When you think about high-powered growth stocks, your mind probably jumps straight to the tech sector, and rightly so. The “Magnificent Seven” stocks have set the stage with their astronomical returns, but let’s not overlook some hidden gems outside of Silicon Valley. Enter Trane Technologies (NYSE: TT), a company that’s been quietly dominating the HVAC and refrigeration space. This isn’t just another run-of-the-mill stock; it’s a powerhouse that has redefined itself as a global climate innovator, riding the wave of climate change and demographic shifts.
Trane Technologies, formerly known as Ingersoll-Rand, has proven to be a consistent market beater. With a staggering 55% increase year-to-date through December 20 and a jaw-dropping 10,000% return since its inception as Ingersoll-Rand in 1988, this stock is nothing short of a 100-bagger. That’s right; a mere $1,000 investment back then would have ballooned to an eye-popping $100,000 today. As we look ahead to 2025, Trane is well-positioned to keep that momentum rolling.
One of the key factors fueling Trane’s growth is its strategic focus on climate trends. The company has a knack for identifying and seizing opportunities, like its recent acquisition of Brainbox AI, a company specializing in autonomous HVAC controls and generative AI technology. In an industry that isn’t typically associated with cutting-edge tech, Trane is making waves by integrating innovative solutions that not only enhance their offerings but also tackle the pressing issue of greenhouse gas emissions. With HVAC systems accounting for about 15% of emissions, this move is both timely and socially responsible.
The HVAC market is on an upward trajectory, projected to grow from $159 billion to $227 billion by 2028. Demographic shifts in the U.S., particularly the migration to warmer states, are driving a surge in demand for HVAC systems. Trane’s Americas segment is reaping the benefits, with a 15% revenue increase to $4.47 billion in the latest quarter. Overall, the company reported an 11% revenue increase to $5.44 billion, bolstered by solid operating margins of 18.9%. These figures speak volumes about Trane’s competitive edge in a rapidly evolving market.
Looking ahead, while Trane hasn’t provided specific guidance for 2025, it did raise its full-year guidance for 2024, expecting organic and reported revenue growth of 11% and a GAAP EPS of $11.10. Sure, the stock trades at a forward P/E of 34, which might seem steep, but given its track record and industry leadership, it’s a price worth paying. Furthermore, Trane is committed to returning cash to shareholders, recently announcing a hefty $5 billion share buyback program.
Trane Technologies stands as a beacon of growth potential in the construction sector, combining a robust history of performance with a tech-forward approach and a strategic focus on sustainability. With a market cap nearing $100 billion, it’s not just another player in the HVAC game; it’s the leader. Investors would do well to keep an eye on this stock as it continues to innovate and adapt in an ever-changing landscape. As the demand for efficient, eco-friendly solutions grows, Trane is poised to deliver, making it a compelling option for those looking to diversify their investment portfolios beyond the tech giants.