Comfort Systems USA (FIX): 3Q26 takeaways: Bookings accelerate; raising estimates despite our lower margin outlook

FIX's 3Q results revealed a 6% EBITDA beat vs consensus and bookings that accelerated to $7.5 bn (~2.0x book to bill vs 1.5x in 2Q26), well ahead of our and investor expectations. FIX guided to 2027 organic growth in the mid-20% range next year, vs our pre-results estimate of 16%. However, the stock was down -9% on results as investors focused on the 17.7% EBITDA margin, which was down 70 bps sequentially and compared to consensus of 18.5% and GSe of 19.0%. It was the first sequential margin decline since 1Q25. We attribute the margin decline to lower revenue recognized from favorable estimate write-ups, which fell to 4.5% of revenue from 7.7% in 2Q. We estimate that margins excluding write-up impacts improved meaningfully sequentially. Management noted that a larger share of projects are early in completion, and that profit margin revisions become more visible when projects are ~40%-70% complete. We lower our 2026/2027/2028 EBITDA margin outlook to 18.1%/18.4%/18.6% from 18.8%/19.2%/1