Core Viewpoint - Comfort Systems USA experienced a significant stock decline of 16.8% in February, primarily influenced by trade tariffs and concerns over profit margins despite reporting strong financial results for Q4 2024 [1][2][3]. Financial Performance - In 2024, Comfort Systems reported a 35% year-over-year increase in revenue, reaching $7 billion, and a 62% increase in net income to $522 million [4]. - The company's backlog reached an all-time high of $6 billion, reflecting a 16% year-over-year growth [4]. Market Dynamics - The company is benefiting from a surge in demand for data centers and semiconductor manufacturing, with 33% of its revenue in 2024 coming from these sectors, up from 21% in 2023 [9]. - Significant infrastructure commitments, including a $100 billion investment from Taiwan Semiconductor, are expected to drive further growth in 2025 [9]. Margin Concerns - Despite revenue growth, there are concerns that profit margins may contract due to rising costs from import tariffs, which could negatively impact profitability [2][5][6]. - Current gross and operating margins are significantly higher than the company's 10-year averages, raising questions about sustainability [5]. Strategic Focus - Management is being selective in job acquisition, prioritizing projects with the best profit margins, which positions the company favorably amidst high manufacturing demand [10].

Group 1 - Comfort Systems (FIX) closed at $339.17, reflecting a -1.85% change from the previous session, underperforming compared to the S&P 500's daily loss of 1.22% [1] - Over the past month, shares of Comfort Systems have decreased by 19.08%, significantly more than the Construction sector's loss of 6.27% and the S&P 500's loss of 2.31% [1] Group 2 - The upcoming earnings disclosure is anticipated to show an EPS of $3.66, representing a 36.06% increase from the same quarter last year, with revenue expected to reach $1.7 billion, up 10.81% year-over-year [2] - For the full year, earnings are projected at $17.87 per share and revenue at $7.55 billion, indicating increases of +22.4% and +7.42% respectively from the previous year [3] Group 3 - Recent modifications to analyst estimates for Comfort Systems reflect changing business dynamics, with positive revisions indicating analyst optimism regarding the company's profitability [4] - The Zacks Rank system, which incorporates estimate changes, has shown that stocks with a 1 rating have delivered an average annual return of +25% since 1988 [5][6] Group 4 - Comfort Systems is currently trading at a Forward P/E ratio of 19.34, which is lower than the industry average of 27.07, suggesting it is trading at a discount [7] - The Building Products - Air Conditioner and Heating industry, part of the Construction sector, holds a Zacks Industry Rank of 55, placing it in the top 22% of over 250 industries [7][8]

Financial Data and Key Metrics Changes - The company reported record annual and fourth quarter earnings, with fourth quarter revenue increasing by 38% year-over-year to $1.9 billion and full year revenue reaching $7 billion, a 35% increase compared to 2023 [13][14] - Earnings per share for the fourth quarter were $4.09, up 60% from the previous year, while full year earnings per share were $14.60, compared to $9.01 in 2023, marking an over 60% increase [19][20] - Operating cash flow for 2024 was $849 million, with free cash flow reaching $1.176 billion [10][22] Business Line Data and Key Metrics Changes - Mechanical segment revenue increased by 40% for the full year, driven by acquisitions and organic growth, while electrical segment revenue rose by 19% [14] - Same store revenue for the full year increased by 23%, amounting to $1.2 billion [14] - Gross profit for the fourth quarter was $434 million, with a gross profit margin of 23.2%, up from 20.6% in the same quarter of 2023 [15] Market Data and Key Metrics Changes - The backlog at the end of the year reached an all-time high of $6 billion, with strong demand across various sectors, particularly technology [9][26] - The industrial sector accounted for over 60% of the company's volume in 2024, with technology representing 33% of revenue, up from 21% the previous year [28] - Institutional markets, including education and healthcare, represented 24% of revenue, while the commercial sector accounted for about 16% [29] Company Strategy and Development Direction - The company is focusing on selecting projects with good margins and working conditions, emphasizing the importance of a skilled workforce [27] - There is a strong emphasis on modular construction, which accounted for 17% of revenue, with expectations for gradual growth in 2025 [40][41] - The company aims to continue investing in operations and share repurchases, reflecting a commitment to rewarding shareholders [11][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining strong gross profit margins in 2025, citing good project selection and execution [38][39] - The demand for data centers remains robust, with no signs of a slowdown, and the company has more booked backlog for 2026 than ever before [60][61] - The company is committed to ongoing recruitment and training to meet demand, ensuring a steady supply of skilled labor [99] Other Important Information - The company announced a quarterly dividend increase of five cents to forty cents per share, reflecting strong cash flow [11] - Capital expenditures for 2024 were $111 million, representing over 1.5% of revenue, with plans to maintain similar levels in 2025 [24][49] Q&A Session Summary Question: What gives confidence in sustaining elevated margin levels in 2025? - Management indicated that confidence stems from good project selection, strong customer relationships, and effective execution [38] Question: How is the modular business expected to grow in 2025? - The modular business is anticipated to grow gradually, with a focus on productivity and automation [41][44] Question: What is the outlook for capital expenditures in 2025? - Capital expenditures are expected to remain at similar levels as a percentage of revenue, with ongoing investments in operations [49] Question: Can you provide insights on the demand from technology customers? - Demand from technology customers, particularly for data centers, remains strong, with no signs of a slowdown [56][58] Question: How does the company approach project selection? - The company prioritizes projects that are good for its workforce, ensuring favorable working conditions and relationships with general contractors [155][158]

