network, AAON has amassed the scale to win in every corner of the United States. In addition, AAON invests in R&D and its world-class research center to stay years ahead of regulatory changes. Macro trends such as decarbonization, electrification, and HVAC efficiency regulations have pushed AAON from a niche manufacturer toward the mainstream as its equipment lasts longer, is more efficient, and is easier to maintain, leading to lower total cost of ownership than peers' equipment."

Merkel continued, "In 2021, AAON acquired BASX, which designs and manufactures custom engineered HVAC systems. BASX's cooling solutions cater to the data center, semiconductor, and electric vehicle markets. Given exposure to these megatrends, we forecast BASX will grow roughly 30% during the next several years. The synergies created through the acquisition enable BASX to scale faster and AAON to reach new customers."

William Blair is the premier global boutique with expertise in investment banking, investment management, and private wealth management. We provide advisory services, strategies, and solutions to meet our clients' evolving needs. As an independent and employee-owned firm, together with our strategic partners, we operate in more than 20 offices worldwide.*

View our research coverage list

*Includes strategic partnerships with Allier Capital, BDA Partners, and Poalim Capital Markets.

William Blair or an affiliate does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. This report is not intended to provide personal investment advice. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments, or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein.

William Blair or an affiliate is a market maker in the security of AAON, Inc.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from AAON, Inc. or an affiliate within the next three months.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in securities of AAON, Inc.

Please contact us at +1 800 621 0687 or view disclosures on our coverage list.

Additional information is available upon request.

Current Ratings Distribution (as of 4/28/24)

Coverage Universe
Outperform (Buy): 73%
Market Perform (Hold): 27%
Underperform (Sell): 1%

Inv. Banking Relationships*
Outperform (Buy): 8%
Market Perform (Hold): 2%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including the quality and accuracy of research, client feedback, contributions to other firm departments, competitive factors, and firm profitability.

OTHER IMPORTANT DISCLOSURES

Stock ratings and valuation methodologies: William Blair & Company, L.L.C. uses a three-point system to rate stocks. Individual ratings reflect the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) - stock expected to outperform the broader market over the next 12 months; Market Perform (M) - stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) - stock expected to underperform the broader market over the next 12 months; not rated (NR) - the stock is not currently rated. The valuation methodologies include (but are not limited to) price-to-earnings multiple (P/E), relative P/E (compared with the relevant market), P/E-to-growth-rate (PEG) ratio, market capitalization/revenue multiple, enterprise value/EBITDA ratio, discounted cash flow, and others. Stock ratings and valuation methodologies should not be used or relied upon as investment advice. Past performance is not necessarily a guide to future performance.

The ratings and valuation methodologies reflect the opinion of the individual analyst and are subject to change at any time.

Our salespeople, traders, and other professionals may provide oral or written market commentary, short-term trade ideas, or trading strategies-to our clients, prospective clients, and our trading desks-that are contrary to opinions expressed in this research report. Certain outstanding research reports may contain discussions or investment opinions relating to securities, financial instruments and/or issuers that are no longer current. Always refer to the most recent report on a company or issuer. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily electronically, and in some instances in printed form. Research is simultaneously available to all clients. This research report is for our clients only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company, L.L.C.

This is not in any sense an offer or solicitation for the purchase or sale of a security or financial instrument. The factual statements herein have been taken from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness or otherwise, except with respect to any disclosures relative to William Blair or its research analysts. Opinions expressed are our own unless otherwise stated and are subject to change without notice. Prices shown are approximate.

If the recipient received this research report pursuant to terms of service for, or a contract with William Blair for, the provision of research services for a separate fee, and in connection with the delivery of such research services we may be deemed to be acting as an investment adviser, then such investment adviser status relates, if at all, only to the recipient with whom we have contracted directly and does not extend beyond the delivery of this report (unless otherwise agreed specifically in writing). If such recipient uses these research services in connection with the sale or purchase of a security referred to herein, William Blair may act as principal for our own account or as riskless principal or agent for another party. William Blair is and continues to act solely as a broker-dealer in connection with the execution of any transactions, including transactions in any securities referred to herein.

This material is distributed in the United Kingdom and the European Economic Area (EEA) by William Blair International, Ltd., authorized and regulated by the Financial Conduct Authority (FCA). William Blair International, Limited is a limited liability company registered in England and Wales with company number 03619027. This material is only directed and issued to persons regarded as Professional investors or equivalent in their home jurisdiction, or persons falling within articles 19 (5), 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not "relevant persons."

"William Blair" and "R*Docs" are registered trademarks of William Blair & Company, L.L.C. Copyright 2024, William Blair & Company, L.L.C. All rights reserved.

Public link

Please use the above public link if you want to share this noodl on another website.