Latest news with #Watsco
Yahoo
a day ago
- Business
- Yahoo
Here's Why Watsco (WSO) Sold Off in Q2
Conestoga Capital Advisors, an asset management company, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter began with a historically poor start but gained momentum later as tariff fears subsided and market volatility dropped precipitously. Conestoga Smid Cap Composite underperformed the Russell 2500 Growth Index in the quarter and returned 5.00% net-of-fees vs 11.31% for the index. Sector allocation effects were positive, while sector allocation effects were negative. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2025. In its second quarter 2025 investor letter, Conestoga Capital Advisors highlighted stocks such as Watsco, Inc. (NYSE:WSO). Watsco, Inc. (NYSE:WSO) engages in the distribution of air conditioning, heating, and refrigeration equipment, and related parts and supplies. The one-month return of Watsco, Inc. (NYSE:WSO) was 10.95%, and its shares lost 2.72% of their value over the last 52 weeks. On July 25, 2025, Watsco, Inc. (NYSE:WSO) stock closed at $489.97 per share, with a market capitalization of $19.554 billion. Conestoga Capital Advisors stated the following regarding Watsco, Inc. (NYSE:WSO) in its second quarter 2025 investor letter: "Watsco, Inc. (NYSE:WSO) is the nation's largest distributor of heating, ventilation and air conditioning (HVAC) equipment, parts and supplies with 80% of revenue tied to the Sun Belt region. The stock sold off after missing estimates in its seasonally smallest quarter citing residential equipment weakness due to an industry-wide refrigerant transition. We believe this disruption will resolve itself during peak heating months." A commercial air conditioning unit mounted atop a residential roof in a suburban neighbourhood. Watsco, Inc. (NYSE:WSO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held Watsco, Inc. (NYSE:WSO) at the end of the first quarter, which was 33 in the previous quarter. While we acknowledge the potential of Watsco, Inc. (NYSE:WSO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors. READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money. Disclosure: None. This article is originally published at Insider Monkey.
Yahoo
4 days ago
- Business
- Yahoo
Watsco: A Durable Compounder in America's Heating and Cooling Backbone
Watsco Inc. isn't a flashy name in tech or a disruptor in artificial intelligence. Instead, it's the largest distributor of HVAC/R (heating, ventilation, air conditioning, and refrigeration) equipment and parts in North America, powering an industry that underpins comfort, productivity, and health across homes and businesses. While the business may look simple on the surface, Watsco has quietly built a distribution empire with remarkable pricing power, recession-resilient demand, and a capital-light model that compounds value over decades. Warning! GuruFocus has detected 3 Warning Sign with WSO. In an industry driven by replacement cycles, regulation, and contractor loyalty, Watsco's dominance stems not from manufacturing products but from owning the customer relationship and controlling the supply chain at scale. With over 670 locations and a product portfolio spanning mission-critical systems, the company thrives at the intersection of necessity and scale. As the U.S. faces ongoing climate volatility and infrastructure aging, Watsco stands to benefit from secular tailwinds that are less cyclical and more structural. What makes this story particularly compelling today is the market's muted recognition of Watsco's long-term optionality: embedded pricing power, underappreciated tech integration, and a shareholder-friendly capital allocation model that continues to return cash while expanding margin. For investors seeking compounding without complexity, Watsco presents a uniquely durable case. Watsco's strength lies not in innovation, but in execution, an often-underappreciated edge in industrial distribution. The company dominates a fragmented HVAC distribution market by building trust with tens of thousands of contractors and maintaining exclusive or preferred rights to distribute premium equipment from giants like Carrier and Trane. With over 120,000 contractor relationships and more than $7 billion in annual sales, Watsco's scale generates real economic advantages: better pricing from suppliers, faster inventory turns, and unmatched geographic reach. Unlike manufacturers, Watsco doesn't carry the capital intensity of product development or the margin volatility of raw input costs. Instead, it sits at the midpoint of a value chain that continues to expand, quietly clipping a take rate on every system replacement or