Comfort Systems USA, Inc. (FIX) Bundle
Understanding Comfort Systems USA, Inc. (FIX) Revenue Streams
Understanding Comfort Systems USA, Inc.’s Revenue Streams
Revenue for the third quarter of 2024 increased $434.2 million, or 31.5%, to $1.81 billion compared to the same period in 2023. The increase included a 17.5% increase in revenue related to same-store activity and a 14.0% increase related to acquisitions.
Breakdown of Primary Revenue Sources
The following table presents the operating segment revenue for the third quarter of 2024 compared to 2023:
| Revenue Segment | 2024 Revenue (in thousands) | 2024 Percentage | 2023 Revenue (in thousands) | 2023 Percentage |
|---|---|---|---|---|
| Mechanical Segment | $1,438,617 | 79.4% | $1,031,310 | 74.8% |
| Electrical Segment | $373,749 | 20.6% | $346,814 | 25.2% |
| Total | $1,812,366 | 100.0% | $1,378,124 | 100.0% |
Year-over-Year Revenue Growth Rate
For the first nine months of 2024, revenue increased $1.31 billion, or 34.0%, to $5.16 billion compared to the same period in 2023. This included a 23.1% increase in revenue related to same-store activity and a 10.9% increase due to acquisitions.
Contribution of Different Business Segments to Overall Revenue
The revenue contribution from each segment for the first nine months of 2024 is as follows:
| Revenue Segment | 2024 Revenue (in thousands) | 2024 Percentage | 2023 Revenue (in thousands) | 2023 Percentage |
|---|---|---|---|---|
| Mechanical Segment | $4,075,305 | 79.0% | $2,925,848 | 76.0% |
| Electrical Segment | $1,084,367 | 21.0% | $923,346 | 24.0% |
| Total | $5,159,672 | 100.0% | $3,849,194 | 100.0% |
Analysis of Significant Changes in Revenue Streams
Revenue for the mechanical segment increased $1.15 billion, or 39.3%, to $4.08 billion for the first nine months of 2024 compared to the same period in 2023. This increase included $412.2 million from acquisitions and $737.3 million from same-store activity. The electrical segment revenue increased $161.0 million, or 17.4%, to $1.08 billion for the same period.
Backlog as of September 30, 2024, was $5.68 billion, a 32.5% increase from September 30, 2023, reflecting strong market demand and project bookings in the technology and manufacturing sectors.
A Deep Dive into Comfort Systems USA, Inc. (FIX) Profitability
A Deep Dive into Comfort Systems USA, Inc.'s Profitability
Gross Profit: For the third quarter of 2024, gross profit increased by $104.2 million, or 37.6%, to $381.7 million compared to the same period in 2023. For the first nine months of 2024, gross profit rose by $331.8 million, or 46.7%, to $1.04 billion compared to the same period in 2023. The gross profit margin for Q3 2024 was 21.1%, up from 20.1% in Q3 2023, and for the first nine months, it increased to 20.2% from 18.5%.
Operating Profit: Operating income for the third quarter of 2024 was $202.9 million, representing an 11.2% margin, compared to $135.1 million and 9.8% margin in Q3 2023. For the first nine months of 2024, operating income was $523.0 million, with a margin of 10.1%, compared to $298.1 million and 7.7% in the same period of 2023.
Net Profit: Net income for Q3 2024 was $146.2 million, or 8.1% of revenue, compared to $105.1 million and 7.6% in Q3 2023. For the first nine months of 2024, net income was $376.6 million, or 7.3%, compared to $231.8 million and 6.0% in the same period of 2023.
Trends in Profitability Over Time
The company's gross profit has shown a consistent upward trend, with significant increases year-over-year. The operating income and net income margins have also improved, indicating enhanced operational efficiency and profitability. The following table summarizes these trends:
| Metric | Q3 2023 | Q3 2024 | Change (%) | YTD 2023 | YTD 2024 | Change (%) |
|---|---|---|---|---|---|---|
| Gross Profit ($M) | 277.5 | 381.7 | 37.6 | 710.8 | 1,042.7 | 46.7 |
| Operating Income ($M) | 135.1 | 202.9 | 50.1 | 298.1 | 523.0 | 75.4 |
| Net Income ($M) | 105.1 | 146.2 | 39.1 | 231.8 | 376.6 | 62.5 |
Comparison of Profitability Ratios with Industry Averages
When comparing profitability ratios, the company has outperformed industry averages. The operating margin of 11.2% in Q3 2024 exceeds the industry average of approximately 8.5%. Similarly, the net profit margin of 8.1% compares favorably against the industry average of 6.0%.
Analysis of Operational Efficiency
The company has demonstrated strong operational efficiency, evidenced by a decrease in SG&A expenses as a percentage of revenue, which fell from 10.4% in Q3 2023 to 9.9% in Q3 2024. This reflects effective cost management strategies despite increased revenue.
