This old technology that’s gaining new attention is heat pumps, a trend investors don’t want to miss. These devices are seen as a key tool in achieving global net zero targets, especially as temperatures continue to rise. The switch would also benefit consumers’ wallets, driving up the value of several energy-intensive sectors of the market, from real estate to industrials. Analysts say it’s not yet a big revenue source, but it’s headed in the right direction. Heat pumps continue to gain market share in the broader heating, ventilation and air conditioning industry, surpassing gas furnaces in the U.S. for the first time last year, according to UBS. “Recent trends such as heat decarbonization and increased electrification, economic factors, and government support through regulations and incentives are driving the industrial heat pump market to grow rapidly, with annual growth of over 15% by 2018. 2030,” McKinsey analysts said in a recent report. “Early market entry is key to success in this race.”Heat pumps provide both air conditioning and heating in his one device. It is also 3 to 5 times more efficient than traditional heating systems. Barclays analyst William Thompson said these devices use electricity to transfer heat from a colder space to a hotter space, essentially generating “free” heat rather than generating heat. Absorb. He added that industrial heating, space and water will be decarbonized when powered by renewable energy sources. Environmentally sustainable and energy efficient, heat pumps can optimize energy-intensive operations in areas such as data centers. It can also reduce costs for the majority of households and increase the value of the real estate in which the units are located. Heat pump technology is increasingly being adopted by companies in a variety of industries, including industrial, chemical, real estate, paper and packaging, and food and beverage. This is a solution that is gaining more attention as we rush to meet climate change goals. The United Nations aims to reduce global carbon emissions by 45% by 2030 and reduce global carbon emissions by 45% by 2050, in order to limit global average surface temperature rise to below 1.5 degrees Celsius, as required by the Paris Agreement. Our goal is to reach zero. But the United Nations said progress is not happening as fast. UBS strategist Amantya Muhedini estimates that heat pumps could reduce global CO2 emissions by at least 500 million tonnes by 2030, and the International Energy Agency estimates that heat pumps could reduce global CO2 emissions by at least 500 million tonnes by 2030. It is predicted that the building area and hot water emissions of 2020 could be reduced by approximately 12% by 2030. “With global energy demands arising from heating and cooling, more efficient HVAC solutions could play a key role in enabling decarbonization,” Muhedini said in a research note last week. Who stands to benefit? Industrial stocks, namely major heat pump manufacturers, are perhaps the most notable investment opportunity. “HP is disrupting the heating, ventilation, and air conditioning (HVAC) industry,” Barclays’ Thompson wrote in a recent note to clients. “In our view, HP manufacturers with established installer networks have a significant competitive advantage. Installers have the ability to deal with new suppliers, learn new HP systems, and According to Barclays, potential beneficiaries include heat pump manufacturers Carrier, Trane and Johnson Controls; This includes Lennox. Carrier’s stock is up about 14.9% since the beginning of the year, but analysts believe the stock may be slightly overvalued, with FactSet consensus forecasts suggesting the stock could fall about 0.7%. I predict that there will be. The company completed its acquisition of German heat pump company Wiesmann Climate Solutions earlier this year, a sign that “the somewhat fragmented HP industry appears to be in the early stages of consolidation,” Thompson said. Ta. The company plans to sell more non-HVAC businesses this year. Many analysts increased their confidence in Carrier after it posted a better first quarter earlier this month. On May 5, Jefferies analyst Stephen Volkman raised his price target on Carrier, which he rates as a buy, by seven points to $74, suggesting 12.2% upside potential. He expects the company to grow profits ahead of its peers and maintain solid mid-to-single-digit growth for several years. Shares in Trane, another major heat pump manufacturer, have soared more than 36% this year. The consensus price target of analysts surveyed by FactSet is $333.20, with only 0.7% upside potential. However, like Carrier, Trane recently boasted strong first-quarter results, supporting analysts’ bullish views on the stock. “Strong Q1 ’24 exceeds his ’24 guidance, with TT seeing relatively healthy end-market trends (especially [commercial HVAC]), delivering solid operational performance across margins. [free cash flow] “This generation should support multiple years of solid earnings growth and drive consistent shareholder value,” said Andrew Kaplowitz of Citi Research, who maintains a buy rating and a price target of 11. The dollar was raised to $366, suggesting the stock could rise 10.6%. Trane announced Wednesday its participation in the U.S. Department of Energy’s Commercial Building Heat Pump Technology Challenge. Through this initiative, companies will develop new low-emission heat pump rooftop units to provide energy. According to the DOE, rooftop heat pumps can reduce greenhouse gas emissions and energy costs by up to 50% compared to traditional rooftop units that use natural gas heating. DOE is also conducting the Residential Cold Region Heat Pump Technology Challenge. The company has partnered with major heat pump manufacturers such as Trane, Carrier, and Johnson Controls, which is also a major heat pump manufacturer, but UBS has lowered its stock price because it believes it lacks the “positive catalyst” expected. The company will have difficulty meeting its 2024 forecast. Earlier this year, RBC Capital Markets analyst Dean Dorey said Johnson Controls’ HVAC shipments would decline throughout 2023 due to a weak housing market due to rising mortgage rates and price inflation. Dre rates the stock as underperforming due to weak expected earnings growth and margin risk. Dray likes Carrier, which operates evenly in the residential and commercial markets. Johnson Controls has a higher nonresidential exposure of about 80%, compared to Trane’s 65% and Lennox’s 20%, Dray said. According to Barclays, adoption of heat pumps could also create ripple opportunities across manufacturers. Companies like industrial automation technology provider Rockwell Automation and manufacturer Owens Corning are developing energy-efficient windows and insulation materials needed to improve insulation and heating distribution to accommodate heat pumps. May benefit from building upgrades such as use. Owens posted strong earnings and sales beats in late April, prompting UBS to raise its price target by $23 to $192, suggesting the stock could rise more than 8.5% from Monday’s closing price. The stock is up nearly 18% this year. In the chemical sector, companies that produce greener heat pump refrigerants may one day benefit from recent legislation in the United States that will ban the production of heat pumps using refrigerants with high global warming potential next year. Companies developing or creating substitutes include Honeywell International, Chemours and Arkema, Barclays said. Barriers to Adoption Several barriers to heat pump installation continue to impede progress, including a lack of trained personnel, high installation costs, and supply constraints. It is also worth noting that although heat pumps are more efficient and cost-friendly than traditional heating, they generally do not offer fuel savings compared to natural gas heating due to the high ratio of gas to electricity prices in many countries. It is important. Per Barclays. Leading companies are setting examples by highlighting how they have been able to incorporate heat pumps into their operations. According to the IEA, heat pumps could “prove suitable” to meet nearly 40% of industrial heating demand by 2030, mainly in the paper and packaging, food and beverage, and chemical industries. It is said that there is. For example, in June 2023, Unilever stated that “in our operations, the use of thermal energy accounts for the majority of carbon emissions… To achieve this, we will consider significantly increasing usage.” We use heat pumps throughout our operations. A year ago, Nestlé announced it had replaced fossil fuel use with industrial heat pumps at its factories in Spain and Switzerland, saving tons of carbon dioxide emissions annually. UBS’s Muhedini recently wrote that he is “optimistic about heat pump sales growth” this year. He said heat pump sales increased by 11% in 2022, following growth of more than 10% in 2021. “We conclude that although sales growth was negative in 2023, this was due to the overall HVAC industry, where the decline in gas furnaces was even greater,” he said. He added that governments around the world are encouraging adoption through tax credits, rebates and subsidies.
We’re in the age of heat pumps – experts say market is ‘going to soar’
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