Heat transfer in counterflow heat exchangers is modeled by using transport and balance equations with the temperatures of cold fluid, hot fluid, and metal pipe as state variables distributed along the entire pipe length. Using such models, boundary value problems can be solved to estimate the temperatures over all the length by means of measurements taken only at the boundaries. Conditions for the stability of the estimation error given by the difference between the temperatures and their estimates are established by using a Lyapunov approach. Toward this end, a method to construct nonlinear Lyapunov functionals is addressed by relying on a polynomial diagonal structure. This stability analysis is extended in case of the presence of bounded modeling uncertainty. The theoretical findings are illustrated with numerical results, which show the effectiveness of the proposed approach.