installation. This model produces consistently high returns on invested capital, averaging above 20% for the past decade, and allows the company to reinvest in organic growth, tech infrastructure, and shareholder returns with minimal dilution or leverage. Crucially, HVAC is not discretionary. More than 85% of residential demand is replacement-driven, meaning units fail and must be replaced regardless of broader economic trends. The typical HVAC system lasts 1015 years, and with 2024 marking the tail end of the 20082009 replacement cycle, a new wave of aging units is driving volume growth. Rising temperatures and regulatory tailwinds, like the phase-out of older refrigerants, only accelerate this trend. While most investors focus on AI and software, Watsco has been quietly digitizing its operations, introducing apps and digital platforms that make contractor ordering seamless and sticky. Over 70% of sales now come through digital channels, increasing wallet share and lowering costs without touching product margins. Watsco operates in a massive but fragmented market. The North American HVAC distribution industry exceeds $50 billion in annual sales, spanning tens of thousands of contractors and thousands of independent distributors. Despite being the largest player, Watsco controls only about 13-14% of the market, underscoring just how much room there is for continued expansion. What sets Watsco apart isn't size alone, but how it uses that scale. With over 670 locations, exclusive relationships with top manufacturers like Carrier and Trane, and a tech-enabled supply chain, Watsco achieves efficiency and pricing power that smaller peers simply can't match. Importantly, this is a business built for durable, repeat demand. Roughly 85% of HVAC replacements are non-discretionary; systems fail, and they must be replaced quickly, regardless of the economic cycle. Watsco thrives in this environment by owning the last mile of that replacement process: contractor relationships, product availability, and seamless fulfillment. Contractors trust Watsco not only for inventory but for uptime, credit, and digital convenience. Over 70% of sales now flow through its e-commerce and mobile platforms, reducing friction, boosting loyalty, and quietly expanding wallet share without sacrificing margin. In a market where most players compete on price, and scale is rare, Watsco's model compounds quietly but powerfully. The company isn't just growing with the market; it's taking share from it. That structural edge is what makes its growth unusually consistent, and what could eventually unlock a 3x revenue trajectory. Watsco trades at around 23x forward earnings and 16x EV/EBITDA, multiples that may seem steep in a distribution-heavy industrial sector. But a closer look at its fundamentals reveals why this valuation is not only justified, but potentially conservative for long-term holders. Over the past decade, gross margin has expanded from 24% to 26%, while net margin has climbed from 4% to 7%. Meanwhile, per-share revenue is up nearly 70%. These gains suggest the company isn't just growing, it's improving as it grows. Scale efficiencies, digital adoption, and pricing discipline are flowing through to the bottom line. This is the hallmark of a best-in-class operator in a fragmented market, a profile that historically justifies long runways for compounding. To frame the long-term opportunity, it's important to consider Watsco's share of the North American HVAC distribution market, which is estimated to exceed $50 billion annually. Despite generating over $7 billion in revenue, Watsco still commands less than a 15% share, leaving significant room for organic and bolt-on expansion. If the company triples revenue over the next 15 years while expanding margins even modestly, its current P/E could look cheap in hindsight. While skeptics may point to the drop in effective tax rate from 30% to 20% over the same period as a key driver of net margin gains, this overlooks the operating leverage embedded in Watsco's model. The widening gap between gross and net margins reflects efficiency improvements that can't be explained by tax arbitrage alone. It's also worth acknowledging concerns around share-based compensation. While Watsco has consistently repurchased stock to offset dilution, the pace of issuance, particularly to management, deserves monitoring. Even so, the company's ability to fund both dividends and buybacks from free cash flow, without resorting to debt, reinforces its identity as a rare compounder that returns capital as it grows. Comparisons to early-stage compounders like Boston Beer (SAM) are not unwarranted. Both began as category leaders in niche