Can Comfort Systems Gain From Fed Cuts and Industrial Expansion?

Comfort Systems USA, Inc. FIX continues to benefit from strong industrial and technology-driven construction demand. A record backlog and rising exposure to large-scale projects highlight the company’s ability to capture growth across critical end markets. With industrial customers representing more than half of total revenues and data center construction gaining momentum, the company is positioned to take advantage of expansion in these sectors. Furthermore, recent monetary policy changes may provide additional support for growth.

On Wednesday, the Federal Reserve reduced its key lending rate by 25 basis points, setting the target range at 4% to 4.25%. This marks the first cut since last December and officials signaled two more quarter-point cuts may follow this year. Lower financing costs are expected to spur investment in large-scale projects, supporting demand in the industrial and institutional markets Comfort Systems serves.

In the second quarter of 2025, Comfort Systems reported revenues of $2.2 billion, a 20% year-over-year increase. Adjusted earnings rose 75% year over year to $6.53 per share, with both the Mechanical and Electrical segments delivering higher margins. Industrial work accounted for 63% of revenues, while technology-related projects expanded to 40%, reflecting strong demand for data centers. As of June 30, 2025, the backlog reached a record $8.12 billion compared with $5.77 billion a year earlier, reflecting strong booking momentum. As manufacturers expand capacity and institutional markets like healthcare remain resilient, FIX is well positioned to capture complex, large-scale projects.

Meanwhile, modular construction continues to scale, representing 18% of revenues year to date, with capacity expected to reach 3 million square feet in early 2026. This approach provides speed and flexibility, a competitive edge as customers demand efficiency. Service revenues, up 10% in the second quarter of 2025, also provides a reliable cash flow buffer.

With Fed easing, expanding margins and a record backlog, Comfort Systems appears well-positioned to capture industrial growth opportunities. Solid fundamentals and supportive macroeconomic conditions could keep performance strong into 2026.

Rising Industrial Demand Expands Data Center Opportunities

Industrial expansion is creating new growth avenues across digital infrastructure. Data centers are emerging as a key driver, with Primoris Services Corporation PRIM and MasTec, Inc. MTZ well-positioned to capture the trend.

Primoris is sharpening its focus on large-scale infrastructure projects, with data centers becoming a key growth driver. In the second quarter of 2025, revenues rose 20.9% year over year to $1.89 billion, supported by strength in Energy and Utilities. The company is actively pursuing more than $1.7 billion of data center projects, which it views as a natural extension of the core capabilities. With backlog climbing to $11.5 billion, Primoris is positioned to capture opportunities linked to digital transformation and AI-driven capacity needs.

MasTec is also capitalizing on rising demand, particularly through fiber deployment tied to hyperscaler spending. Communications revenues surged 42% year over year in the second quarter of 2025, supported by broadband build-outs and telecom infrastructure linked to data centers. With a record backlog and strong demand for power and fiber connectivity, MasTec expects data center-related revenues to grow further in 2025, aided by rapid investment in AI, cloud and high-performance computing.

FIX’s Price Performance, Valuation & Estimates

Shares of Comfort Systems have gained 52.9% in the past three months, against the Zacks Building Products - Air Conditioner and Heating industry’s fall of 2.3%.

From a valuation standpoint, FIX trades at a forward 12-month price-to-earnings ratio of 32.95X, up from the industry’s 25.97X.

Comfort Systems’ earnings estimates for 2025 and 2026 have trended upward in the past 30 days by 2% to $22.25 per share and 2.4% to $24.45, respectively. The estimated figures for 2025 and 2026 indicate 52.4% and 9.9% year-over-year growth, respectively.

FIX’s Zacks Rank

Comfort Systems currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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