Growth stock AAON is breaking out of a cup-with-handle base from a 100.46 entry, according to IBD MarketSmith. Shares rebounded from the 50-day line on Wednesday and volume has been ticking up as the stock rises in a four-day winning streak on Monday. The relative strength line is also rising bullishly with earnings due on Aug. 3.
The IBD 50 stock boasts stellar technical ratings. It has a perfect 99 Composite Rating, while the RS Rating is 93. The EPS Rating is also an impressive 98.
Sales growth over the past seven quarters built fundamental strength, though earnings growth has been mixed. For the fiscal first quarter, sales grew 46% to $266 million, while EPS of 67 cents was up 103%. Shares surged in strong volume on May 5 after earnings and set the starting point of the current base.
Growth Stock Shows Record Backlog
The company had a record backlog of $599.9 million at the end of the quarter, up 30% from a year ago. CEO Gary Fields noted that the company anticipates "more pricing and better productivity from the capacity investments" made in the first half of the year. The company also announced a cash dividend of 12 cents per share payable to shareholders on record as of June 9, 2023.
The stock is also going through a stock split. On July 28, shareholders will receive one additional share of AAON stock for every two shares that they already hold. Wall Street estimates earnings will grow 49% to $2.78 per share in 2023.
AAON makes building products through three segments. It makes standard, semi-custom and custom heating, ventilation and air conditioning. It sells them through two retail stores in Tulsa, Oklahoma, and online through its AAON Oklahoma segment. Additionally, it makes and sells heating and cooling coils used in HVAC systems through its AAON Coil Products segment. It recently expanded its coil products facility in Longview, Texas. The third segment, BASX, designs and manufactures data center cooling products, cleanroom HVAC systems, commercial/industrial HVAC systems and modular products. In 2021, AAON acquired BASX through a combination of cash, credit and equity.
AAON sells its products in all 50 states and in certain provinces in Canada.
AAON Leads Building Products Group
The growth stock holds first place in the building air conditioning, heating and ventilation products group, which is ranked a lofty No. 16 among IBD's 197 industry groups.
Mutual funds own 58% of outstanding shares of the stock. More funds have been buying the stock over the past five quarters. Among top mutual funds, Invesco Discovery Fund (OPOCX) holds shares of AAON. Exchange traded funds hold the stock as well. IShares Core S&P Small-Cap ETF and iShares S&P Small-Cap 600 Growth ETF hold shares of AAON.
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