We recently published a list of 10 Best Engineering Stocks to Buy for 2025. In this article, we are going to take a look at where Comfort Systems USA, Inc. (NYSE:FIX) stands against other engineering stocks to buy for 2025.
Overview of the Engineering Industry
The engineering industry is playing an increasingly significant role in today’s tech-supported world. The demand for engineering solutions is increasing globally, and this trend is expected to continue into 2025. Investments in clean energy, urban development, and transportation are driving this demand, presenting a scalable opportunity for investors to benefit from engineering companies’ potential.
According to a report by Mordor Intelligence, the global engineering services industry has remained resilient over the years, with a market size worth $1.67 trillion as of 2024. It is expected to grow to $2.04 trillion by 2029 at a compound annual growth rate (CAGR) of 4.20% between 2024 and 2029. Although the largest market for the engineering services industry is centered in the Asia Pacific region, the Middle East and Africa are showing the fastest market growth globally.
This growth is attributed to various factors, including infrastructure development, technological advancements, demand for sustainable solutions, and the need for specialized skills in infrastructure programs. Since infrastructure projects are complicated and strenuous, the demand for innovative engineering services continues to grow. In fact, data from the US Census Bureau shows that the value of infrastructure building in the US rose from $1.80 trillion to $1.84 trillion between October 2022 and February 2023. The surge in the use of digital technologies such as artificial intelligence, cloud computing, and IoT is another primary force driving the market.
Thus, the engineering sector stands out as a promising investment opportunity due to technological advancements, resilience to economic fluctuations, supportive government initiatives, and strong market demand.
The construction industry experienced a 10% increase in nominal value added and a 12% growth in gross output in 2024. According to Deloitte, construction spending surpassed $2 trillion in the US in 2024. Its employment level touched 8.3 million in July 2024, exceeding its previous high of 7.7 million in 2006. These numbers have been consistently increasing for more than a year. Similarly, the Dodge Momentum Index (DMI), which measures nonresidential building spending, was on an upward trajectory in fiscal Q2 2024. This reflects increasing confidence in market conditions among developers and owners.
Deloitte’s 2025 Engineering and Construction Industry Outlook states that there are reasons to be optimistic in 2025. The company’s analysis of the Oxford Economic Model shows that short-term interest rates are likely to fall gradually over the coming years, followed by interest rate cuts by the Federal Reserve. The improving financial and economic conditions are anticipated to positively influence construction and engineering demand across various segments.
Declining mortgage rates may also increase demand and residential construction activity. Other drivers of growth in segments such as manufacturing, engineering, and energy may include government investments through the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA).
Our Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 30 engineering stocks. We then selected the 10 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An engineer inspecting a newly renovated electrical installation.
Comfort Systems USA, Inc. (NYSE:FIX)
Number of Hedge Fund Holders: 35
Comfort Systems USA, Inc. (NYSE:FIX) provides electrical and mechanical contracting services. It also offers engineering, design-assist, turnkey, and direct-hire construction services of modular systems for the industrial, power, and advanced technology sectors.
The company’s operating income in fiscal Q3 2024 was 50% higher than its already strong fiscal Q3 last year. Revenue for fiscal Q3 2024 was $1.8 billion, an increase of $343 million or 32% compared to last year. In addition, the company’s same-store backlog was 21% higher than last year, supported by exceptional strength in its pipelines.
Comfort Systems USA, Inc. (NYSE:FIX) experienced a 39% revenue increase in its Mechanical segment. This growth was attributed to modular expansion, recent expansions, and substantial organic construction and service growth. Its Electrical segment also grew 8% in revenue, with overall same-store revenue increasing by 18% or $241 million. The remaining $193 million increase came from the company’s acquisitions.
Construction accounted for 84% of the company’s revenue, with projects for existing building construction representing 27% and new buildings 57%. This reflects its strong operational model. Comfort Systems USA, Inc. (NYSE:FIX) also increased the pace of its share repurchases in fiscal Q3 2024, and returned $42 million to shareholders in 2024 by retiring more than 130,000 shares.
Carillon Chartwell Small Cap Growth Fund stated the following regarding Comfort Systems USA, Inc. (NYSE:FIX) in its first quarter 2024 investor letter:
“Another strong performer was Comfort Systems USA, Inc. (NYSE:FIX). The company is a modular construction company, involved in manufacturing plant and data center construction. Given strong demand trends, the company is reporting record growth and backlogs.”
Overall, FIX ranks 7th on our list of engineering stocks to buy for 2025. While we acknowledge the potential of engineering stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FIX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
