This week’s Stock of the Week is in the business of making people comfortable, and business is growing.
Comfort Systems USA Inc. (FIX), which provides and maintains heating, ventilation and air-conditioning (HVAC) systems for commercial, educational and government construction, should benefit as commercial construction picks up in the next few years—which is likely as the US economy slowly expands.
The company, based in Houston, with more than 85 locations throughout the US, has a backlog of more than $900 million in booked business—its highest ever. It has been cash-flow positive for 18 straight years. It has no huge competitors—most competition is from mom-and-pop firms that Comfort Systems frequently purchases. Even if there is slower commercial construction in the next few years than currently expected, Comfort Systems’ backlog and the 30% of revenue it gets from service contracts should help. Another 30% of revenue comes from existing buildings redoing their HVAC systems, a trend likely to continue as companies try to improve worker productivity and promote energy efficiency.
Revenue of $1.63 billion in 2016 should grow to $1.79 billion this year and $2.04 billion next year, although earnings this year will likely be slightly down because of a few project delays. The small dividend of $0.30/share/yr. recently yielded 0.9% and appears secure.
Fiscal year: December. Earnings per share: 2018 est./$2.39…2017 est./$1.69…2016/$1.72.
William E. Costello, CFA, is senior vice president and senior portfolio manager, Westwood Holdings Group, Dallas, which manages $22.1 billion, including the $214 million Westwood SmallCap Value Fund (WHGSX). WestwoodGroup.com