markets, steadily grew share through execution, and delivered 10x returns to patient investors. For Watsco, the ingredients are all present: pricing power, efficiency, capital discipline, and a massive TAM to grow into. Watsco has quietly attracted some of the most respected long-term investors in the world, not because it's flashy, but because it's dependable. Two standouts, Caledonia Investments and Markel Group (led by Tom Gayner (Trades, Portfolio)), offer strong validation of Watsco's compounding potential. Caledonia Investments, a concentrated, long-horizon firm based in London, has made Watsco its largest U.S. equity position. The firm owns over 11.5% of its portfolio in Watsco, with an estimated average cost of $160, a stake that has more than doubled. More notably, they've held the position without trimming, signaling deep belief in Watsco's durability and capital discipline. This kind of inactivity from a high-conviction fund reflects alignment with the company's long-term compounding path. Markel Group, led by Tom Gayner (Trades, Portfolio), often called a modern-day Buffett, holds a $300 million position in Watsco, a top holding in their portfolio. Gayner's investing framework prizes predictable cash flows, pricing power, and low-debt balance sheets, all traits Watsco exhibits. Markel initiated the position well before the stock's current run, and like Caledonia, they've let it compound quietly. That patience is not passive; it's conviction. Both investors understand what makes Watsco rare: it grows without consuming capital, earns trust in a fragmented industry, and reinvests with discipline. Their continued presence isn't just a signal; it's a blueprint for how quality investors behave when they've found a wonderful business. Watsco's capital allocation is simple, consistent, and shareholder-friendly, a rarity in industrials. Rather than pursue debt-fueled expansion or flashy acquisitions, management has opted for organic growth, bolt-on deals, and meaningful dividend increases. The result is a financial profile that compounds steadily without stretching the balance sheet. The company has grown its dividend every year since 1975 and paid out over $2.3 billion in dividends over the past decade, a remarkable feat for a distributor. In 2023 alone, Watsco returned over $450 million to shareholders, even while continuing to invest in tech infrastructure and inventory capacity. Its payout ratio remains conservative relative to free cash flow, leaving room for reinvestment. On the M&A front, Watsco sticks to its playbook: small regional distributors with sticky contractor bases and cultural alignment. These acquisitions are almost always immediately accretive and are funded through internal cash flow or equity issuance only when the valuation is attractive. Notably, the company avoids leveraging even when the market environment makes debt tempting. As of the latest filings, Watsco holds virtually no net debt, maintains an investment-grade credit rating, and has ample liquidity to support future growth. The absence of financial leverage in a capital-light, cash-generative business enhances its resilience during economic slowdowns, a hidden strength often missed in cursory peer comparisons. Watsco may not spark headlines, but its business model quietly embodies everything great investors seek: scalability, operational leverage, capital efficiency, and a long reinvestment runway. In an industry still highly fragmented, Watsco is the best-positioned player, one whose scale, loyalty-driven distribution network, and disciplined execution enable it to widen its moat year after year. The company has managed to grow per-share revenue by over 70% in the last decade, with net margins expanding faster than gross margins, clear evidence of operating leverage and efficiency. Critics may point to falling tax rates or stock-based compensation, but those fade against the reality: Watsco grows without consuming capital and returns cash as it scales, something few businesses can claim. What makes the case particularly compelling is the market structure. HVAC distribution still has ample TAM left, and Watsco's share remains modest despite its dominance. If the company merely continues gaining share and expanding margins at its current pace, it could triple revenue over 15 years and deliver multi-bagger returns from here. That's how long-term wealth is built. For the patient investor, Watsco represents a rare class of asset: one that grows, returns capital, and gets more efficient with scale, all while selling products that are non-discretionary and increasingly essential in a warming, aging America. This article first appeared on GuruFocus.
