COLUMBUS, Ohio — Heating, Air-conditioning, and Refrigeration Distributors International (HARDI) recently finished the fifth annual Mid-Season HVAC Distributor Survey with JP Morgan Equity Research.

HARDI presented the findings during a webinar with JP Morgan’s HVAC industry analyst C. Stephen Tusa. The presentation was a follow-up to the annual outlook presentation HARDI developed earlier this year.

The survey stated that the U.S. housing market has been through a violent correction. It took almost five years from the Q1-2006 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 have been more system replacements, and they are opting for more expensive systems,” Tusa said. “Maybe the consumer is actually getting better.”

HARDI distributors might be feeling that optimism, as well. More than half of the survey respondents expect their revenues to improve by 5-10 percent.

“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 years,” said Tusa.

HARDI market research and benchmarking analyst Brian Loftus said he feels pretty good about their high single-digit revenue forecast for next year.

“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,” said Loftus.

Tusa said replacement rates are the wild card.

“They could easily turn down, but the industry has some momentum at this point,” said Tusa. “The high single-digit growth we forecast in 2014 reflects a modestly higher replacement rate.”

The survey goes into detail on residential end market demand, commercial end market demand, inventory levels, raw material and OEM price pressures, and government policy measures.

Publication date: 10/7/2013

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