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1. Company Snapshot

1.a. Company Description

AAON, Inc., together with its subsidiaries, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment in the United States and Canada.The company operates through three segments: AAON Oklahoma, AAON Coil Products, and BasX.It offers rooftop units, data center cooling solutions, cleanroom systems, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls.


The company markets and sells its products to retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, and other commercial industries.It sells its products through a network of independent manufacturer representative organizations and internal sales force.The company was incorporated in 1987 and is based in Tulsa, Oklahoma.

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1.b. Last Insights on AAON

AAON, Inc.'s recent performance was driven by strong sales growth, with net sales increasing 20.1% to $1.44 billion in 2025, and a record year-end backlog of $1.83 billion, up 110.9% year-over-year. The company's strategic investments in production expansion and ERP implementation are expected to support future growth. Despite gross margin headwinds, the company's 2026 outlook reflects revenue growth of 18-20% and gross margins of approximately 29-31%. According to Marketbeat Ratings, the stock has a consensus recommendation of "Moderate Buy" from eight brokerages.

1.c. Company Highlights

2. AAON's Q4 2025 Earnings: Strong Growth Amidst Transformational Investments

AAON, Inc.'s Q4 2025 financial performance was marked by a 42.5% year-over-year increase in net sales to $424.2 million. The company's gross margin stood at 25.9%, slightly down from 26.1% in the prior-year period, primarily due to unabsorbed fixed costs associated with the new Memphis facility. Non-GAAP adjusted EBITDA margin was 15.2%, down from 15.8% a year ago. Diluted EPS was $0.39, up 30% from 2024, although actual EPS came in at $0.3854, slightly below estimates of $0.45.

Publication Date: Mar -03

📋 Highlights
  • Basics Branded Sales Surge:: Sales rose 143% to $548 million in 2025, driven by strong demand for custom solutions and a 141% backlog increase to $1.3 billion.
  • Q4 2025 Revenue Growth:: Net sales jumped 42.5% YoY to $424.2 million, despite an 8% decline in AAON branded sales amid industry-wide volume drops.
  • Gross Margin Pressure:: Q4 2025 gross margin dipped to 25.9% from 26.1% due to unabsorbed costs at the new Memphis facility, with adjusted EBITDA margin falling to 15.2%.
  • 2026 Guidance:: Projects sales growth of 18–20% and gross margin improvement to 29–31%, with Basics revenue growth midpoint at ~25% and $225 million in 2025 working capital reductions.
  • Backlog and Capacity Constraints:: Basics backlog of $1.3 billion includes long-duration projects, with only half expected to ship in 2026 due to data center market dynamics and lead times exceeding 20 weeks in Oklahoma.

Segment Performance

The Basics branded sales saw a significant increase of 143% to $548 million in 2025, while the backlog grew 141% to $1.3 billion. In contrast, AAON branded sales declined 8% despite a 16% decline in overall industry volumes, showcasing the company's resilience. The robust bookings and revenue momentum were driven by demand for its custom solutions.

Outlook for 2026

For 2026, AAON expects sales growth of 18% to 20%, with a gross margin of 29% to 31%. The company anticipates SG&A as a percent of sales to be around 16% and depreciation and amortization expenses in the range of $95 million to $100 million. The focus in 2026 will be on execution, leveraging its foundation, improving throughput, and continuing progress towards its margin objectives.

Valuation Insights

With a P/E Ratio of 79.36 and an EV/EBITDA of 41.65, the market seems to be pricing in significant growth expectations. The company's ROE stands at 12.63%, indicating a decent return on equity. As AAON continues to invest in capacity and improve its operations, the near-term focus will be on executing its strategy in a profitable manner. The 2026 sales growth guidance implies sales dollars above the three-year Investor Day targets for 2027, reinforcing the growth trajectory.

Operational Updates

The company has made significant investments in capacity, including the Longview expansion and Memphis facility. The gating mechanism for growth is not the square footage but the ramp rate, which is crucial for executing its strategy. Lead times in the Oklahoma business are longer than desired, around mid-20 weeks for some high-volume lines, and the company aims to drive throughput and bring them down throughout the year.