SYSTEMS CLA Quality People. Building Solutions. Q4 2024 Earnings Call NYSE: FIX February 21, 2025 COMFORTUS A Certain statements and information in this presentation may constitute forward-looking statements within the meaning of applicable securities laws and regulations. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could," or other similar expressions are intended to identify forward-looking statements, which are generally not historic in nature. These forw ...

Core Viewpoint - Comfort Systems (FIX) reported quarterly earnings of $4.09 per share, exceeding the Zacks Consensus Estimate of $3.43 per share, and showing a significant increase from $2.55 per share a year ago, indicating strong financial performance [1][2]. Financial Performance - The company achieved revenues of $1.87 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 6.44%, compared to $1.36 billion in the same quarter last year [2]. - Over the last four quarters, Comfort Systems has consistently exceeded consensus EPS estimates four times and topped revenue estimates two times [2]. Stock Performance - Comfort Systems shares have declined approximately 6.7% since the beginning of the year, contrasting with the S&P 500's gain of 4.5% [3]. - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.72, with projected revenues of $1.8 billion, and for the current fiscal year, the estimate is $16.86 on revenues of $7.54 billion [7]. - The trend of estimate revisions for Comfort Systems is mixed, which may change following the recent earnings report [6]. Industry Context - The Building Products - Air Conditioner and Heating industry ranks in the top 8% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8]. - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, highlighting the importance of monitoring these revisions for investment decisions [5].

