Sterling vs. Comfort Systems: Which Stock Wins on Data Center Growth?

Core Insights - Sterling Infrastructure Inc. (STRL) and Comfort Systems USA Inc. (FIX) are positioned to benefit from the increasing demand for data center development driven by artificial intelligence (AI) [2][24] - Both companies are experiencing growth due to their specialized services in the infrastructure sector, particularly in large-scale data centers [3][11] Company Overview: Sterling Infrastructure Inc. (STRL) - STRL specializes in advanced site development services for data centers and related facilities, with a strong focus on AI-driven projects [5][6] - In Q1 2025, STRL's E-Infrastructure Solutions revenues increased by 18% year-over-year, with adjusted operating income rising by 61% and margins expanding to 23% [6][9] - The total backlog for STRL reached $2.1 billion, with a gross margin of 17.7%, indicating strong demand and project execution capabilities [7][9] - STRL's acquisition of CEC Facilities Group is expected to enhance its service capabilities and broaden its customer base, particularly in Texas [8][25] Company Overview: Comfort Systems USA Inc. (FIX) - FIX is experiencing strong growth in demand for data center development, with advanced technology projects now accounting for 37% of its total revenues [11][12] - In Q1 2025, FIX reported EPS of $4.75, a 75% increase year-over-year, with revenues rising by 19% to $1.83 billion [12][9] - FIX's backlog reached a record $6.9 billion, supported by sustained demand from technology and industrial sectors [13][9] - The company is investing in modular construction capacity to enhance execution speed and scalability in the data center market [14] Market Performance and Valuation - STRL's stock has gained 29.4% year-to-date, outperforming the broader construction sector, while FIX shares have risen by 17.9% [16] - STRL is trading below FIX on a forward 12-month price-to-earnings (P/E) ratio basis, indicating a potentially attractive valuation [18] - EPS estimates for FIX have trended upward, suggesting stronger near-term earnings momentum compared to STRL [20] Conclusion - The demand for data center infrastructure and AI-driven projects presents significant growth opportunities for both STRL and FIX [24] - FIX appears better positioned for near-term growth due to its record backlog and operational strength, while STRL offers a solid long-term growth story [25][26]