The Zacks Building Products - Air Conditioner & Heating industry is well-positioned for long-term growth, supported by rising demand for energy-efficient solutions and smarter climate control technologies. Companies across the sector are capitalizing on favorable policy trends and sustainability goals, with increasing investment in digitalization, system upgrades, and green retrofits. Leading companies like Carrier Global Corporation (CARR Quick QuoteCARR - Free Report) and Comfort Systems USA, Inc. (FIX Quick QuoteFIX - Free Report) are actively leveraging this environment, expanding through strategic acquisitions, digital investments, and value-added service offerings.

The residential market continues to drive momentum, as homeowners prioritize comfort, efficiency, and indoor air quality. At the same time, commercial and industrial demand is accelerating, fueled by the need for specialized cooling in high-tech environments and environmentally responsible infrastructure. Industry leaders are strengthening their market positions through service-based models and strategic acquisitions, which help deliver steady revenue streams even during economic fluctuations. Despite near-term headwinds such as housing market volatility, rising interest rates, and geopolitical uncertainty, the industry is set to gain from innovation, sustainability trends, and supportive policies.

Industry Description

The Zacks Building Products - Air Conditioner & Heating industry comprises designers, manufacturers, and marketers of a broad range of products for heating, ventilation, air conditioning, and refrigeration markets. The products include rooftop units, chillers, air-handling units, condensing units and coils. The industry players also supply thermostats, insulation materials, refrigerants, grills, registers, sheet metal, tools, concrete pads, tape and adhesives. Air conditioning and heating equipment are sold in residential replacement, commercial and industrial HVAC (heating, ventilation and air conditioning), as well as residential new construction markets.

4 Trends Shaping the Future of the Air Conditioner & Heating Industry

U.S. Administration’s Pro-Environmental Moves: Reducing greenhouse gas emissions for a cleaner environmental footprint has been a major focus of the U.S. administration. Many industry participants remain engaged in supporting industries and facilities by selling and maintaining clean and efficient energy systems to reach their environmental goals for carbon reduction while providing resiliency to grid outages. The companies are gaining from the fast-growing controlled-environment agriculture industry courtesy of their consistent supply of clean cooling solutions. Aging equipment and higher efficiency standards are prompting homeowners to upgrade to high-SEER air conditioners, advanced heat pumps, and smart thermostats that cut energy use while meeting stricter emissions rules. Federal and state incentives and rebates are further accelerating this trend by offsetting the cost of high-efficiency units. The commercial HVAC market in 2025 is experiencing a rebound and transformation, thereby driving fresh HVAC needs. Overall, the HVAC replacement activity remains resilient.

Data Centers & Specialized Cooling Needs: The data center boom, driven by AI, cloud computing, and high-performance computing, is fueling demand for specialized HVAC solutions. Cooling systems for these facilities must deliver precise, reliable performance, which has spurred investment in advanced technologies like liquid cooling and modular units. This segment is becoming a major growth driver for HVAC companies, offering high-margin opportunities and attracting M&A activity. HVAC firms with capabilities in precision cooling and energy-efficient infrastructure are well-positioned to capture share in this fast-expanding niche.

Meanwhile, technology upgrades and strategic acquisitions are driving growth across the industry. Companies are enhancing customer experience through digital platforms and investing in R&D, distribution, and marketing. Acquisitions are expanding product lines and geographic reach. Meanwhile, service-related revenues—such as maintenance and repair—offer steady income, cushioning against construction market volatility.

Housing Market Volatility, Macroeconomic Uncertainty, Tariff and Trade Policy Risks: The broader housing and remodeling market remains uncertain. Higher interest rates, economic fluctuations, and shifts in consumer spending patterns can impact renovation and construction activity. If homeowners and builders pull back on discretionary projects due to economic concerns, the industry players could face slower growth. Global players face headwinds from economic and political volatility, with China’s slowdown and weaker Asian demand posing growth risks. In Europe, policy shifts on heat pumps add uncertainty, while China’s property slump and soft HVAC demand further challenge the residential segment.