Financial Performance and Risks - The company's backlog as of December 31, 2024, was $5.99 billion, indicating potential revenue yet to be recognized [75]. - Approximately 5.4% of the company's revenue for the year ended December 31, 2024, was attributable to projects in the government sector, highlighting dependency on government spending [73]. - One customer represented approximately 13.3% of the company's consolidated revenue in 2024, indicating a risk of revenue concentration [77]. - Rising inflation and interest rates may negatively impact the company's financial condition, with potential increases in debt service obligations due to variable rate indebtedness [79]. - The company is exposed to cost overruns in contracts, which could lead to reduced profits or losses if costs exceed estimates [74]. - Labor shortages and increased labor costs from third parties could adversely impact the company's results of operations [86]. - The company’s revenue recognition relies on the cost-to-cost input method, which may lead to adjustments in previously recorded revenue or profits [88]. - Economic downturns in the markets where the company operates could materially and adversely affect its business due to dependency on construction activity [71]. - The company’s ability to provide surety bonds is crucial, and difficulties in the financial and surety markets may adversely affect its bonding capacity [89]. - The company is susceptible to adverse weather conditions, which may harm business and financial results, including potential project delays or cancellations due to extreme weather events [94]. - Political and economic uncertainties, including the COVID-19 pandemic and international conflicts, could adversely affect revenue and profitability, leading to constrained spending and difficulties in collecting accounts receivable [98]. - The company faces challenges in attracting and retaining qualified personnel, which may increase labor costs and reduce profitability due to high employee turnover rates [100]. - Future growth may impose additional responsibilities on senior management, and failure to manage growth effectively could hinder operational expansion and execution of the business plan [101]. - Rising health insurance costs due to healthcare inflation and legislative changes could adversely impact the company's results of operations and cash flows [118]. - The company is exposed to risks related to compliance with environmental regulations, which could increase project costs or prevent projects from proceeding [97]. - The company’s insurance policies have high deductibles, and difficulties in the insurance market may affect the ability to obtain necessary coverage, increasing overall risk exposure [112]. - Failure to comply with covenants under the credit agreement could result in default, impacting the company's ability to borrow and potentially leading to asset liquidation [115]. - The company’s ability to utilize its workforce effectively is crucial for profitability, with underutilization leading to lower margins and overutilization impacting safety and project execution [117]. - The company is exposed to potential claims and lawsuits that could reduce profitability and liquidity, impacting financial condition [120]. - Warranty claims, although historically not material, could require the company to incur costs for repairs or replacements, adversely affecting operating results [122]. - The company operates 178 locations across 27 states, exposing it to various state and local regulations that could increase costs and distract management [124]. - Changes in U.S. trade policy, including tariffs, could adversely impact demand for services and overall financial performance [130]. - The company faces risks related to tax audits and changes in tax laws that could affect financial results and cash flows [131]. - The market price of the company's common stock has experienced significant fluctuations, which may continue to affect shareholder value [135]. - The company has anti-takeover provisions that may inhibit or delay changes in control, potentially impacting shareholder interests [137]. - Failure of internal controls over financial reporting could harm the company's financial condition and results of operations [139]. - Force majeure events, such as natural disasters or pandemics, could negatively impact operations and financial performance [140]. Operational Challenges - The company may face challenges in integrating future acquisitions, which could expose it to additional business risks and affect financial performance [81]. - The company is exposed to risks from potential deficiencies in internal controls, which could lead to material weaknesses and loss of investor confidence [145]. - Future acquisitions may not be successful, posing risks related to integration and profitability [81]. - Labor shortages and increased costs from third-party subcontractors could harm the company's execution and profitability [85]. - The company may face challenges in maintaining sufficient bonding capacity, which could limit its ability to bid on contracts or work with certain customers [90]. - Delays or defaults in customer payments could negatively impact the company's financial condition and operational results [92]. - The company may struggle to attract and retain qualified personnel, which could reduce operational efficiency and profitability [100]. - The company's growth may strain its infrastructure and resources, potentially affecting revenue growth and operational efficiency [104]. - Cybersecurity threats and information technology system failures could lead to significant financial losses and operational disruptions [106]. - The company faces challenges in maintaining adequate insurance coverage, which could increase overall risk exposure and limit project opportunities [113]. - Non-compliance with credit agreement covenants could result in default, impacting the company's ability to borrow and service its debt [115]. - The company is exposed to increasing health insurance costs, which could adversely impact operations and cash flows due to rising healthcare costs and legislative changes [118]. - The company has experienced significant price and volume fluctuations in its common stock, which may continue to affect stockholder investments [135]. - The company is subject to various environmental regulations that could impose additional costs and impact profitability [126]. - The company has taken precautions to minimize safety risks, but past serious accidents could lead to penalties and affect customer relationships [129]. - The company must comply with numerous rules and regulations as a government contractor, with violations potentially barring future contracts [125]. - Tax matters, including changes in corporate tax laws, could materially impact the company's financial condition and results of operations [131]. - The company remains obligated to perform services after extraordinary events, which could significantly impact financial position and liquidity if not managed properly [142]. - Deliberate acts such as terrorism could damage facilities and disrupt operations, potentially leading to substantial costs and liability [143]. - The company is required to assess and report on internal controls annually, with findings of inadequacies potentially reducing investor confidence [144]. - Deficiencies in internal controls could impair the integration of acquired companies, leading to a loss of investor confidence and a decline in stock price [145]. - Changes in accounting rules and regulations could adversely affect reported financial results and require significant changes to systems and processes [146].