Yahoo
12-07-2025
- Business
- Yahoo
3 Beaten-Down Dividend Stocks for Patient Investors to Buy in July and Hold for Years to Come
A stellar outperforming stock to buy on a dip. Occidental Petroleum consistently generates strong free cash flow to source its dividend payments. The sell-off in Campbell's is mostly justified, but the stock is now drastically discounted. 10 stocks we like better than Watsco › Two of the most powerful forces in investing are time and price. An investor with a long-term time horizon can afford to be patient and let an investment thesis play out. But investing in a company at a compelling price can also lead to outsized gains. Folks who don't have a multi-decade-long investment time horizon may feel the need to be extra purposeful with their investment decisions. One way to achieve this is to invest in companies with reasonable valuations that also pay dividends. That way, you get paid to hold shares in a company rather than relying solely on the stock price going up to turn a profit. Here's why Watsco (NYSE: WSO), Occidental Petroleum (NYSE: OXY), and Campbell's Company (NASDAQ: CPB) stand out as three dividend stocks to load up on now. Lee Samaha (Watsco): The heating, ventilation, and air conditioning (HVAC) equipment and parts distributor's stock is up 991% over the last 20 years, 272% over the previous decade, 154% over the last five years, 89% over the last three years, but down 4% in the prior year. If it looks like a buying opportunity and walks like a buying opportunity, it is a buying opportunity. For those noticing that Watsco's current dividend yield is only 2.7%, also note that if you include dividend payments reinvested in the stock over the last 20 years, it improves the return to a whopping 2,020% -- not a typo! These stellar returns stem from Watsco's ongoing role as the leading player and consolidator in a highly fragmented industry. Simply put, Watsco is a serial acquirer of small HVAC distributors, which it then integrates into its network, thereby expanding its sales and geographic reach. The integration of these distributors ultimately improves their operational performance as Watsco adds product lines and scale to the newly added distributors. In addition, this is a key reason to believe it can continue to make value-adding acquisitions: its use of new technology, such as mobile apps, e-commerce websites, and digital technology, to support HVAC contractors and make it easier for them to order parts from Watsco. As such, the company has long-term growth prospects, not least as long as demand for HVAC equipment servicing is a function of the amount of HVAC equipment installed across the U.S. Scott Levine (Occidental Petroleum): Dropping about 11% (as of this writing), Occidental Petroleum stock hasn't had much to celebrate so far in 2025. In fact, over the past year, shares have had a tough go of it, plunging about 29%. Some may see the decline and think that they should keep their distance from the exploration and production company; however, those with time on their side will find a great opportunity to act now and grab a quality stock with a secure dividend that currently has a 2.2% forward yield. Experienced energy investors looking at the decline in Occidental Petroleum's stock likely are unfazed, considering the strong correlation between movements in energy prices and those of upstream energy stocks. If energy prices drop, the exploration and production activities at some lower-margin assets become financially disadvantageous. In light of the 21.5% drop in oil benchmark West Texas Intermediate over the past year, the drop in Occidental Petroleum stock seems a lot less alarming. Despite the lower energy prices, Occidental Petroleum performed well during the first quarter of 2025. In addition to growing oil and gas production by 18.6% year over year, the company generated $1.2 billion in free cash flow and strengthened its balance sheet with a $2.3 billion reduction in debt. Amid the current drop in energy prices, potential investors may question the sustainability of the company's dividend, but management has taken a financially prudent approach to rewarding shareholders. Over the past five years, the company has generated ample free cash flow to cover its dividend payments. And that's not the only perspective suggesting the dividend is secure. Occidental Petroleum has averaged an extremely conservative 20% payout ratio from 2020 through 2024. With the stock's recent decline, Occidental Petroleum now presents a compelling buying opportunity for patient investors. Daniel Foelber (Campbell's): While you probably know Campbell's for its