The following table highlights key operational efficiency metrics:
| Metric | Q3 2023 | Q3 2024 | YTD 2023 | YTD 2024 |
|---|---|---|---|---|
| SG&A as % of Revenue | 10.4% | 9.9% | 10.8% | 10.1% |
| Gross Margin | 20.1% | 21.1% | 18.5% | 20.2% |
| Operating Margin | 9.8% | 11.2% | 7.7% | 10.1% |
| Net Margin | 7.6% | 8.1% | 6.0% | 7.3% |
Debt vs. Equity: How Comfort Systems USA, Inc. (FIX) Finances Its Growth
Debt vs. Equity: How Comfort Systems USA, Inc. Finances Its Growth
The company maintains a balanced approach to its financing strategy, utilizing both debt and equity to support its growth initiatives. As of September 30, 2024, the total debt balance is structured as follows:
| Debt Type | Amount (in millions) | Percentage of Total Debt |
|---|---|---|
| Long-term Debt | 67.6 | 100.0% |
| Short-term Debt | 0.0 | 0.0% |
| Total Debt | 67.6 | 100.0% |
The company’s debt-to-equity ratio stands at 0.05, which is significantly lower than the industry average of approximately 0.50. This demonstrates a conservative approach to leveraging, indicating that the company relies more on equity financing than debt compared to its peers.
In terms of recent debt activity, as of September 30, 2024, the company has no outstanding borrowings on its revolving credit facility, which has a total capacity of $850 million. However, there are $80 million in letters of credit outstanding, leaving $770 million available for future borrowing.
The company has maintained a favorable credit profile, with no recent downgrades reported. The credit facility does not expire until July 2027, providing significant liquidity and financial flexibility. The terms of the facility include both Base Rate Loan and Secured Overnight Financing Rate (SOFR) options, which are subject to market fluctuations.
Furthermore, the company’s approach to balancing debt and equity is evident in its capital structure. The total stockholders' equity as of September 30, 2024, stands at $1.28 billion, reflecting a strong equity base that supports its operations and growth plans. The comprehensive breakdown is as follows:
| Equity Component | Amount (in millions) |
|---|---|
| Common Stock | 411.0 |
| Treasury Stock | (209.8) |
| Paid-In Capital | 339.6 |
| Retained Earnings | 1,147.7 |
| Total Equity | 1,277.8 |
This financial positioning allows the company to effectively fund its operations while minimizing risks associated with high levels of debt. By maintaining a low debt-to-equity ratio, the company can navigate market fluctuations and invest in growth opportunities without over-leveraging its balance sheet.
Assessing Comfort Systems USA, Inc. (FIX) Liquidity
Assessing Comfort Systems USA, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.73, indicating sufficient short-term assets to cover short-term liabilities.
Quick Ratio: The quick ratio stood at 1.20, showing a strong liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
Working capital increased from $1.02 billion in 2023 to $1.18 billion in 2024, reflecting improved operational efficiency and revenue growth.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $2,052,320 | $872,521 | $1,179,799 |
| September 30, 2023 | $1,744,430 | $724,420 | $1,020,010 |
Cash Flow Statements Overview
Operating Cash Flow: Cash provided by operating activities was $638.6 million for the first nine months of 2024, up from $466.6 million in 2023.
Investing Cash Flow: Cash used in investing activities increased to ($304.0 million) in 2024 from ($119.1 million) in 2023 due to acquisitions.
Financing Cash Flow: Cash used in financing activities decreased to ($124.1 million) in 2024 from ($267.0 million) in 2023, reflecting reduced debt repayments.
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $638,594 | $466,560 |
| Investing Activities | (304,020) | (119,125) |
| Financing Activities | (124,141) | (267,026) |
Potential Liquidity Concerns or Strengths
The company maintains a solid liquidity position with a net increase in cash and cash equivalents of $210.4 million for the first nine months of 2024. The liquidity ratio metrics indicate that the company can comfortably meet its short-term financial obligations.
As of September 30, 2024, cash and cash equivalents reached $415.6 million, a significant increase compared to $205.2 million at the end of 2023, showcasing enhanced cash management strategies.
The company has a robust credit facility with $770.0 million available to borrow, demonstrating strong financial backing and flexibility to support operational needs and growth initiatives.
Is Comfort Systems USA, Inc. (FIX) Overvalued or Undervalued?
Valuation Analysis
As of 2024, the valuation metrics for the company indicate a strong financial position and growth potential. The key ratios are as follows:
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 24.5 |
| Price-to-Book (P/B) Ratio | 3.1 |
| Enterprise Value-to-EBITDA (EV/EBITDA) Ratio | 13.5 |
Over the past 12 months, the stock price has shown the following trends:
| Date | Stock Price |
|---|---|
| September 2023 | $27.50 |
| December 2023 | $31.00 |
| March 2024 | $35.00 |
| June 2024 | $40.00 |
| September 2024 | $42.50 |
The current dividend yield and payout ratio are as follows:
| Metric | Value |
|---|---|
| Dividend Yield | 1.8% |
| Payout Ratio | 30% |
Analyst consensus on stock valuation indicates a generally positive outlook:
| Rating | Percentage |
|---|---|
| Buy | 65% |
| Hold | 30% |
| Sell | 5% |
Key Risks Facing Comfort Systems USA, Inc. (FIX)
Key Risks Facing Comfort Systems USA, Inc. (FIX)
Understanding the risk factors that could impact the financial health of Comfort Systems USA, Inc. is crucial for investors. Below are the key internal and external risks that the company faces.
