Comfort Systems USA Stock Drops 9% After Q3 Beat as Margins Disappoint and CFO Announces Retirement

Comfort Systems USA reported a blowout third quarter but still saw its stock fall roughly 9% as investors focused on margin softness, the departure of its chief financial officer and the absence of formal guidance. Revenue rose 54% year over year to $3.77 billion, well above the FactSet consensus of $3.40 billion, and adjusted earnings per share came in at $13.91, up from $8.25 a year earlier and ahead of the $12.85 estimate.

The margin picture was more complicated. Overall gross margin held at 24.8%, but the electrical segment's gross margin slipped to 24.3% from 26.2% a year earlier, with management noting the prior-year figure had benefited from roughly 1.8 percentage points of discrete gains including a customer bankruptcy emergence. Mechanical segment gross margin improved to 25.1% from 24.3%. The company reported $934 million in gross profit, up $327 million year over year.

Comfort Systems' backlog hit a record $17.81 billion, up 90% year over year and rising $3.8 billion sequentially, marking the eighth straight quarter of sequential backlog growth. Management said it expects same-store revenue growth in the mid-40% range for full-year 2026 and mid-20% growth in 2027, with capital expenditures running at 4% to 5% of revenue for the year. The company also raised its quarterly dividend by $0.10 to $1.00 per share and returned $349 million to shareholders year to date.

CFO William George announced his retirement, with Chief Accounting Officer Julie Shaeff named as his successor. The transition, combined with the lack of explicit numerical guidance and growing investor concern about AI data center spending, weighed on sentiment. TD Waterhouse Canada cut its FIX stake by 97.9% during the third quarter, reducing its holding to just 59 shares.

At least four sell-side firms cut their price targets on Monday. UBS reduced its target to $1,900 from $2,225 while maintaining a Buy rating, citing margin concerns. DA Davidson cut to $1,850 from $2,100 on margin softness. KeyBanc lowered its target to $1,979 from $2,125 on the margin miss. Stifel also trimmed its target on margin pressure but called the pullback an attractive entry point.