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Comfort Systems USA is benefiting from the AI data center megatrend as companies turn to HVAC providers to keep their chips cool.
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The company’s acquisition strategy resulted in 184 locations in 139 cities, positioning it well as AI data center buildout expands.
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Comfort Systems USA increased its dividend by 20% last year, indicating a strong financial position.
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Investing in stocks for the long term doesn’t translate into big profits right away, but spending time in the market instead of timing the market can lead to lucrative savings when you need it most. Picking growth stocks with attractive fundamentals and tailwinds can help you outperform the S&P 500 over the long term. If that’s your goal, you might want to consider Comfort Systems USA (NYSE: REPAIR).
The HVAC supplier’s stock price has more than doubled over the past year as more investors recognize its potential in the artificial intelligence (AI) industry. Those stock gains are also accompanied by compelling revenue growth and higher profit margins.
Any industry that revolves around AI chips can become a long-term winner. These chips power robotics, artificial intelligence models and other innovations, but they also need cold temperatures to operate.
Comfort Systems USA has been serving data centers for many years, becoming one of the industry’s leading HVAC providers. A $9.38 billion order book highlights demand for Comfort Systems USA solutions, with that figure increasing 65% year over year.
The HVAC provider is acquiring more companies to expand its market share as the artificial intelligence industry continues to heat up. Recent acquisitions of power companies in western Michigan and southern Florida should provide Comfort Systems USA with incremental annual revenue of $200 million.
Buying competitors will help the HVAC supplier increase prices as AI development continues, which may result in higher dividend payments. Although the stock yields just 0.24% right now, Comfort Systems USA notably increased its dividend by 20% in the last year. That kind of dividend increase only comes with a strong balance sheet and compelling financial growth, and that kind of growth rate may be the norm for years to come.
Many HVAC suppliers specialize in a single region, but Comfort Systems USA’s acquisition strategy has made it a giant. The company has 184 locations in 139 cities across the country, putting it close to many AI hotspots.
This level of scale gives it an advantage over most of the competition and explains why revenue increased 35% year over year in the third quarter.
