Almost every news report about coronavirus vaccines in the last few weeks has included a discussion about how vaccines need to be kept at very cold temperatures from where they're manufactured to where they're being deployed. The vaccine from Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) needs to be kept at -94 degrees Fahrenheit for long-term storage, and Moderna's (NASDAQ:MRNA) vaccine must be kept at -4 degrees Fahrenheit if stored for more than 30 days.
The cold storage requirements, particularly for Pfizer's vaccine, have left governments, pharmaceutical companies, and even hospitals scrambling for cold storage equipment to tackle the logistical challenge of distributing vaccines. One of the big beneficiaries will be Trane Technologies (NYSE:TT), owner of Thermo King, an industry leader in industrial-scale cold storage that got its start a long way from the vaccine industry.
Built on the tuna trade
Thermo King's refrigeration units were originally designed to keep sashimi tuna frozen and fresh on its way from Japan to locations around the world. A unit can cost as much as $70,000 and is designed for ships, trucks, trains, and other modes of transport. The company says it's also working with airlines to make refrigeration units available for air travel.
These will be critical tools to get a vaccine from major distribution points in states to hospitals, pharmacies, and doctors' offices, particularly in the last few miles of distribution. And the windfall for Thermo King and Trane Technologies could be significant.
What a windfall of demand looks like
This may only be one line of products, but it's a notable source of demand for Trane in an otherwise weak year. Thermo King's vice president of commercial business for the Americas, Dwayne Cowan, said recently that demand for refrigeration units that reach ultra-low temperatures is up tenfold this year. And the Pfizer-BioNTech vaccine is a big reason why.
We're starting to see some of this increased demand in Train Technologies' outlook as well. Management originally said that revenue would be down 10% to 15% in 2020 because of the pandemic, but now they expect it to be down just 6% and 5% in the fourth quarter.
Bookings are also improving. Enterprise-wide, bookings were up 7% in the third quarter, and up 8% in North America.
But the current financial results may not yet show the true opportunity for Thermo King. The company has rental options for customers, and it is likely to see sales pick up in 2021 as vaccine production increases. So this could be a year-long bump in demand.
Does the coronavirus vaccine make Trane Technologies a buy?
What does all of this mean for Trane Technologies and investors? A tenfold increase in demand for ultra-cold refrigeration units is good and will help Thermo King's operations in late 2020 and throughout 2021.
It looks like this demand is making up for losses in other parts of the market. Commercial HVAC demand is down due to less building investment during the pandemic, and transportation demand overall is down as well. Cold storage for vaccine distribution will offset some of the weakness in the market. And you can see above that demand is already starting to come back, so 2021 might be a strong recovery year for this industrial stock.