Financial Performance - For Q4 2024, net income was $145.9 million, or $4.09 per diluted share, compared to $91.6 million, or $2.55 per diluted share in Q4 2023, representing a 59.3% increase in net income [2]. - Revenue for Q4 2024 was $1.87 billion, up from $1.36 billion in Q4 2023, marking a 37.5% year-over-year growth [2]. - For the full year 2024, net income reached $522.4 million, or $14.60 per diluted share, compared to $323.4 million, or $9.01 per diluted share in 2023, reflecting a 61.5% increase in net income [4]. - Full year revenue for 2024 was $7.03 billion, up from $5.21 billion in 2023, representing a 34.8% increase [4]. - Adjusted EBITDA for Q4 2024 was $260,987,000, a 14.0% increase from $141,235,000 in Q4 2023 [14]. - The diluted income per share for Q4 2024 was $4.09, compared to $2.55 in Q4 2023, reflecting a 60.8% increase [13]. Cash Flow and Assets - Operating cash flow for Q4 2024 was $210.5 million, compared to $173.0 million in Q4 2023, showing a 21.7% increase [2]. - The company reported operating cash flow of $849.1 million for the full year 2024, up from $639.6 million in 2023, a 32.8% increase [4]. - Free cash flow for the twelve months ended December 31, 2024, was $743,524,000, up from $550,681,000 in 2023, indicating a 35% increase [17]. - Total current assets increased to $2,790,241,000 in 2024 from $1,911,100,000 in 2023, reflecting a 46% growth [16]. - Cash and cash equivalents rose to $549,939,000 in 2024, compared to $205,150,000 in 2023, marking a 168% increase [16]. - Billed accounts receivable increased to $1,861,212,000 in 2024 from $1,318,926,000 in 2023, a growth of 41% [16]. - Operating cash flow for the twelve months ended December 31, 2024, was $849,057,000, up from $639,568,000 in 2023, indicating a 32.7% increase [17]. Liabilities and Goodwill - Total liabilities increased to $3,006,412,000 in 2024 from $2,027,750,000 in 2023, representing a 48% increase [16]. - The company reported a significant increase in goodwill, rising to $875,270,000 in 2024 from $666,834,000 in 2023, a 31% increase [16]. Backlog and Future Outlook - The company's backlog as of December 31, 2024, was $5.99 billion, an increase from $5.68 billion as of September 30, 2024, and $5.16 billion as of December 31, 2023, indicating a 16.1% year-over-year growth [3]. - The company expects continued strong results in 2025 due to a robust backlog and healthy project pipelines [5]. - The company achieved same-store growth in backlog both sequentially and year-over-year, indicating strong operational performance [5]. - The company announced the acquisition of Century Contractors, Inc. in January 2025, enhancing its operational capabilities [5].

Core Viewpoint - Comfort Systems USA, Inc. is expected to report strong fourth-quarter results driven by robust demand in key sectors, despite challenges in maintaining growth levels due to tough year-over-year comparisons [2][11][21] Financial Performance - In the last reported quarter, Comfort Systems achieved record earnings with an EPS of $4.09, surpassing the Zacks Consensus Estimate by 1% and reflecting a 40% increase year-over-year [2] - Revenue for the last quarter grew by 31.5% to $1.81 billion, with quarterly EBITDA reaching $238 million, a 53% year-over-year increase [2] - The Zacks Consensus Estimate for the upcoming fourth-quarter EPS is $3.43, indicating a 34.5% increase from the previous year's EPS of $2.55, while revenue is estimated at $1.75 billion, representing a 29.3% year-over-year growth [5] Growth Drivers - The company is benefiting from strong demand in the technology and manufacturing sectors, particularly in data centers, chip plants, food, and pharmaceuticals [9] - Comfort Systems has a strategically aligned backlog with high-demand areas, which positions the company to capitalize on sector-specific growth trends [9][10] - Acquisitions have broadened operational scope and enhanced revenue streams, contributing to substantial growth [10] Market Position and Valuation - Comfort Systems' stock has increased by 17.5% over the past six months, outperforming the industry average of 6.9% [13] - The company is currently trading at a forward 12-month earnings multiple of 23.01X, which is above its three-year median of 21.52X but remains undervalued compared to the industry average of 29.86X [16][17] Shareholder Returns - Comfort Systems has consistently allocated an average of 11% of its capital toward dividend payments over the past 16 years, increasing its dividend payout for 12 consecutive years [20] - The company generated $572 million in free cash flow year-to-date and has net cash exceeding debt by $347 million, allowing for continued investment in growth and acquisitions [20]

Comfort Systems USA (FIX) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 23.25. This is notably lower than the industry average of 29.52, making the stock look attractive on a relative valuation basis. However, it is trading higher than its three-year median P/E of 21.48. FIX’s three-year P/E range spans from 13.32 to 32.52, meaning the current valuation is closer to the higher end of its historical range.FIX’s P/E Ratio (Forward 12-Month) vs. IndustryImage Source: Zacks Investm ...

In the latest market close, Comfort Systems (FIX) reached $395.05, with a -0.82% movement compared to the previous day. The stock trailed the S&P 500, which registered a daily gain of 1.04%. At the same time, the Dow added 0.77%, and the tech-heavy Nasdaq gained 1.51%.The heating, ventilation and air conditioning company's stock has dropped by 19.35% in the past month, falling short of the Construction sector's gain of 2.12% and the S&P 500's gain of 3.92%.Analysts and investors alike will be keeping a clos ...