6th Annual HARDI-JP Morgan Mid-Season HVAC Distributor Survey Indicates Continued Improvement

COLUMBUS, Ohio — Heating, Air-conditioning and Refrigeration Distributors International recently completed the sixth annual Mid-Season HVAC Distributor Survey in partnership with JP Morgan Equity Research. HARDI presented the findings with a webinar featuring JP Morgan’s HVAC industry analyst C. Stephen Tusa. The presentation serves as a follow-up to the annual outlook presentation HARDI gave earlier this year.
In the residential sector, the themes from the selling season have confirmed the predictions at the beginning of 2014. Revenue growth is in line with the industry; Q1 was good and Q2 was solid.

14+ SEER mix equipment sales are up, R22 dry ship units are continuing to decline.

Replacement demand offset slightly weaker new construction. At the same time, replacement parts were down indicating less repair activity. Pricing demands were good while inventories were described by distributors as “about the same as sales.”

84 percent of distributors saw demand improving in 2Q14 with high single-digits growth as opposed to 71 percent last year.

Weather and economy played their roles as well. Approximately 50 percent of survey respondents saw negative impact from the weather. Thirty percent of respondents gave a positive response regarding the economy versus a 20 percent negative response.

Residential construction was positive with almost 50 percent reporting a positive impact, 36 percent gave a neutral response while only 16 percent responded negatively.

The commercial end market should remain stable with low single-digit growth, but slightly weaker than last year.

“Commercial markets…certainly have not had the bounceback that residential guys have had in the last couple of years,” remarked Tusa.
Competitively, OEMs had no surprises: Lennox and Goodman are the leaders with Carrier behind them and Trane beginning to come into line. Revenue growth was up approximately 10 percent year-to-date.

Preview for 2015: replacement demand should offset any lagging from commercial construction.

Tusa predicts a normalized demand of approximately 7 million units by 2016. This is not unreasonable and continues the upswing from 2013’s 5.9 million units.

Tusa stated, “Core fundamentals of the businesses remain pretty solid, so we would expect to see continued growth for the rest of the year.”

The survey goes into detail on Residential End Market Demand, Commercial End Market Demand, Weather/Economy, Construction, Repair/Replace Dynamics, Inventories, Pricing, Ductless/VRF and Ductless VRF. Questions about the results of this annual joint survey should be directed to HARDI’s Brian Loftus at bloftus@hardinet.org.

The report and webinar playback is now available for purchase on HARDI’s website at  http://www.hardinet.org/mid-season-hvac-distributor-survey.