Many industry players are exposed to potential disruptions from changing trade policies. With ongoing discussions about increased tariffs on imports, any changes could impact production costs and pricing strategies, with companies having significant manufacturing operations. Steel and aluminum tariffs also present cost risks. Managing supply chain efficiency while ensuring cost competitiveness in the face of potential tariff increases remains a critical challenge. The inflationary impact of proposed U.S. tariffs, especially on refrigerants like R-32, most of which are sourced from China, is also a cause of concern. This may trigger price hikes by OEMs, further contributing to channel volatility.

Labor Shortages, Supply Chain Constraints, Regulations: In 2025, the U.S. HVAC industry faces three major challenges: a deepening skilled labor shortage, persistent supply chain disruptions, and rising regulatory compliance costs. Technician scarcity is inflating wages and delaying installations, while global material shortages and tariffs are increasing equipment costs and lengthening lead times.Meanwhile, the mandated shift to low-GWP refrigerants and stricter SEER2 efficiency standards are driving up manufacturing and training expenses. These headwinds are pressuring margins, stretching capital needs, and complicating project execution. Also, stiff competition and the impacts of seasonality on the industry’s revenues are significant risks.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Building Products - Air Conditioner & Heating industry is a seven-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #67, which places it in the top 27% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates impressive near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a higher earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since April 2025, the industry’s earnings estimates for 2025 have increased to $5.58 per share from $5.52.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500, Sector

The Zacks Air Conditioner & Heating industry has outperformed the broader Zacks Construction sector and Zacks S&P 500 Composite over the past year.

In the same time frame, the industry has gained 17.1% against the broader sector’s 0.5% decline. Meanwhile, the Zacks S&P 500 Composite has gained 11.1% during the period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing Air Conditioner and Heating stocks, the industry is currently trading at 28.43X versus the S&P 500’s 22.11X and the sector’s 17.96.

Over the past five years, the industry has traded as high as 32.83X, as low as 17.35X and at a median of 25.99X, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

2 Air Conditioner and Heating Stocks to Look Into

Below, we have discussed two stocks from the Zacks Air Conditioner & Heating universe with solid growth potential. 

Comfort Systems: Based in Houston, TX, the company is a national provider of comprehensive heating, ventilation and air conditioning installation, along with maintenance, repair and replacement services. The company has been benefiting from surging demand in advanced technology and industrial sectors, particularly data centers and chip fabs, which together accounted for 37% of total revenues, up from 30% a year ago. This tech-driven momentum contributed to a record $6.9 billion backlog, with broad-based booking strength across regions and sectors. Strong field execution and pricing discipline have been boosting margins. Meanwhile, healthcare and institutional sectors also showed growing contribution, helping to diversify the revenue base. Comfort Systems USA’s strategic acquisitions, including the recent purchase of Century Contractors, further bolstered revenue and market reach. Innovation drives its operations, keeping it competitive.

Comfort Systems currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 52.9% over the past year. FIX has seen an upward estimate revision for 2025 earnings per share (EPS) to $19.28 from $19.07 over the past 30 days. The company is expected to witness 32.1% earnings growth in 2025. Comfort Systems surpassed earnings estimates in all the trailing four quarters, with the average surprise being 17.6%. Again, Comfort Systems’ trailing 12-month return on equity of 36.4% is better than its peer group average of 18.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: FIX

Carrier Global: Headquartered in Palm Beach Gardens, FL, the company offers innovative climate and energy solutions across the United States, Europe, the Asia Pacific, and other global markets. Carrier’s strategic transformation efforts, including investments in digitally enabled lifecycle solutions and an increased focus on integrated systems, have been driving growth. The expansion into solutions such as home energy management systems and battery-integrated heat pumps for grid resiliency helped to broaden Carrier’s addressable market and enhance customer value. New product launches, such as the QuantumLeap cooling solution for data centers and expanded digital offerings in the cold chain sector, are expected to drive additional revenue streams.

Carrier currently carries a Zacks Rank #3 (Hold). The stock has gained 13.3% over the past year. CARR has seen an upward estimate revision for 2025 EPS to $3.02 from $3.00 over the past 30 days. The company is expected to witness 18% earnings growth in 2025. Carrier surpassed earnings estimates in all the trailing four quarters, with the average surprise being 5.7%. The company’s three-to-five year expected EPS growth rate is 11.8%.

Price and Consensus: CARR