More than half of the respondents to the fifth annual Mid-Season HVAC Distributor Survey expect their revenues to improve by 5 percent to 10 percent. The survey was conducted by Heating, Air-conditioning and Refrigeration Distributors International (HARDI) in partnership with JP Morgan Equity Research.
“For the first time in our survey, more distributors expected repair activity to decline. That could be an indication of an unlocking of the pent-up demand from units that were fixed instead of replaced over the past few of years,” said C. Stephen Tusa, JP Morgan's HVAC industry analyst.
The U.S. housing market has been through a violent correction, Tusa said in a webinar discussing the survey results. It took almost five years from the Q12006 peak for the market to find a bottom. Confidence in a recovery was improving in the back half of 2012. The 2013 forecast had a positive bias because the correction had been so deep and painful. At the time it was difficult to generate a great deal of confidence in an aggressive growth forecast, but that would have been more accurate.
“In general things have been better than expected,” Tusa said. “Sales of condensing units and furnaces have been better than expected and SEER mix has also improved.”
Confidence in a rosier forecast is consistent with improving consumer confidence this year. “There has been more system replacement and they are opting for more expensive systems. Maybe the consumer is actually getting better.”
“We feel pretty good about our high single digit revenue forecast for next year,” said HARDI Market Research and Benchmarking Analyst Brian Loftus. “Following the real estate correction, there is a lot of older equipment out there. That older equipment is more expensive to operate and energy costs are higher than five years ago.”
“The high single digit growth we forecast in 2014 reflects a modestly higher replacement rate and if the economy continues to improve then another couple points from housing completions. Replacement rates are the wild card. They could easily turn down, but the industry has some momentum at this point,” Tusa said.
