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Written by Josh Kohn-Lindquist for The Motley Fool->
AAON grew sales and earnings per share by 54% and 37% in Q1, sailing past analysts' expectations.
The company's backlog grew even faster, by 107%, pointing to strong future sales.
AAON's BASX unit -- which primarily serves data centers -- grew sales by 105% and its backlog by 160%.
Shares of leading customizable HVAC (heating, ventilation, and air conditioning) equipment provider AAON (NASDAQ: AAON) are up 45% this week after the company delivered expectation-smashing first-quarter earnings earlier this week. Sales and earnings per share grew by 54% and 37% in Q1, far surpassing analysts' hopes. And that's just the start of the good news.
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Simply put, AAON is firing on all cylinders. Its 2021 acquisition of BASX for roughly $200 million now looks like an absolute masterstroke, as the young unit just grew sales by 105% to reach $135 million in Q1 revenue. As the hyperscalers pile money into data centers for AI compute at a hard-to-fathom rate, AAON's premium, customizable HVAC equipment and solutions are becoming an indispensable part of the AI revolution's build-out.
That said, as awesome as this news is for AAON right now, investors need to beware that the hyperscaler's blistering expansion plans will likely not last forever -- or, at a minimum, will lead to brutal cyclicality at some point. However, there haven't been any hints yet that the data center build-out is slowing, so I'm not going to say AAON's good times are soon to end. It's impossible to tell how long this cycle will (or won't) last.
Trading at 61 times forward earnings, AAON's valuation isn't outrageous if its outsize sales growth continues -- which isn't a stretch given its booming backlog and BASX unit's book-to-bill ratio of over 2. I'm fascinated by AAON and will be keeping a close eye on it, as it looks like a promising picks-and-shovels play to the AI revolution.
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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aaon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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