“Our biggest challenge is project selection,” explained the CEO of Comfort Systems on their most recent quarterly earnings conference call. They install and service HVAC systems for large commercial buildings. Worrying about how to choose which new customers to take on is a high-quality problem to have.
Notice where new demand begins to accelerate. It’s coming from the biggest power sucking machines inside Data Centers, which need significantly more cooling than other buildings.
Technology customers like this one make up 32% of current revenues. That is up from 21% last year. “We could book so much more if we were willing to take it,” explained the CEO on the call. They like a balanced mix, and so do we. But to be clear, in our quantitative research process, we don’t pay attention to what anybody says, and we only focus on what the numbers and data evidence were already telling us.
There are not many industries with steadily growing demand like HVACs. Perhaps the only thing more consistent is their business to then service that increasing installed base.
Talking about HVAC systems is not as fun as those data centers firing up machines and robots with artificial intelligence. But when those predictions change again at the next party, that room will also be cooled by an air conditioner.
More important to us than any growth rates are their directions. Are they accelerating or decelerating? What is impressive about cash piling up at Comfort Systems is that is after two recent key acquisitions, buying back shares, and paying down debt. After all that, they still had more than enough left over to reward stakeholders with another dividend pay raise, 16% higher than last quarter.
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