What happened 

Shares in heating, ventilation, and air conditioning (HVAC) company AAON (AAON 1.70%) were up by 16.6% in the week to Thursday afternoon. The more significant part of the move comes down to its third-quarter earnings released at the start of the week. 

AAON's earnings per share (EPS) of $0.51 came in ahead of the market consensus of $0.42 as the company continued the theme of a robust reporting season for HVAC companies. 

Furthermore, there's every indication that the market that AAON plays in, namely commercial HVAC, is strengthening even as the residential HVAC market is cooling. 

For example, AAON peer Trane Technologies gave earnings earlier in the month. It reported a 20% increase in its Americas commercial HVAC bookings and a low-teens increase in its EMEA commercial HVAC bookings.

Similarly, another peer, Carrier Global, reported a 15% to 20% increase in its commercial HVAC orders in the third quarter, even as its residential HVAC orders declined 5% to 10%. Furthermore, Johnson Controls continues to report solid orders and a record backlog.

So what

With its peers reporting before it, everything pointed to AAON delivering an excellent set of results, and the company duly obliged with its third-quarter earnings. An acquisition boosted the company's third-quarter net sales growth of 75%. Still, "Organic volume growth and product mix contributed approximately 26.9% to year-over-year growth," according to the earnings release.

Moreover, intense pricing action (pricing contributed 24% of growth) helped the gross margin improve to 27% from 26% in the same period last year. That's excellent news in a year categorized by rising supply chain costs for industrial companies.

Now what

Investors should look for AAON and other HVAC companies to execute on their backlogs in an environment of (hopefully) moderating inflation. If so, margins could expand meaningfully in 2023 -- something to look forward to.