SPX Technologies is Wednesday's IBD Stock Of The Day as the heating, ventilation and air conditioning, or HVAC, innovator capitalizes on growth opportunities serving data centers, drugmakers and more. SPXC stock edged higher on Thursday. It's one to keep on your watchlist as it etches out a handle at the end of a 10-week consolidation.
SPX, based in Charlotte, N.C., has a stellar 98 IBD Composite Rating, according to IBD Stock Checkup. The Composite Rating, on a 1-99 scale, combines both technical and fundamental factors in a single rating.
Data Centers Lift HVAC Sales
"We continue to see strong demand for our cooling products across a broad set of end market applications, including data centers, health care facilities, semiconductor plants and industrial facilities," CEO Gene Lowe told analysts on the Aug. 1 second-quarter earnings call.
HVAC makes up about 70% of SPX sales, with its Detection & Measurement business making up the rest
HVAC segment revenue grew 32.5% from a year ago, including 17.7% organic growth, according to a note from William Blair analyst Ross Sparenblek.
The segment also saw a 15% boost from acquisitions of Ingenia and Aspeq that SPX has said expand its product line and its technological leadership.
EPS has grown 34% in each of the past two quarters. Revenue growth has accelerated from 9% to 16% to 18% the past three quarters, amid acquisitions and a couple of large jobs that were completed in Q2.
SPX Growth Outlook
The outlook provided by SPX on Aug. 1 implies "sequentially more moderate growth and margin expansion in the second half of 2024," Blair's Sparenblek wrote.
William Blair rates SPXC stock as outperform. It sees a "fair value" at $160 per share, or 25 times earnings of $6.35 in 2025.
The firm sees a path to continued double-digit earnings growth as it consolidates fragmented markets and keeps deploying its ample capital for bolt-on acquisitions.
Blair also highlighted traction on new products, including its hybrid wet/dry Adiabatic Cooling Tower, and the ramping of production for various in-demand product lines, including the Everest Cooling Tower for data centers.
New construction of data centers, chip and EV plants, and other nonresidential products has boosted SPX's backlog. But the company derives about two-thirds of revenue from replacement sales.
SPXC Stock
SPX rose 0.8% to 159.76 in Wednesday stock market action, finding support just above the 21-day line once again. That puts SPX 3% below an official 164.91 buy point from a 10-week consolidation, according to MarketSurge.
SPX has been consolidating since mid-July, briefly cresting the buy point on Sept. 20, when SPXC touched an intraday high of 165.13.
Investors can treat that Sept. 20 peak as a high handle on the end of the consolidation. A break of the handle's downtrend with a convincing move higher would flash an early entry opportunity. The trigger could be the 10-day line, currently just above 160.
SPXC is up roughly 58% year to date, as several HVAC companies have become AI-adjacent cooling plays.
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