The Zacks Building Products - Air Conditioner & Heating industry is positioned for sustained expansion, driven by rising demand for energy-efficient systems, advanced climate-control technologies, and specialized solutions for data centers. Policy support and sustainability goals are creating a favorable backdrop, encouraging investment in digitalization, retrofits, and next-generation offerings. Companies such as Comfort Systems USA (FIX Quick QuoteFIX - Free Report) and Tecogen Inc. (TGEN Quick QuoteTGEN - Free Report) are benefiting from these trends by scaling through acquisitions, enhancing their digital platforms, and expanding service-based models tailored to high-growth areas like data center cooling.

Residential demand remains a strong tailwind, with homeowners increasingly focused on comfort, efficiency, and indoor air quality. Meanwhile, commercial and industrial markets are accelerating as data centers, high-tech facilities, and green infrastructure projects require more specialized cooling and heating solutions. Industry leaders are bolstering recurring revenue streams by leaning into services and targeted acquisitions, providing resilience against macro fluctuations. While near-term risks tied to housing, interest rates, tariff-related headwinds and geopolitical factors remain, the sector’s innovation pipeline, sustainability orientation, and supportive policy environment underpin its long-term growth potential.

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: One of the key priorities of the U.S. administration has been cutting greenhouse gas emissions to promote a cleaner environment. 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.

Technology Augmentation & Inorganic Moves: Persistent investments in technologies designed to revolutionize customer experience seem vital for the industry. Digitization of the companies’ marketplace via e-commerce and iOS/Android-enabled apps, supported by a comprehensive database of product information, continues to see strong momentum. Importantly, new investments in the expansion of distribution, research and development projects, and marketing programs are contributing significantly to the companies’ top lines. The players are also actively pursuing accretive acquisitions to broaden their product portfolios and expand their geographic footprints, as well as market share. Meanwhile, services associated with maintaining, monitoring and repairing the existing equipment are providing industry participants with stable revenue sources. The industry generates a major share of revenues from these services, which consumers generally cannot suspend, even when the construction market fluctuates.

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.

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 June 2025, the industry’s earnings estimates for 2025 have increased to $6.11 per share from $6.06.

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 Sector, Lags S&P 500

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

In the same time frame, the industry has gained 12.1% compared with the broader sector’s 3.8% rise. Meanwhile, the Zacks S&P 500 Composite has gained 18.3% 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 27.03X versus the S&P 500’s 22.76X and the sector’s 19.97.

Over the past five years, the industry has traded as high as 32.59X, as low as 17.35X and at a median of 25.87X, as the chart below shows.

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

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

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 a combination of strong backlog visibility, sector diversification, and execution strength. Also, rising demand in technology-driven projects, particularly data centers, which provide attractive margins and long-term revenue streams, is a major tailwind. Its modular construction capabilities add speed, flexibility, and efficiency, strengthening its competitive edge in complex projects across technology, pharmaceutical, and industrial end-markets. Beyond construction, the service segment has become a reliable contributor of steady cash flow, balancing out the lumpier nature of large-scale builds. Broad exposure to industrial, institutional, and healthcare customers further diversifies revenue sources and reduces risk concentration. Margin expansion has been supported by disciplined project selection, operational efficiency, and pricing power, while a strong balance sheet enables continued reinvestment, acquisitions, and shareholder returns. Importantly, Comfort Systems’ ability to attract and retain skilled craft professionals ensures execution capacity, positioning it well for sustained growth.

Comfort Systems currently sports a Zacks Rank #1 (Strong Buy). The stock has gained 121.9% over the past year. FIX has seen an upward estimate revision for 2025 earnings per share (EPS) to $21.04 from $18.99 over the past 60 days, depicting analysts’ optimism over the company’s prospects. The estimated figure indicates 44.1% year-over-year growth in 2025. Comfort Systems surpassed earnings estimates in all the trailing four quarters, with the average surprise being 22.4%. Again, Comfort Systems’ trailing 12-month return on equity of 39.3% is better than its peer group average of 17.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: FIX

Tecogen: Headquartered in North Billerica, MA, the company designs, manufactures, sells, and services systems that produce electricity, hot water, and air conditioning for commercial installations and buildings and industrial processes. Tecogen is gaining momentum by focusing on the booming demand for data center cooling. The company has a unique technology that makes these chillers hard for competitors to copy, giving it an advantage in the market. It is also building a strong pipeline of large projects with data center developers, supported by its partnership with Vertiv and other outreach efforts. To prepare for bigger orders, Tecogen is expanding its factory capacity and strengthening its supply chain. At the same time, it is improving its service business by making equipment easier to maintain and more efficient, which should boost long-term profitability and add steady income alongside new product sales.

Tecogen currently carries a Zacks Rank #3 (Hold). The stock has surged an impressive 658.9% over the past year. TGEN is expected to witness a loss of 17 cents per share for 2025, narrower than the year-ago loss of 19 cents.

Price and Consensus: TGEN