3. NewsRoom

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AAON Announces Quarterly Cash Dividend

Mar -05

Source: prnewswire.com

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AAON Q4 Earnings Call Highlights

Mar -04

Source: defenseworld.net

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AAON: Growth Remains Good, But Not Good Enough

Mar -03

Source: seekingalpha.com

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AAON Passes DOE's Commercial Building HVAC Technology Challenge with Simultaneous Dual Fuel Technology

Mar -03

Source: prnewswire.com

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Bahl & Gaynor Inc. Sells 6,754 Shares of AAON, Inc. $AAON

Mar -03

Source: defenseworld.net

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AAON, Inc. (AAON) Q4 2025 Earnings Call Transcript

Mar -02

Source: seekingalpha.com

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Aaon (AAON) Misses Q4 Earnings Estimates

Mar -02

Source: zacks.com

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AAON Reports Fourth Quarter and Full Year 2025 Results

Mar -02

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.63%)

6. Segments

AAON Oklahoma

Expected Growth: 11%

AAON Oklahoma's 11% growth is driven by increasing demand for energy-efficient HVAC solutions, strategic expansion into new markets, and growing adoption of its proprietary technology. Additionally, the segment benefits from a strong backlog of orders, favorable industry trends, and effective cost management.

BASX

Expected Growth: 9%

BASX from AAON, Inc. growth driven by increasing demand for energy-efficient HVAC solutions, government incentives for green buildings, and rising construction activities in commercial and industrial sectors, contributing to 9% growth.

AAON Coil Products

Expected Growth: 10%

AAON Coil Products' 10% growth is driven by increasing demand for energy-efficient HVAC systems, growing adoption of modular construction, and rising need for indoor air quality solutions. Additionally, AAON's focus on innovation, quality, and customer service contributes to its market share expansion.

7. Detailed Products

Rooftop Units

AAON's rooftop units are designed for outdoor installation and provide heating, cooling, and ventilation to commercial and industrial buildings.

Air Handling Units

AAON's air handling units are designed for indoor installation and provide heating, cooling, and ventilation to commercial and industrial buildings.

Condenser Coils

AAON's condenser coils are designed for outdoor installation and provide efficient heat transfer for air conditioning and refrigeration systems.

Chillers

AAON's chillers are designed for outdoor installation and provide efficient cooling for large commercial and industrial applications.

Packaged Outdoor Units

AAON's packaged outdoor units are designed for outdoor installation and provide heating, cooling, and ventilation to commercial and industrial buildings.

Fan Coil Units

AAON's fan coil units are designed for indoor installation and provide heating, cooling, and ventilation to commercial and industrial buildings.

8. AAON, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for AAON, Inc. is medium due to the availability of alternative products and services in the HVAC industry.

Bargaining Power Of Customers

The bargaining power of customers for AAON, Inc. is low due to the company's strong brand reputation and customer loyalty.

Bargaining Power Of Suppliers

The bargaining power of suppliers for AAON, Inc. is medium due to the company's dependence on a few key suppliers for raw materials.

Threat Of New Entrants

The threat of new entrants for AAON, Inc. is low due to the high barriers to entry in the HVAC industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for AAON, Inc. is high due to the competitive nature of the HVAC industry, with many established players vying for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 6.67%
Debt Cost 7.89%
Equity Weight 93.33%
Equity Cost 7.89%
WACC 7.89%
Leverage 7.15%

11. Quality Control: AAON, Inc. passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Beacon Roofing Supply

A-Score: 4.7/10

Value: 4.6

Growth: 5.2

Quality: 5.0

Yield: 0.0

Momentum: 7.5

Volatility: 6.0

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Advanced Drainage Systems

A-Score: 4.7/10

Value: 2.7

Growth: 6.7

Quality: 6.8

Yield: 0.0

Momentum: 7.0

Volatility: 5.0

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LP

A-Score: 4.6/10

Value: 3.3

Growth: 7.0

Quality: 6.1

Yield: 3.0

Momentum: 2.5

Volatility: 5.7

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Fortune Brands

A-Score: 4.3/10

Value: 5.2

Growth: 4.6

Quality: 5.4

Yield: 3.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

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AAON

A-Score: 4.0/10

Value: 2.9

Growth: 8.1

Quality: 6.4

Yield: 1.0

Momentum: 2.0

Volatility: 3.3

1-Year Total Return ->

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Trex

A-Score: 3.5/10

Value: 3.8

Growth: 5.8

Quality: 7.5

Yield: 0.0

Momentum: 0.5

Volatility: 3.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

91.99$

Current Price

92.0$

Potential

-0.00%

Expected Cash-Flows