Comfort Systems USA, Inc. (FIX – Free Report) has delivered a remarkable 143.8% return over the past two years, demonstrating strong long-term performance. However, the stock has hit a rough patch recently, plummeting 20% year to date (YTD), significantly underperforming the Zacks Building Products – Air Conditioner and Heating industry’s 4.9% decline.
The stock even performed below the broader Construction sector’s 6.3% decline and the S&P 500’s 3.9% decrease.
FIX Stock’s YTD Performance
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The recent weakness appears to stem from investor concerns over potential margin compression due to external factors such as tariffs. While part of the decline followed the company’s fourth-quarter earnings report on Feb. 20, a more substantial portion of the selloff occurred earlier in February, potentially tied to market reaction to President Donald Trump’s trade tariff policies.
Comfort Systems USA delivered outstanding fourth-quarter 2024 results, with revenue soaring 38% year over year to $1.87 billion, surpassing estimates by 6.4%. EPS surged 60% to $4.09, while gross margins expanded 260 basis points to 23.2%, reflecting strong execution. The company ended the year with a record $6 billion backlog, growing both sequentially and year over year.
As of Tuesday, the stock closed at $339.30, well below its 52-week high of $553.09 but above its 52-week low of $272.93. In the past month, FIX has also outperformed AAON, Inc. (AAON – Free Report) , down 28.1%) but underperformed industry players like Watsco, Inc. (WSO – Free Report) , down 1.1%) and EMCOR Group, Inc. (EME – Free Report) , down 8.9%).
Tariff Headwinds for Comfort Systems
Tariffs imposition under a potential Trump administration could pose significant challenges for Comfort Systems, particularly through higher input costs and supply chain disruptions. As a leading provider of HVAC, electrical, and mechanical contracting services, the company relies on materials such as steel, aluminum, copper, and imported components. Increased tariffs on metals or goods from key trading partners could drive up material costs, squeezing profit margins and potentially delaying projects. Additionally, broader economic impacts such as inflation and reduced construction spending due to trade tensions may lead clients to postpone or scale back projects, weighing on Comfort Systems’ growth prospects.
While FIX’s recent stock performance has been disappointing, its positive earnings estimate revisions and strong fundamentals suggest a potential rebound could be on the horizon.
FIX Stock’s Upward Estimate Revisions Signal Strength
Analysts are becoming increasingly bullish on Comfort Systems’ earnings potential. Over the past 30 days, the Zacks Consensus Estimate for FIX’s 2025 EPS has climbed from $16.86 to $17.87, signaling growing confidence in the company’s outlook.
Comfort Systems is well-positioned for strong earnings growth, with projections forecasting a 22.4% increase in 2025. Meanwhile, revenue is expected to grow at a healthy pace, with a 7.4% rise anticipated for the year, further solidifying optimism around the company’s growth trajectory.
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Decoding Comfort Systems’ Tailwinds
Strong Demand Across Industrial and Technology Sectors: One of the key drivers of Comfort Systems’ success was the strength and breadth of its industrial sector, which accounted for more than 60% of total revenues in 2024. The company’s strategic focus on industrial clients, particularly in advanced technology fields like data centers and semiconductor fabrication, has been paying off. Data center projects alone contributed to 33% of revenues, a sharp rise from 21% in the prior year. This growth was fueled by the continued digital infrastructure buildout across the United States as hyperscale and cloud providers pushed forward with aggressive capacity expansions.
Importantly, management noted no slowdown in demand from technology clients, underscoring how resilient this sector remains, even amid broader macroeconomic uncertainty.
Cushion Against Tariff: Comfort Systems’ strong backlog and presence in non-discretionary sectors, such as healthcare, education, and government projects, may help offset some of these pressures. Institutional markets such as healthcare, education, and government also provided stable revenue streams in 2024, comprising 24% of total revenues. These projects tend to have long lead times and lower susceptibility to cyclical downturns, providing Comfort Systems with a balanced and diverse backlog.
Modular Capabilities Accelerate Growth: The company’s modular construction offering emerged as another driving force. Modular projects accounted for 17% of total revenues in 2024, reflecting approximately 50% growth year over year. This expansion stems from several large-scale orders from data centers and advanced manufacturing clients, who increasingly prefer modular solutions due to their efficiency and speed. Comfort Systems has been investing in expanding modular capacity and productivity, incorporating automation to enhance throughput. While there are physical space constraints limiting exponential growth in the short term, the company sees steady, incremental growth ahead. Management emphasized that modular work supports strong margins and will continue to outpace overall revenue growth.
Strategic Acquisitions: The acquisition of Century Contractors in early 2025 added further momentum, bringing in an estimated $90 million in annual revenues. These acquisitions strengthened Comfort Systems’ footprint in key markets like North Carolina and enhanced its capacity to meet growing customer demands in mechanical contracting.
Strong Cash Flow Provide Stability: The company ended 2024 with nearly $550 million in cash and minimal debt, holding just $68.3 million in total debt. The debt-to-EBITDA ratio was an impressively low 0.08, reflecting conservative financial management. Comfort Systems also maintained a $850 million senior credit facility with no borrowings against it at 2024-end, offering substantial debt capacity for future needs. Importantly, the company has posted positive free cash flow for 26 consecutive years and increased its dividend for 13 consecutive years, underlining its shareholder-friendly policies and financial resilience.
Is FIX Stock Fairly Valued?
FIX’s stock is currently trading at a discount compared to its industry. FIX stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 18.72, much lower than the industry average. The company’s three-year P/E range has fluctuated between 13.32 and 32.52. The stock is currently trading lower than its three-year median value of 21.54.
FIX’s P/E Ratio (Forward 12-Month) vs. Industry
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Should You Buy, Sell, or Hold FIX Stock?
While Comfort Systems has faced recent stock price weakness, its strong long-term performance, solid financial position, and promising growth prospects indicate potential resilience. The company’s record backlog, robust demand from industrial and technology sectors, and expanding modular capabilities provide a solid foundation for future growth. Additionally, upward earnings estimate revisions signal analyst confidence in its outlook.
However, external challenges such as tariff-related cost pressures and broader macroeconomic uncertainties remain key risks to watch. Despite the recent decline, FIX’s valuation appears attractive compared to historical and industry averages. With a Zacks Rank #3 (Hold), investors may want to monitor the stock’s trajectory closely for signs of stabilization or renewed momentum. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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