Construction and home maintenance company Comfort Systems USA (FIX -3.02%) reported better-than-expected quarterly results and provided an upbeat outlook about the future. Investors are taking notice, sending shares of Comfort Systems up as much as 18% on Friday and up 9% as of noon ET.
Strong growth is fueling investor enthusiasm
Comfort Systems is a rollup of commercial, industrial, and institutional heating, ventilation, air conditioning (HVAC) and electrical contracting services. The company earned $2.55 per share on revenue of $1.36 billion in the fourth quarter, surpassing Wall Street expectations for $2.20 per share in earnings on sales of $1.33 billion.
Revenue was up 21% year over year in the quarter, and up 26% for the year. Operating cash flow totaled $639.6 million, more than double the $301.5 million reported in 2022.
"During the fourth quarter both our mechanical and electrical businesses grew and increased margins to drive our annual results to new heights," CEO Brian Lane said in a statement. "Construction finished an already strong year on an up note, with particularly notable profit and activity increases in our modular business. Service also achieved superb execution, continued growth, and improved profitability, as our service operations continue to benefit from ongoing investments."
Is Comfort Systems stock a buy after a strong earnings report?
Lane sees continued growth up ahead. The company's backlog was up 27% at year-end, an increase of about $1.1 billion.
"Underlying demand remains very supportive, and we are excited about the two new companies that joined us at the beginning of this month," the CEO said. "As a result, we are optimistic that we will continue to grow and maintain our strong operational results in 2024."
With Friday's gains, shares of Comfort Systems are up 121% in the past 12 months. Those sorts of gains are only sustainable from a construction company if growth continues, and investors buying in now need to pay close attention to management commentary about growth in the quarters to come. But for now, Comfort Systems is still a relatively small company chasing a massive opportunity, and is an appealing option for growth-focused investors.