soups, you may be unfamiliar with just how beaten-down the packaged food stock is. Campbell's has been serving up investors a healthy portion of disappointment with the stock at a 16-year low. Part of the reason for the sell-off is that Campbell's is now much more than a soup company, and not necessarily to the benefit of its investors. In 2017, it completed its $700 million acquisition of Pacific Foods of Oregon -- expanding its portfolio of soups, broths, and plant-based beverages. That deal was fairly on brand with the rest of Campbell's lineup. However, what followed was more out of the box. In 2018, Campbell's bought Snyder's-Lance for a whopping $6.1 billion -- which was a play in snacks like pretzels, chips, and cookies. It then bought Sovos Brands for $2.7 billion in 2024 -- which gave Campbell's a variety of pasta sauces, dry pasta, frozen entrées and pizzas, and yogurt products. Combined, these three acquisitions amount to $9.5 billion -- which is more than Campbell's market cap at the time of this writing of $9.3 billion. So, in hindsight, Campbell's clearly overpaid for these brands. Campbell's has struggled to convert these acquisitions into high-margin sales growth. In fact, its earnings and operating margin are around five-year lows. The good news is that Campbell's still generates a ton of free cash flow, which more than covers its sizable dividend (yielding 5.1%). Campbell's stock is beyond cheap -- with a 10.5 forward price-to-earnings (P/E) ratio compared to a 10-year median P/E of 19.9. Add it all up, and now is an incredible opportunity for investors who believe Campbell's can turn its business around to scoop up shares of the packaged food giant. Before you buy stock in Watsco, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Watsco wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,432!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,005,854!* Now, it's worth noting Stock Advisor's total average return is 1,049% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Watsco. The Motley Fool recommends Campbell's and Occidental Petroleum. The Motley Fool has a disclosure policy. 3 Beaten-Down Dividend Stocks for Patient Investors to Buy in July and Hold for Years to Come was originally published by The Motley Fool
Yahoo
12-07-2025
- Business
- Yahoo
3 Beaten-Down Dividend Stocks for Patient Investors to Buy in July and Hold for Years to Come
A stellar outperforming stock to buy on a dip. Occidental Petroleum consistently generates strong free cash flow to source its dividend payments. The sell-off in Campbell's is mostly justified, but the stock is now drastically discounted. 10 stocks we like better than Watsco › Two of the most powerful forces in investing are time and price. An investor with a long-term time horizon can afford to be patient and let an investment thesis play out. But investing in a company at a compelling price can also lead to outsized gains. Folks who don't have a multi-decade-long investment time horizon may feel the need to be extra purposeful with their investment decisions. One way to achieve this is to invest in companies with reasonable valuations that also pay dividends. That way, you get paid to hold shares in a company rather than relying solely on the stock price going up to turn a profit. Here's why Watsco (NYSE: WSO), Occidental Petroleum (NYSE: OXY), and Campbell's Company (NASDAQ: CPB) stand out as three dividend stocks to load up on now. Lee Samaha (Watsco): The heating, ventilation, and air conditioning (HVAC) equipment and parts distributor's stock is up 991% over the last 20 years, 272% over the previous decade, 154% over the last five years, 89% over the last three years, but down 4% in the prior year. If it looks like a buying opportunity and walks like a buying opportunity, it is a buying opportunity. For those noticing that Watsco's current dividend yield is only 2.7%, also note that if you include dividend payments reinvested in the stock over the last 20 years, it improves the return to a whopping 2,020% -- not a typo! These stellar returns stem from Watsco's ongoing role as the leading player and consolidator in a highly fragmented industry. Simply put, Watsco is a serial acquirer of small HVAC distributors, which it then integrates into its network, thereby expanding its sales and geographic reach. The integration of these distributors ultimately improves their operational performance as Watsco adds product lines and scale to the newly added distributors. In addition, this is a key reason to believe it can continue to make value-adding acquisitions: its use of new technology, such as mobile apps, e-commerce