2 Air Conditioner & Heating Stocks to Watch Despite Industry Headwinds

The Zacks Building Products - Air Conditioner & Heating industry continues to face challenges associated to housing softness, elevated interest rates, tariff pressures and lingering geopolitical uncertainty. These factors could weigh on residential new-build activity, input costs and project timing, creating pockets of demand volatility. Macroeconomic caution among consumers and developers may also delay discretionary upgrades and large commercial commitments, tempering near-term visibility.

Despite these challenges, the industry’s long-term growth trajectory remains constructive. Demand for energy-efficient systems, advanced climate-control technologies and data-center-focused cooling solutions continues to strengthen. Sustainability mandates and policy incentives are driving investments in retrofits, electrification and digitalization. Companies such as Comfort Systems USA FIX and SPX Technologies SPXC are leveraging acquisitions, digital tools and service-led models to tap high-growth areas like data center cooling. Residential customers are prioritizing comfort and indoor air quality, while commercial and industrial demand benefits from data centers and green infrastructure projects, supporting recurring service revenues and reinforcing the industry’s durable outlook.

Industry Description

The Zacks Building Products - Air Conditioner & Heating industry comprises designers, manufacturers, and marketers of a broad range of products for heating, ventilation, air conditioning, and refrigeration markets. The products include rooftop units, chillers, air-handling units, condensing units and coils. The industry players also supply thermostats, insulation materials, refrigerants, grills, registers, sheet metal, tools, concrete pads, tape and adhesives. Air conditioning and heating equipment are sold in residential replacement, commercial and industrial HVAC (heating, ventilation and air conditioning), as well as residential new construction markets.

4 Trends Shaping the Future of the Air Conditioner & Heating Industry

Housing Market Volatility, Macroeconomic Uncertainty, Tariff and Trade Policy Risks: The broader housing and remodeling market remains uncertain. Higher interest rates, economic fluctuations and shifts in consumer spending patterns can impact renovation and construction activity. 

Global players face headwinds from economic and political volatility, with China’s slowdown and weaker Asian demand posing growth risks. In Europe, policy shifts on heat pumps add uncertainty, while China’s property slump and soft HVAC demand further challenge the residential segment.

Many industry players are exposed to potential disruptions from changing trade policies. Managing supply chain efficiency while ensuring cost competitiveness in the face of potential tariff increases remains a critical challenge. The inflationary impact of proposed U.S. tariffs, especially on refrigerants like R-32, most of which are sourced from China, is also a cause of concern. This may trigger price hikes by OEMs, further contributing to channel volatility.

Labor Shortages, Supply Chain Constraints, Regulations: The U.S. HVAC industry has been grappling with labor shortages, ongoing supply chain bottlenecks and rising regulatory costs. Limited technician availability is pushing up wages and slowing project timelines, while material shortages and tariffs are driving equipment prices higher. Compliance with low-GWP refrigerant rules and tougher SEER2 standards is adding further manufacturing and training expenses. These pressures are tightening margins and complicating execution, while competition and seasonal demand swings add to overall risk.

Data Centers & Specialized Cooling Needs: The data center boom, driven by AI, cloud computing, and high-performance computing, is fueling demand for specialized HVAC solutions. Cooling systems for these facilities must deliver precise, reliable performance, which has spurred investment in advanced technologies like liquid cooling and modular units. This segment is becoming a major growth driver for HVAC companies, offering high-margin opportunities and attracting M&A activity. HVAC firms with capabilities in precision cooling and energy-efficient infrastructure are well-positioned to capture share in this fast-expanding niche.

Meanwhile, technology upgrades and strategic acquisitions are driving growth across the industry. Companies are enhancing customer experience through digital platforms and investing in R&D, distribution, and marketing. Acquisitions are expanding product lines and geographic reach. Meanwhile, service-related revenues—such as maintenance and repair—offer steady income, cushioning against construction market volatility. Also, electrification remains one of the most powerful structural tailwinds for the industry in 2026. Heat pumps continue to gain share versus traditional gas furnaces as performance in colder climates improves and total lifecycle economics become more attractive.

