Shares of Comfort Systems USA (FIX 0.53%) slid 16.8% in February, according to data provided by S&P Global Market Intelligence. Part of this drop occurred after the company reported financial results for the fourth quarter of 2024 on Feb. 20, but the bigger drop happened earlier in the month and could be related to President Donald Trump's trade tariffs.
The trade tariff situation is constantly changing, so my thoughts could quickly become outdated. But suffice it to say that Comfort Systems' costs could go up because of import tariffs -- the company specifically calls this out in the risk section of its financial filings. And if it can't raise prices by the same amount, its profit margins would go down, which is bad for the business and, consequently, for the stock.
Before reporting Q4 results, Comfort Systems' stock was down about 10% during the month, and I'd wager that investors were thinking about its profit margins due to tariffs. It seems the Q4 report didn't do anything to alleviate concerns. The numbers beat expectations, but the stock still fell.
NYSE: FIX
Key Data Points
Are Comfort Systems' profits at risk?
Comfort Systems installs air conditioning systems, does electrical work, and more. In 2024, the company's revenue was up an impressive 35% year over year to $7 billion. This resulted in a massive 62% jump in net income, which hit $522 million.
Moreover, Comfort Systems' backlog ended 2024 at an all-time high of $6 billion, up 16% year over year. Management doesn't give concrete guidance. But given the trends, it expects to continue to grow in 2025.
Comfort Systems is benefiting from a massive surge in data centers and semiconductor manufacturing. These facilities must stay cool, for example, making the company an ideal partner.
The problem for investors is that Comfort Systems' profits look like they could pull back even if the business grows. Right now, the company's gross margin and operating margin are both considerably higher than its 10-year averages, as the chart below shows.
FIX Gross Profit Margin data by YCharts. TTM = trailing 12 months.
Hypothetically, Comfort Systems could keep growing because of huge technology trends. But if margins contract, profits might not benefit, which would likely impact the stock. The uncertainty of what tariffs could due to margins makes investors extra jumpy here.
The future is incredibly bright
The profit that a business produces is very consequential to the long-term stock price, so the conversation isn't irrelevant. However, I think investors need to be careful not to fret too much about Comfort Systems.
In 2024, 33% of Comfort Systems' revenue was from demand for data centers and semiconductor chip fabrication, up from just 21% in 2023. In 2025 alone, massive commitments to build infrastructure in the U.S. are materializing, including a recent $100 billion commitment from Taiwan Semiconductor.
Comfort Systems management says it's being selective in the jobs it takes on -- it wants the ones with the best profit margins. With historic manufacturing demand coming in, I think the future is incredibly bright for Comfort Systems stock.
