AAON: Data Center Expansion Will Drive Results Amid Margin Uncertainty

Analysts have raised their fair value price target for AAON from $103.25 to $115.25 per share. They cite expectations of stronger revenue growth, a slightly higher discount rate, and continued benefits from the company's positioning in data center and industrial efficiency sectors.

Analyst Commentary

Recent research notes have highlighted both strengths and potential challenges for AAON as the company positions itself within the evolving data center and industrial efficiency markets.

Bullish Takeaways

• Bullish analysts have raised their price targets in response to AAON’s consistent exposure to the artificial intelligence infrastructure buildout. This exposure is driving outperformance compared to names tied to traditional residential and construction markets.
• AAON is viewed as a differentiated innovator, specifically in HVAC and data center thermal management. The company leverages advanced research and development to sustain its competitive edge.
• Analysts foresee additional operating leverage as the company executes on transformational growth initiatives and expands its data center footprint. There is potential for margins to move into the upper tier of industry benchmarks by fiscal year 2027.
• Recent operational improvements and resilience in the face of non-residential market weakness are expected to support improving results in the near term.

Bearish Takeaways

• Bearish analysts note that fundamentals in the upcoming quarter are anticipated to align closely with broader sector trends, which could introduce downside if the data center and industrial efficiency tailwinds moderate.
• Stocks more heavily tied to residential and construction demand have lagged. AAON’s continued success will depend on maintaining its focus on higher-growth sectors and avoiding overexposure to weaker end markets.
• There is some caution around the company’s ability to sustain high margins and capitalize fully on growth opportunities as it undergoes operational transitions and doubles its footprint, particularly through fiscal years 2025 to 2027.

What's in the News

• Jehoshaphat Research has announced a short position on AAON, questioning the profitability of its data center cooling projects and warning of potential downside to company earnings, as well as possible accounting restatements (Periodical).
• AAON increased its full-year 2025 guidance, now projecting year-over-year sales growth in the mid teens instead of low teens (Key Development).
• The company provided new guidance for the fourth quarter of 2025, expecting double-digit revenue growth due to production recovery and earlier pricing actions (Key Development).
• AAON has completed a share repurchase of 11,094,705 shares, representing 14.59 percent for $832.65 million, as part of a long-term buyback program (Key Development).
• AAON's cold climate heat pump rooftop units have met U.S. Department of Energy challenge criteria and have been deployed in the field since February (Key Development).

Valuation Changes

• Consensus Analyst Price Target has increased from $103.25 to $115.25 per share, reflecting higher fair value expectations.
• The discount rate has risen slightly, moving from 8.15 percent to 8.41 percent in the valuation model.
• Revenue growth assumptions are up from 15.29 percent to 16.60 percent.
• The net profit margin projection is virtually unchanged, moving marginally from 14.86 percent to 14.87 percent.
• The future P/E multiple has increased slightly, from 37.36x to 38.84x.