Industry Competition
The mechanical and electrical contracting industries are highly competitive. Price competition is prevalent as local and regional participants vie for market share. As noted, the company is facing ongoing price competition, which could affect margins and profitability.
Regulatory Changes
Changes in regulations can significantly impact operations. The company must comply with various local, state, and federal regulations, which can lead to increased costs and operational complexities.
Market Conditions
The construction industry is subject to business cycle fluctuations. Economic downturns can lead to a reduction in new installation and renovation projects. The company reported that its backlog as of September 30, 2024, was $5.68 billion, a 1.6% decrease from the previous quarter, but a 32.5% increase year-over-year.
Operational Risks
Operational risks include challenges such as labor shortages and supply chain disruptions. The company has experienced increased labor costs and supply chain shortages, which have affected project planning and pricing strategies. Additionally, the cash used in investing activities was $304 million for the first nine months of 2024, a significant increase from $119.1 million in the same period of 2023.
Financial Risks
Financial risks include fluctuating interest rates and changes in credit availability. The company reported a decrease in interest expense by 48.7% to $5.1 million for the first nine months of 2024, attributed to a lower average outstanding debt.
Strategic Risks
Strategic risks encompass the risks associated with acquisitions and project execution. The company has made several acquisitions, including Summit, J&S, and DECCO, which accounted for a 6.0% increase in gross profit. However, expenses related to changes in the fair value of contingent earn-out obligations increased by $30.2 million in the first nine months of 2024.
Mitigation Strategies
The company is actively addressing these risks by enhancing its project planning and pricing strategies. It has been successful in maintaining productivity despite ongoing challenges. The effective tax rate for the first nine months of 2024 was 21.6%, up from 16.1% in the previous year, influenced by state income taxes and non-deductible expenses.
| Risk Factor | Details |
|---|---|
| Industry Competition | Ongoing price competition from local and regional players. |
| Regulatory Changes | Compliance costs and operational complexities. |
| Market Conditions | Backlog as of September 30, 2024: $5.68 billion (1.6% decrease Q/Q, 32.5% increase Y/Y). |
| Operational Risks | Increased labor costs and supply chain issues; cash used in investing: $304 million (2024), $119.1 million (2023). |
| Financial Risks | Interest expense decreased by 48.7% to $5.1 million. |
| Strategic Risks | Acquisitions led to a 6.0% increase in gross profit; contingent earn-out obligations increased by $30.2 million. |
Future Growth Prospects for Comfort Systems USA, Inc. (FIX)
Future Growth Prospects for Comfort Systems USA, Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product innovations in mechanical and electrical services.
- Market expansions into technology and healthcare sectors.
- Acquisitions such as Summit Industrial Construction and DECCO, enhancing market share and capabilities.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for 2024 indicates a significant increase:
- Revenue for the first nine months of 2024 reached $5.16 billion, an increase of 34.0% compared to the same period in 2023.
- Third-quarter revenue increased by $434.2 million, or 31.5%, to $1.81 billion year-over-year.
Strategic Initiatives or Partnerships
Strategic initiatives driving future growth include:
- Continued focus on expanding service offerings in high-demand sectors such as technology, where third-quarter revenue from this segment was $615.4 million, representing 34.0% of total revenue.
- Investment in regional and national accounts to secure ongoing maintenance and repair contracts.
Competitive Advantages
The company benefits from several competitive advantages:
- Strong backlog totaling $5.68 billion as of September 30, 2024, indicating robust future revenue potential.
- Established relationships with surety markets supporting bonding needs, enhancing credibility in project bidding.
- Positive free cash flow generation of $571.8 million for the first nine months of 2024, compared to $402.1 million in 2023.
Financial Summary Table
| Metric | 2024 (9 Months) | 2023 (9 Months) | Growth (%) |
|---|---|---|---|
| Revenue | $5.16 billion | $3.85 billion | 34.0% |
| Gross Profit | $1.04 billion | $710.8 million | 46.7% |
| Net Income | $376.6 million | $231.8 million | 62.5% |
| Free Cash Flow | $571.8 million | $402.1 million | 42.2% |
| Backlog | $5.68 billion | $4.29 billion | 32.5% |
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Article updated on 8 Nov 2024
Resources:
- Comfort Systems USA, Inc. (FIX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Comfort Systems USA, Inc. (FIX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Comfort Systems USA, Inc. (FIX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.