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

Infrastructure firms Sterling (STRL) and Comfort Systems (FIX) are significantly benefiting from the surge in AI-driven data center development, reflected in strong Q1 2025 results and robust backlogs. STRL's E-Infrastructure revenues grew 18% with operating income up 61%, while FIX reported a 75% EPS increase to $4.75 and 19% revenue growth, with both companies securing multi-billion dollar backlogs driven by data center projects. Despite shared risks like cost pressures, FIX is currently deemed a stronger near-term investment due to its operational strength and earnings momentum, while STRL offers a compelling long-term growth narrative, enhanced by its recent acquisition of CEC Facilities Group.

Analysis

Both Sterling Infrastructure (STRL) and Comfort Systems (FIX) are capitalizing on the secular growth in AI-driven data center construction, as evidenced by their strong first-quarter 2025 performance. Comfort Systems demonstrated significant earnings power, with EPS surging 75% year-over-year to $4.75 on a 19% revenue increase, and its backlog reached a record $6.9 billion. This growth is increasingly driven by advanced technology projects, which now constitute 37% of its total revenue. In parallel, Sterling's E-Infrastructure segment reported an 18% revenue rise and a 61% jump in adjusted operating income, expanding margins by over 600 basis points to 23%. Sterling's strategic focus is clear, with AI-related projects making up over 65% of its E-Infrastructure backlog and the recent acquisition of CEC Facilities Group enhancing its service capabilities. While STRL's stock has outperformed year-to-date (+29.4% vs. +17.9% for FIX) and it trades at a lower forward P/E multiple, a key differentiator is earnings momentum. FIX has benefited from upward EPS estimate revisions over the past 30 days, whereas STRL's estimates have remained unchanged, suggesting stronger near-term investor confidence in FIX's execution. Both companies face common industry headwinds, including potential tariff-related cost pressures and volatility in hyperscaler capital spending.

Key Decisions for Investors

• Comfort Systems (FIX) appears to be the stronger near-term investment, supported by its substantial $6.9 billion backlog, superior 75% YoY EPS growth in Q1, and positive earnings estimate revisions that signal strong operational momentum.
• Investors with a longer-term horizon or a focus on value could find Sterling Infrastructure (STRL) attractive, given its lower forward P/E ratio, significant margin expansion in its core E-Infrastructure segment, and the strategic enhancement from its CEC Facilities Group acquisition.
• Regardless of the choice, it is crucial to monitor both companies for risks related to construction cost inflation and any slowdown in hyperscaler capital expenditure, as these factors could directly impact project pipelines and profitability for the entire data center infrastructure sector.