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Record third-quarter revenue of $707.4 million, driven by demand for data center cooling systems, sent AAON (NASDAQ:AAON) soaring 37.8% this week.
AAON stock changed hands at $78.80 as of the close on Thursday, Nov. 12, up 37.8% this week from Friday, Nov. 6's close through Thursday, Nov. 12's close, according to data provided by S&P Global Market Intelligence. Over the same period, the S&P 500 (SNPINDEX:^GSPC) gained 2.9%, and the Nasdaq-100 was up 4.8%.
On Tuesday, the company reported third-quarter net sales of $707.4 million, up 84.1% year over year, topping analyst expectations of $601.2 million. Adjusted earnings per share reached $0.83, more than double the prior-year period's $0.37. Sales from its BASX brand, which manufactures specialized liquid-cooling equipment for artificial intelligence data centers, surged 218% to $397.2 million.
AAON manufactures custom heating, ventilation, and air conditioning (HVAC) equipment and specialized liquid-cooling systems for commercial, industrial, and data center customers. Demand for high-density computing requires heavy-duty thermal management to prevent server overheating. The rapid ramp-up in data center orders accelerated total sales, prompting management to raise its full-year sales growth forecast to 72%-75%.
Alongside the record sales, the company disclosed a material weakness in internal controls over financial reporting, which required a first-half results restatement, though the adjustment added $10.7 million to revenue. Management also expanded its senior credit facility to $1.2 billion to fund factory capacity. The surge in data center cooling revenue confirms that AAON's thermal management business is capturing high-margin demand from AI infrastructure builds despite internal accounting control fixes.
AAON stock trades at a trailing price-to-earnings (P/E) ratio of 32.3. AAON's trailing P/E of 32.3 sits within a peer range spanning Lennox International at 15.7, Trane Technologies at 29.8, and Modine Manufacturing at 44.4, so the multiple on its own does not say whether the stock is cheap or expensive; execution on the data center order backlog does.
Investors should focus on whether the company can maintain manufacturing throughput without expanding control issues when it reports fourth-quarter results on March 1, 2027.
While AAON stock seems to trade at a high sales multiple, it's important to recognize that shares are changing hands at a discount to their historical valuation -- their five-year average P/E is 48. Between this and management's belief that the company is poised for strong revenue growth, AAON stock is well worth further investigation for those seeking data center exposure.
Those who do choose to load up on AAON stock, though, should be mindful of the company's gross profit margin in the next quarter. With the shift toward lower-margin BASX products, AAON's gross profit margin in Q3 2026 declined from 27.8% in the prior-year period to 26.7%. Should the company continue to experience a contraction in its gross profit margin, it may suggest the industrial stock is less alluring.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aaon, Modine Manufacturing, and Trane Technologies Plc. The Motley Fool has a disclosure policy.
Why AAON Stock Surged 37.8% This Week was originally published by The Motley Fool
