Earnings
Comfort Systems' backlog nearly doubles to $17.8 billion, but shares fall after a third-quarter beat
The mechanical contractor topped revenue forecasts and generated more than $1 billion of operating cash, yet its stock slid as investors questioned AI-linked spending.
HedgeWeekly News Desk ·
Comfort Systems USA said on Thursday that third-quarter revenue rose to $3.77 billion from $2.45 billion a year earlier, ahead of the roughly $3.40 billion analysts expected, according to StockStory. Net income climbed to $489.0 million, or $13.91 a diluted share, from $291.6 million, or $8.25, in the Houston-based contractor's after-the-close release.
Backlog reached $17.81 billion at September 30, up from $14.06 billion at the end of June and $9.38 billion a year earlier, an increase of about 90%. Same-store backlog was $17.39 billion. Operating margin widened to 16.6% from 15.5% as administrative costs fell as a share of revenue, while gross margin held at 24.8%.
Operating cash flow was $1.01 billion in the quarter, and capital spending rose to $210.6 million from $35.3 million, leaving free cash flow of $805.6 million. Cash stood at $2.16 billion. Chief executive Brian Lane said demand remains robust and the company expects to grow organically through year-end and into 2027, but the release gave no numerical guidance. The shares fell 7.6% to $1,186 shortly after the report, StockStory said.
Why it matters: Comfort Systems' order book is a read on the physical build-out behind AI, and 247 Wall St attributed much of the backlog growth to data-centre and technology clients. The drop came as AI spending doubts hit US markets: Reuters reported the Nasdaq fell more than 2% on Thursday and Meta nearly 8% after it disclosed its first cash outflow in more than a decade and a share issuance plan. StockStory said analysts expect revenue growth to slow to 16.5% over the next 12 months. Investors will listen to Friday's 10 a.m. Central call for detail on the mix of data-centre work, labour capacity and the pace of conversion into 2027 revenue.