websites, and digital technology, to support HVAC contractors and make it easier for them to order parts from Watsco. As such, the company has long-term growth prospects, not least as long as demand for HVAC equipment servicing is a function of the amount of HVAC equipment installed across the U.S. Scott Levine (Occidental Petroleum): Dropping about 11% (as of this writing), Occidental Petroleum stock hasn't had much to celebrate so far in 2025. In fact, over the past year, shares have had a tough go of it, plunging about 29%. Some may see the decline and think that they should keep their distance from the exploration and production company; however, those with time on their side will find a great opportunity to act now and grab a quality stock with a secure dividend that currently has a 2.2% forward yield. Experienced energy investors looking at the decline in Occidental Petroleum's stock likely are unfazed, considering the strong correlation between movements in energy prices and those of upstream energy stocks. If energy prices drop, the exploration and production activities at some lower-margin assets become financially disadvantageous. In light of the 21.5% drop in oil benchmark West Texas Intermediate over the past year, the drop in Occidental Petroleum stock seems a lot less alarming. Despite the lower energy prices, Occidental Petroleum performed well during the first quarter of 2025. In addition to growing oil and gas production by 18.6% year over year, the company generated $1.2 billion in free cash flow and strengthened its balance sheet with a $2.3 billion reduction in debt. Amid the current drop in energy prices, potential investors may question the sustainability of the company's dividend, but management has taken a financially prudent approach to rewarding shareholders. Over the past five years, the company has generated ample free cash flow to cover its dividend payments. And that's not the only perspective suggesting the dividend is secure. Occidental Petroleum has averaged an extremely conservative 20% payout ratio from 2020 through 2024. With the stock's recent decline, Occidental Petroleum now presents a compelling buying opportunity for patient investors. Daniel Foelber (Campbell's): While you probably know Campbell's for its soups, you may be unfamiliar with just how beaten-down the packaged food stock is. Campbell's has been serving up investors a healthy portion of disappointment with the stock at a 16-year low. Part of the reason for the sell-off is that Campbell's is now much more than a soup company, and not necessarily to the benefit of its investors. In 2017, it completed its $700 million acquisition of Pacific Foods of Oregon -- expanding its portfolio of soups, broths, and plant-based beverages. That deal was fairly on brand with the rest of Campbell's lineup. However, what followed was more out of the box. In 2018, Campbell's bought Snyder's-Lance for a whopping $6.1 billion -- which was a play in snacks like pretzels, chips, and cookies. It then bought Sovos Brands for $2.7 billion in 2024 -- which gave Campbell's a variety of pasta sauces, dry pasta, frozen entrées and pizzas, and yogurt products. Combined, these three acquisitions amount to $9.5 billion -- which is more than Campbell's market cap at the time of this writing of $9.3 billion. So, in hindsight, Campbell's clearly overpaid for these brands. Campbell's has struggled to convert these acquisitions into high-margin sales growth. In fact, its earnings and operating margin are around five-year lows. The good news is that Campbell's still generates a ton of free cash flow, which more than covers its sizable dividend (yielding 5.1%). Campbell's stock is beyond cheap -- with a 10.5 forward price-to-earnings (P/E) ratio compared to a 10-year median P/E of 19.9. Add it all up, and now is an incredible opportunity for investors who believe Campbell's can turn its business around to scoop up shares of the packaged food giant. Before you buy stock in Watsco, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Watsco wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,432!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,005,854!* Now, it's worth noting Stock Advisor's total average return is 1,049% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Watsco. The Motley Fool recommends Campbell's and Occidental Petroleum. The Motley Fool has a disclosure policy. 3 Beaten-Down Dividend Stocks for Patient Investors to Buy in July and Hold for Years to Come was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
08-07-2025
- Business
- Yahoo
FIX Stock Trades Near 52-Week High: Should You Chase the Rally?
