Demand for heating, ventilation, and air conditioning (HVAC) systems warmed up considerably in 2024. That powered strong growth for companies that provide climate solutions, like Lennox (LII -2.38%) and Trane Technologies (TT -1.72%). This catalyst helped drive up shares of Lennox by more than 40%, while Trane Technologies' stock was up over 55%, easily beating the S&P 500's more than 25% rise.

Here's a look at what drove their rallies and whether they'll cool off or continue rising in 2025.

Heating up in 2024

Lennox is a leader in energy-efficient climate-control solutions. Demand for its products, which include air conditioners, furnaces, heat pumps, and indoor air quality systems, has grown briskly this year. Its core revenue was up 15% in the third quarter to $1.5 billion, which includes 2% growth from recent acquisitions (it acquired AES to expand its commercial HVAC services late last year).

Meanwhile, its adjusted earnings per share soared 24%, while its free cash flow jumped 50%. Home comfort solutions revenue rose 15% to $1 billion, while revenue from its building climate solutions also rose 15% to $465 million.

That strong showing enabled the company to boost its full-year forecast. It expects revenue to rise 10% this year (with the AES deal adding 2% to its top line). Lennox also increased its earnings per share range and boosted its free-cash-flow outlook.

Trane Technologies delivered similarly strong growth. Revenue rose 11% in the third quarter to $5.4 billion, while adjusted earnings per share surged 21%. That continued the company's "track record of delivering leading revenue and earnings-per-share growth," noted CEO Dave Regnery in the third-quarter earnings press release. The company also continued to see strong bookings, which totaled $5.2 billion in the quarter, a 5% increase compared to the year-ago period.

The climate technology company is seeing strong demand for its sustainable solutions, notably for commercial HVAC systems. That drives its view that it will deliver another strong year of growth, with revenue expected to increase by 11% in 2024.

The forecast for 2025

Trane Technologies' strong bookings give it excellent momentum heading into 2025. Its backlog stood at $7.2 billion, up from $6.9 billion at the end of 2023. Meanwhile, it had a strong project pipeline, especially for commercial HVAC solutions. Because of that, the company expects "2025 to be another strong year," stated Regnery in the third-quarter earnings release.

Lennox also has solid momentum heading into 2025. It recently launched the most efficient air conditioner system on the market, which will help residential customers save on their energy bills. It also formed a joint venture with Samsung to produce heat pumps and other comfort solutions products. The company expects demand for these higher-value products to rise in 2025. It also expects to gain a greater share of the commercial market, driven in part by the ramp-up of its new factory in Mexico.

Can they keep turning up the heat in 2025?

That growth could give their stocks the power to continue rising in 2025. However, if there's one concern, their valuations are getting a little heated. Trane Technologies currently trades at a forward price-to-earnings (P/E) ratio of more than 34 times, while Lennox fetches nearly 30 times its forward earnings. That's expensive compared to the broader market. The S&P 500 trades at about 22 times forward earnings, while the even more richly valued Nasdaq-100 index fetches about 27.5 times its earnings estimate.

If demand for their climate solutions products unexpectedly cools off next year, their stocks will likely get a frigid reception from investors. However, if they continue to deliver strong growth, their shares could keep pushing higher.