If you're looking for high-powered growth stocks, you're first instinct is probably to look in the tech sector. That makes sense. After all, the "Magnificent Seven" stocks all hail from the tech sector, and all have delivered monster returns on their way to $1 trillion-plus valuations.
However, there have been consistent winners in other sectors, and one lesser-known stock that has dominated over its history. That's Trane Technologies (TT +4.00%), a leader in HVAC and refrigeration systems. The company calls itself a global climate innovator, and climate change and related demographic trends have been a meaningful tailwind for the company.
The company, which was formerly known as Ingersoll-Rand, has been a consistent market beater. Year-to-date through Dec. 20, the stock is up 55%, and it's returned more than 10,000% since 1988, dating back to its time as Ingersoll-Rand. That makes the stock a 100-bagger, meaning it's turned $1,000 into $100,000 over that time.
Heading into 2025, Trane Technologies looks poised to continue beating the market. Let's take a look at a few reasons why.
Image source: Getty Images.
Climate trends are in its favor
Trane Technologies has historically grown through a combination of both organic growth and acquisitions, and the company just made another smart acquisition.
Trane is acquiring Brainbox AI, a maker of autonomous HVAC controls and generative AI technology for buildings. It's the latest example of how the company has made itself a leader in technology in an industry where investors don't typically look for it.
Demand for air conditioning and HVAC services is climbing due to climate change, but HVAC is also a major source of greenhouse gas emissions as heating and cooling buildings make up an estimated 15% of emissions. It sees Brainbox AI as a way to reduce energy consumption and emissions. Trane said the "bolt-on acquisition" follows its "proven model of adding leading technologies that augment its core business and scaling them to deliver strong returns over time."
Other trends are driving above-average growth in the industry as the global HVAC market is expected to increase from $159 billion to $227 billion in 2028.
Demographic trends in the U.S. also favor it as more Americans move to warm-weather states, and rising temperatures should also drive demand for HVAC systems.
The Americas segment is both its largest and fastest-growing as revenue from the Americas rose 15% to $4.47 billion. Overall revenue was up 11% to $5.44 billion in the quarter.
Trane also generates strong operating margins, a sign of competitive advantages from its technology and brand. In the third quarter, it reported 18.9%.
NYSE: TT
Key Data Points
Why Trane can keep gaining in 2025
Trane hasn't issued guidance for 2025, but it did raise its full-year guidance for 2024 in the recent earnings report.
The company now expects organic and reported revenue of 11% for the year and generally accepted accounting principles (GAAP) EPS of $11.10. Based on that forecast, the stock trades at a forward P/E of 34, which isn't cheap but seems like a good price for a stock with its track record of steady growth and industry leadership.
Trane is also committed to returning cash to shareholders as it recently announced a $5 billion share buyback program.
Overall, Trane combines the track record of a top growth stock with a strong position in HVAC one of the fastest-growing subsectors in construction, and a tech-forward business model that uses acquisitions to give the company valuable tools that can be deployed across the business.
With a market cap approaching $100 billion, Trane is the clear leader in its industry, and it has the competitive strength and management discipline to remain on top. The stock has what it takes to continue to reward investors next year and for years to come.
