Lights, Camera, HVACtion: European Heat Wave Fans Growth for Climate Control Industry

Empty streets, deserted public squares and swimming pools so packed that people were turned away like they were trying to get into hyper-exclusive nightclub Berghain. That was Berlin this past weekend, as the German capital turned into Death Valley with currywurst under temperatures reaching a record 104 degrees Fahrenheit.

It was part of a long-running European heat wave drawing attention to the fact that only 20% of the region’s homes have AC, according to the International Energy Agency. With heat waves becoming stronger and more frequent, the IEA estimates the number of air conditioners in the EU will more than double from 2019 levels to 275 million units by 2050. A handful of stocks, including US-based companies, stand to benefit.

Cooler Stocks Prevail

Europe is heating up at twice the rate of other inhabited continents because of its exposure to the fast-warming Arctic and changing weather patterns that push heat in its direction. That means Paris on the Seine will more frequently feel like Paris on the Sahara, and a host of heating, ventilation, and air conditioning companies are positioned to meet the resulting spike in demand:

• Citi analysts identified US HVAC stocks Carrier Global, Trane Technologies and Johnson Controls, up 15%, 6.5% and 4.8%, respectively, in the past month. They flagged Carrier, which makes more than a quarter of its sales in Europe, as likely to benefit most.
• HVAC has also proven a steady bet elsewhere in the world. Tokyo’s Daikin Industries, the world’s largest HVAC maker, is up 21% this year, and the AdvisorShares HVAC and Industrials ETF, which tracks the broader sector, is up 32%.

AI to HVAC: One firm to watch is South Korea’s Samsung Electronics. On a scorching 138% rally this year, thanks to its role in the AI memory chip ecosystem, the conglomerate is also going after Europe’s commercial and residential air conditioning markets. Last year, it acquired Fläkt, Europe’s largest HVAC company, and it’s developing a refrigerant-free cooling technology with Johns Hopkins University scientists that would eliminate the need for outdoor AC units, an issue for parts of Europe where older buildings weren’t designed with the technology (or other ventilation systems) in mind.

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