In the past 30 days, two analysts have increased their EPS estimates for our first idea today, an HVAC company. Secondly, we are selling an underperformer.
Buy: Comfort Systems USA, Inc. (FIX)
Comfort Systems USA, Inc. (FIX) is a major player in the fragmented heating, ventilation, and air-conditioning (HVAC) market. In 2018, about 62% of revenue came from the renovation and repair of existing buildings, with the balance related to new construction, including residential projects.
Favorable pricing, project wins, and a sizable backlog should drive growth. On Dec. 31 the backlog stood at $1.2 billion, up 27%. The stock boasts strong scores in Momentum (95) and Earnings Estimates (83), contributing to an Overall score of 97.
Comfort Systems trades at 18 times trailing earnings, versus a median of 15 for its industry group. The premium makes sense for an industry leader tapping into attractive markets. Moreover, shares trade 25% below their five-year average P/E and 30% below their 10-year norm. For 2019, analysts target per-share earnings of $3.30, up 16%.
If the environment remains favorable in core commercial and industrial markets, Comfort Systems seems well-positioned to top expectations. The stock is being initiated as a Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, April 2019