Shares of Watsco, Inc. (NYSE:WSO – Get Free Report) gapped down before the market opened on Tuesday after the company announced weaker than expected quarterly earnings. The stock had previously closed at $305.33, but opened at $280.18. Watsco shares last traded at $285.74, with a volume of 211,806 shares changing hands.
The construction company reported $3.77 EPS for the quarter, missing the consensus estimate of $4.10 by ($0.33). The firm had revenue of $2.22 billion for the quarter, compared to analysts’ expectations of $2.21 billion. Watsco had a net margin of 6.53% and a return on equity of 14.40%. The business’s revenue for the quarter was up 7.4% compared to the same quarter last year. During the same period last year, the company posted $3.98 earnings per share.
Watsco Announces Dividend
The company also recently announced a quarterly dividend, which will be paid on Friday, October 30th. Stockholders of record on Friday, October 16th will be paid a $3.30 dividend. This represents a $13.20 annualized dividend and a dividend yield of 4.6%. The ex-dividend date is Friday, October 16th. Watsco’s dividend payout ratio is currently 114.48%.
Trending Headlines about Watsco
Here are the key news stories impacting Watsco this week:
- Positive Sentiment: Third-quarter revenue rose 7% year over year to a record $2.22 billion, slightly exceeding analysts’ $2.21 billion estimate. Watsco also generated strong operating cash flow and reported nine-month cash flow growth of 79%. Watsco Reports Record $2.22 Billion Third-Quarter Revenue
- Positive Sentiment: The company expanded through the acquisitions of Jackson Supply Company and The Granite Group, adding 107 locations and approximately $730 million in annualized revenue. Management said its balance sheet, technology platform and improving demand support further growth. Watsco Reports Record Third Quarter Sales, Strong Cash Flow and Improving Demand
- Neutral Sentiment: Watsco operates in HVAC distribution, where replacement and repair demand can be relatively resilient to consumer sentiment. This supports the company’s long-term investment case, although the article does not provide a new earnings estimate or price target. Nobody Brags About Owning an HVAC Distributor
- Negative Sentiment: Adjusted or diluted EPS was $3.77, missing the consensus estimate of $4.10 by $0.33. EPS declined 5% year over year, while net income fell to $182.8 million from $189.2 million and operating income dropped 4% to $225.2 million. The earnings miss and weaker margins are likely the primary reasons for the negative market reaction. Watsco Quarterly Earnings
Analysts Set New Price Targets
A number of equities analysts recently weighed in on the stock. Robert W. Baird set a $400.00 price objective on shares of Watsco in a report on Thursday, July 30th. Stephens reiterated an “overweight” rating and set a $485.00 target price on shares of Watsco in a research note on Monday, August 17th. Weiss Ratings downgraded Watsco from a “hold (c)” rating to a “hold (c-)” rating in a research note on Tuesday, October 6th. Zacks Research raised Watsco from a “strong sell” rating to a “hold” rating in a report on Wednesday, October 21st. Finally, Mizuho decreased their price target on Watsco from $350.00 to $325.00 and set a “neutral” rating for the company in a research note on Thursday, October 15th. Two analysts have rated the stock with a Buy rating and eight have assigned a Hold rating to the company. According to MarketBeat, Watsco has an average rating of “Hold” and an average price target of $373.62.
Get Our Latest Stock Analysis on WSO
Institutional Inflows and Outflows
Hedge funds and other institutional investors have recently added to or reduced their stakes in the stock. Western Wealth Management LLC purchased a new position in shares of Watsco in the 1st quarter worth $41,000. Versant Capital Management Inc boosted its position in Watsco by 293.3% in the second quarter. Versant Capital Management Inc now owns 118 shares of the construction company’s stock worth $49,000 after purchasing an additional 88 shares during the last quarter. GK Wealth Management LLC bought a new stake in shares of Watsco during the 3rd quarter valued at about $63,000. N.E.W. Advisory Services LLC bought a new stake in shares of Watsco during the 2nd quarter valued at about $67,000. Finally, Jones Financial Companies Lllp bought a new stake in shares of Watsco during the 2nd quarter valued at about $71,000. Institutional investors own 89.71% of the company’s stock.
Watsco Stock Performance
The stock has a market cap of $11.95 billion, a PE ratio of 25.16 and a beta of 1.06. The company’s 50-day moving average price is $307.02 and its 200 day moving average price is $367.03.
Watsco Company Profile
Watsco, Inc (NYSE: WSO) is a distributor of heating, ventilation, air conditioning and refrigeration (HVAC/R) equipment and related products. The company supplies residential and light commercial air-conditioning and heating systems, refrigeration equipment, replacement parts, and other supplies used by contractors and service professionals.
Watsco distributes products from leading HVAC/R manufacturers, including equipment and components such as air conditioners, heat pumps, furnaces, air handlers, thermostats, controls, motors and indoor air-quality products.
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