Regulatory-Driven Efficiency Upgrades and Premiumization: Stricter efficiency standards and the transition to low-global-warming-potential refrigerants are driving a new upgrade cycle.  Aging equipment and higher efficiency standards are prompting homeowners to upgrade to high-SEER air conditioners, advanced heat pumps and smart thermostats that cut energy use while meeting stricter emissions rules. Federal and state incentives and rebates are further accelerating this trend by offsetting the cost of high-efficiency units. The commercial HVAC market has been experiencing a rebound and transformation, thereby driving fresh HVAC needs. Overall, the HVAC replacement activity remains resilient.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Building Products - Air Conditioner & Heating industry is a seven-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #223, which places it in the bottom 8% of more than 250 Zacks industries. 

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since January 2026, the industry’s earnings estimates for 2026 have decreased to $5.00 per share (from $5.06).

Despite limited near-term visibility, we highlight a few stocks that investors may consider adding to their portfolios. First, we examine the industry’s shareholder returns and current valuation backdrop.

Industry Outperforms Sector & S&P 500

The Zacks Air Conditioner & Heating industry has outperformed the broader Zacks Construction sector and the Zacks S&P 500 Composite over the past year.

In the same time frame, the industry has gained 21.7% compared with the broader sector’s 19.8% rise. Meanwhile, the Zacks S&P 500 Composite has gained 14.9% during the period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing Air Conditioner and Heating stocks, the industry is currently trading at 29.86X compared with the S&P 500’s 22.59X and the sector’s 22.11.

Over the past five years, the industry has traded as high as 30.37X, as low as 15.87X and at a median of 23.93X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

2 Air Conditioner and Heating Stocks to Keep an Eye On

Below, we have discussed two stocks from the Zacks Air Conditioner & Heating universe with solid growth potential.

SPX Technologies: Headquartered in Charlotte, NC, SPX Technologies supplies infrastructure equipment for global HVAC and detection and measurement markets. SPX Technologies has been benefiting from strong organic momentum across HVAC and Detection & Measurement, aided by rising demand in data centers, healthcare and institutional markets. The company is gaining from robust backlog levels and meaningful operating leverage as volumes increase. Capacity expansion—such as new U.S. production for TAMCO dampers and planned Ingenia facilities—positions SPXC to capture excess demand and accelerate revenue conversion. New products like Olympus Max, receiving solid customer engagement, open incremental data-center cooling opportunities. Recent acquisitions, including KTS and Sigma & Omega, are contributing materially to revenue and margin expansion. Additionally, enhanced liquidity from a sizeable equity raise provides flexibility to pursue further organic and inorganic growth initiatives.

SPX Technologies currently carries a Zacks Rank #2 (Buy). The stock has surged 71.8% over the past year. SPXC has seen an upward estimate revision for 2026 earnings per share (EPS) to $7.68 from $7.59 over the past seven days. The estimated figure indicates 14% year-over-year growth in 2026. SPXC surpassed earnings estimates in all the trailing four quarters, with the average surprise being 12.1%. Again, SPXC’s trailing 12-month return on equity is 18.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: SPXC

Comfort Systems: Based in Houston, TX, the company is a national provider of comprehensive heating, ventilation and air conditioning installation, along with maintenance, repair and replacement services. Comfort Systems is benefiting from strong backlog visibility, diversified end-market exposure and disciplined execution. Rising demand for technology-oriented projects, especially data centers, is a key tailwind, offering attractive margins and durable revenue streams. Its modular construction capabilities enhance speed and efficiency, strengthening competitiveness in complex technology, pharmaceutical and industrial projects. A growing service business provides steady cash flow, balancing the volatility of large construction work. Broad exposure to industrial, institutional and healthcare customers reduces concentration risk. Margin gains reflect selective bidding, operational efficiency and pricing discipline. A solid balance sheet supports acquisitions, reinvestment and shareholder returns, while a skilled workforce sustains long-term execution capacity.

Comfort Systems currently carries a Zacks Rank #3 (Hold). The stock has gained 277.4% over the past year. FIX’s EPS estimate remained unchanged for 2026 at $30.61 over the past 60 days. The estimated figure indicates 16.4% year-over-year growth in 2026. Comfort Systems surpassed earnings estimates in all the trailing four quarters, with the average surprise being 30.4%. Again, Comfort Systems’ trailing 12-month return on equity of 43.6% is better than its peer group average of 17%.

Price and Consensus: FIX

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

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