UBS upgrades this HVAC stock, says it can benefit from AI push

It’s time to buy shares of HVAC company Comfort Systems , according to UBS. Analyst Joshua Chan upgraded shares to buy from neutral and increased his price target by $129 to $525, which reflects more than 16% upside from Monday’s close. Chan pointed to tailwinds in tech from artificial intelligence demand and in manufacturing from reshoring, with both making up a combined 60% of the company’s revenue. As a result, he sees continued double-digit organic growth — specifically, at least between 10% and 11% — over the next two years. “Datacenter demand is expected to grow for years to come, with the ‘Big 4′ hyperscalers alone spending an estimated $69-82B on datacenters in 2024E and $93-108B in 2025E,” the analyst wrote in a Tuesday note to clients. “This will drive continued strong growth in FIX’s datacenter business (currently $1.3-1.4B).” “We also expect Manufacturing to benefit from reshoring and an increased emphasis on U.S. manufacturing capabilities, with Manufacturing construction spend now 19% of [nonresidential] construction, nearly doubling from 10% in 2019,” he added. On top of this, Chan expects the company to sustain its EBIT margins of about 10% heading into next year as well as in 2026 as a result of a strong demand backdrop and a “constrained” labor environment. “Notably, nonresidential construction spending and manufacturing construction spending have increased 89% and 207%, respectively, since the start of 2015,” he said. “However, payrolls for Plumbing/HVAC contractors and electrical contractors have only increased 39% and 37%, respectively, over the same timeframe.” Wall Street is split on the name. Among the six analysts covering it, three have a strong buy or buy rating, while the other three have a hold rating, per LSEG. Meanwhile, its average target reflects marginal downside. FIX YTD mountain FIX, year-to-date Shares rose nearly 1% in the premarket after UBS’ upgrade. The stock has already had a monstrous rally this year, with shares advancing more than 119%.