U.S. stocks edge higher; solid earnings season continues
Sidoti upgraded AAON Inc (NASDAQ:AAON) from neutral to buy on Monday, setting a price target of $95.00 following the company’s recent investor day that triggered a significant share price decline. The $6.06 billion market cap company currently trades at a P/E ratio of 38.4x, and according to InvestingPro data, its RSI suggests the stock is in oversold territory.
AAON shares fell 22% after its June 10 investor day presentation, substantially underperforming the Russell 2000’s 2% decline during the same period. The selloff was primarily driven by a surprise downward revision to second-quarter 2025 guidance and the introduction of three-year financial targets below market expectations. Despite the recent decline, the company maintains strong fundamentals with a healthy current ratio of 2.77 and operates with moderate debt levels.
Despite the negative short-term outlook, Sidoti analyst Julio Romero views the recent pullback as "an attractive entry point for a stock with a multiyear double-digit sales growth trajectory, reset expectations, and favorable thematic exposure to data centers, HVAC, and decarbonization/electrification." The company has demonstrated strong growth fundamentals, with a 21% revenue CAGR over the past five years and current revenue growth of 8.24%. InvestingPro subscribers can access 14 additional investment tips and a comprehensive Pro Research Report for deeper analysis.
The research firm maintained a positive view on AAON’s demand and long-term growth prospects, suggesting that both the second-quarter guidance reduction and below-consensus financial targets reflect the company’s near-term focus on optimizing existing systems and ensuring proper execution of new capacity additions.
Sidoti lowered its price target to $95 from $100 previously, but the upgrade from neutral to buy indicates the firm believes the stock now offers upside potential following the recent correction.
In other recent news, AAON Inc. reported its Q1 2025 earnings, exceeding analysts’ expectations with an adjusted earnings per share (EPS) of $0.37, compared to the forecasted $0.24. The company’s revenue also surpassed projections, reaching $322.1 million against the anticipated $290.62 million, marking a 22.9% year-over-year increase driven by robust demand in data centers. Despite a decrease in gross profit by 6.4% to $86.4 million, AAON maintained its competitive edge through product innovation and operational efficiency improvements. DA Davidson reiterated its Buy rating on AAON, maintaining a price target of $125.00, citing the company’s calculated plan for double-digit growth through 2027. The research firm noted that AAON’s growth strategy requires modest capital, which is seen as a positive element in the company’s long-term planning. DA Davidson also observed that AAON’s premium valuation compared to peers has narrowed, supporting their Buy recommendation. AAON continues to focus on expanding its product portfolio and operational capabilities, with significant production expected from its Memphis facility in Q4 2025. The company is optimistic about its future prospects, supported by strategic initiatives and strong demand in key markets.
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