Explore the Innovative Construction Tech Company Already Delivering 100x Returns and Set to Outperform the Market by 2025
Explore the Innovative Construction Tech Company Already Delivering 100x Returns and Set to Outperform the Market by 2025
If you're hunting for high-powered growth stocks, your initial thought might be to explore the tech sector. That's reasonable, considering the "Amazing Eight" stocks all stem from the tech sector and have delivered stellar returns, surpassing $1 trillion valuations.
However, there have been consistent winners in different sectors, and one lesser-known stock that has outperformed throughout its history is Trane Technologies (TT -1.54%). A pioneer in HVAC and refrigeration systems, the company labels itself as a global climate innovator. Climate change and related demographic trends have served as a significant boost for the company.
Originally known as Ingersoll-Rand, the company has consistently outpaced the market. By December 2020, the stock had climbed 55%, and since 1988, it has yielded over 10,000% returns, transforming $1,000 into $100,000.
Heading into 2025, Trane Technologies seems poised to continue its market dominance. Let's examine a few reasons why.
Climate trends work to its advantage
Trane Technologies has expanded through a mix of organic growth and acquisitions. Recently, it made an intelligent acquisition.
Trane is purchasing Brainbox AI, which specializes in autonomous HVAC controls and generative AI technology for buildings. This move highlights Trane's lead in technology within an industry not typically associated with it.
The demand for air conditioning and HVAC services is increasing due to climate change, but HVAC is also a major contributor to greenhouse gas emissions, with heating and cooling buildings accounting for an estimated 15% of emissions. Trane sees Brainbox AI as a way to reduce energy consumption and emissions. The company described the acquisition as a "bolt-on addition" that follows its "proven strategy of incorporating leading technologies that complement its core business and amplifying their impact over time."
Industry trends are also fueling above-average growth, with the global HVAC market anticipated to grow from $159 billion to $227 billion by 2028.
Demographic trends in the U.S. also favor Trane, with more Americans moving to warm-weather states, and rising temperatures expected to fuel demand for HVAC systems.
The Americas segment is its largest and fastest-growing, with revenues from the Americas rising 15% to $4.47 billion. Overall revenue grew 11% to $5.44 billion in the quarter.
Trane also boasts robust operating margins, a clear sign of its technology and brand's competitive advantages. In the third quarter, it reported an operating margin of 18.9%.
Why Trane will keep winning in 2025
Trane has not provided guidance for 2025, but it did raise its full-year guidance for 2024 in its latest earnings report.
The company now expects organic and reported revenue to grow by 11% for the year and GAAP EPS to reach $11.10. At this forecast, the stock trades at a forward P/E of 34, which may not appear cheap but seems reasonable given its consistent growth and industry leadership.
Trane is also dedicated to sharing its success with shareholders, having recently announced a $5 billion share buyback program.
Overall, Trane combines the growth potential of a top stock with a formidable position in the HVAC sector, one of the fastest-growing subsectors in construction, and a tech-forward business model that uses acquisitions to equip the company with valuable tools that can be deployed across its operations.
With a market cap approaching $100 billion, Trane is the undisputed leader in its industry, and it possesses the competitive strength and management discipline to maintain its position. The stock appears capable of continuing to reward investors in 2025 and beyond.
In light of the company's focus on climate innovation and the increasing demand for energy-efficient HVAC solutions due to climate change, investors might consider investing in Trane Technologies to capitalize on this growth in the finance sector.
Trane Technologies' strategic acquisition of Brainbox AI and its commitment to reducing energy consumption and emissions through advanced technology further demonstrate the company's potential for generating significant returns for those who choose to invest in the stock market.