Comfort Systems (NYSE:FIX) Reports Bullish Q3, Stock Jumps 15.6%

HVAC and electrical contractor Comfort Systems (NYSE:FIX) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 35.2% year on year to $2.45 billion. Its GAAP profit of $8.25 per share was 32.4% above analysts’ consensus estimates.

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Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “Our teams across the country continue to set a new standard, delivering excellent results for our customers, and again achieving record financial results. Great ongoing execution and favorable developments in certain late-stage projects delivered third quarter EPS that doubles our same quarter last year. In addition to increased revenue and earnings, we are also reporting remarkable quarterly cash flow of over $550 million.”

Company Overview

Formed through the merger of 12 companies, Comfort Systems (NYSE:FIX) provides mechanical and electrical contracting services.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Comfort Systems grew its sales at an incredible 23.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Comfort Systems’s annualized revenue growth of 29.5% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Comfort Systems’s backlog reached $9.38 billion in the latest quarter and averaged 33.6% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Comfort Systems’s products and services but raises concerns about capacity constraints.

This quarter, Comfort Systems reported wonderful year-on-year revenue growth of 35.2%, and its $2.45 billion of revenue exceeded Wall Street’s estimates by 13.2%.

Looking ahead, sell-side analysts expect revenue to grow 7.9% over the next 12 months, a deceleration versus the last two years. Still, this projection is above the sector average and implies the market sees some success for its newer products and services.

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Operating Margin

Comfort Systems has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.6%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Comfort Systems’s operating margin rose by 7 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, Comfort Systems generated an operating margin profit margin of 15.5%, up 4.3 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Comfort Systems’s EPS grew at an astounding 43.8% compounded annual growth rate over the last five years, higher than its 23.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Comfort Systems’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Comfort Systems’s operating margin expanded by 7 percentage points over the last five years. On top of that, its share count shrank by 3.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Comfort Systems, its two-year annual EPS growth of 71.9% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Comfort Systems reported EPS of $8.25, up from $4.09 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Comfort Systems’s full-year EPS of $23.62 to grow 6%.

Key Takeaways from Comfort Systems’s Q3 Results

We were impressed by how significantly Comfort Systems blew past analysts’ backlog expectations this quarter. We were also glad its revenue and EPS both outperformed Wall Street’s estimates handily. Zooming out, we think this was a great print. The stock traded up 15.6% to $955 immediately after reporting.

Comfort Systems put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.