Comfort Systems USA FIX has seen a spectacular run in recent months. Shares have surged more than 73.3% in the past three months alone, eclipsing the broader Zacks Building Products - Air Conditioner and Heating industry's 37.1% gain and leaving broader Construction sector benchmarks far behind. As this national leader in mechanical, electrical, and plumbing (MEP) services hovers just 2.2% below its 52-week high of $553.09, investors are right to ask: Is there still room to run? FIX Share Price Performance Image Source: Zacks Investment Research Against competitors like AAON AAON, Watsco WSO, and EMCOR Group EME, FIX's recent outperformance stands out. Over the past three months, while AAON has gained just 3.1%, Watsco has declined slightly by 1.2%, and EMCOR—its closest peer in terms of MEP breadth—has gained a still-impressive 54.4%. Comfort Systems' national scale, deep industrial and tech-sector exposure, and large-scale project capacity give it a distinct edge, especially as demand shifts toward more complex and integrated mechanical and electrical solutions. FIX Stock Performance Vs EME, AAON, WSO Stock Image Source: Zacks Investment Research Comfort Systems ended the first quarter with a record $6.9 billion backlog, up 16% year over year and 14% sequentially on a same-store basis. Bookings were broad-based, led by advanced technology projects—data centers and semiconductor fabs now account for 37% of total revenues, up from 30% last year. With this strong backlog, management confirmed that visibility into 2026 is already higher than ever. Even as macro risks loom, this backlog depth provides a cushion and supports sustained revenue and earnings growth. Comfort Systems' modular business accounted for 19% of total revenues in first-quarter 2025, aided by more than 2.5 million square feet of production and storage space. Modular projects are typically large, repeatable, and margin-accretive, and their expansion helps reduce seasonality and drive better capital efficiency. The recent acquisition of Century Contractors, a mechanical contractor in North Carolina, further enhances Comfort Systems' geographic reach and earnings power. The company expects to generate $90 million in revenues from Century Contractors this year. The company also returned $92 million to shareholders via share repurchases, while maintaining over $130 million in net cash, reinforcing its disciplined capital allocation. FIX's revenue mix is increasingly tilted toward high-growth, high-complexity sectors. Advanced tech leads the way, but institutional demand from healthcare, education, and government (now accounting for 24% of total revenues) also remains resilient. Management has noted a rise in healthcare bookings, which now account for about 10% of business, driven by aging demographics. Meanwhile, manufacturing activity and onshoring trends continue to offer new bidding opportunities. With 85% of revenue tied to construction, including 58% from new buildings and 27% from existing retrofits, FIX is positioned for secular growth even as pockets of commercial softness emerge. While the latest tariff headlines raise concerns across the construction sector, Comfort Systems appears better insulated than many of its peers. Management emphasized that most pricing is locked in early—particularly for large equipment and long-lead items—and customers often share the risk of inflation. In addition, FIX's size allows for aggressive early procurement and price hedging across its network. The company's experience navigating COVID-era disruptions—with minimal margin erosion—gives confidence that it can manage future volatility. As of the first quarter, supply chain pressures and pricing pass-throughs remain manageable, with no sign of customer sticker shock. Despite a remarkable rally, FIX's valuation remains under control. The stock currently trades at a forward 12-month price/earnings (P/E) ratio of 27.24—below the industry average of 29.11 and comfortably below its five-year peak of 32.52. That's especially notable given the company's 82% gain from its 52-week low and its substantial outperformance relative to peers. For context, AAON is currently trading at 30.71X, Watsco at 30.72, and EMCOR—another large MEP player—at 22.27. FIX's scale, diversified customer base, and robust backlog make its premium more justifiable than most. FIX Stock Valuation Image Source: Zacks Investment Research Comfort Systems' earnings estimates for 2025 and 2026 have trended upward in the past 60 days to $19.28 per share and $20.41, respectively. The estimated figures for 2025 and 2026 indicate 32.1% and 5.8% year-over-year growth, respectively. Image Source: Zacks Investment Research FIX is not simply benefiting from cyclical momentum. The company is executing exceptionally well in structurally advantaged markets, such as tech infrastructure and institutional construction. While macroeconomic risks, such as tariffs and inflation, warrant caution, management's track record suggests that these challenges are unlikely to derail its long-term growth story. With a record backlog, strong margin visibility, and a balanced capital strategy, FIX offers more staying power than many of its industrial peers. Comfort Systems currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Watsco, Inc. (WSO) : Free Stock Analysis Report EMCOR Group, Inc. (EME) : Free Stock Analysis Report AAON, Inc. (AAON) : Free Stock Analysis Report Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
