Watsco (NYSE:WSO) Shares Gap Down After Earnings Miss

Watsco, Inc. (NYSE:WSO) gapped down prior to trading on Tuesday following a weaker than expected earnings announcement. 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 trading hands.

The construction company reported $3.77 EPS for the quarter, missing analysts’ consensus estimates of $4.10 by ($0.33). The business 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 firm’s quarterly revenue was up 7.4% on a year-over-year basis. During the same period in the prior year, the company posted $3.98 earnings per share.

Watsco Dividend Announcement

The firm also recently declared a quarterly dividend, which will be paid on Friday, October 30th. Investors of record on Friday, October 16th will be issued a $3.30 dividend. The ex-dividend date of this dividend is Friday, October 16th. This represents a $13.20 dividend on an annualized basis and a yield of 4.6%. Watsco’s payout ratio is currently 114.48%.

More Watsco News

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

Analyst Upgrades and Downgrades

Several research analysts have commented on WSO shares. Zacks Research raised shares of Watsco from a “strong sell” rating to a “hold” rating in a report on Wednesday, October 21st. Weiss Ratings downgraded Watsco from a “hold (c)” rating to a “hold (c-)” rating in a research report on Tuesday, October 6th. Mizuho dropped 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. Stephens reaffirmed an “overweight” rating and issued a $485.00 price objective on shares of Watsco in a research note on Monday, August 17th. Finally, Morgan Stanley decreased their price objective on Watsco from $370.00 to $330.00 and set an “equal weight” rating on the stock in a report on Monday, October 12th. Two equities research analysts have rated the stock with a Buy rating and eight have given a Hold rating to the company’s stock. According to data from MarketBeat, the stock presently has a consensus rating of “Hold” and a consensus target price of $373.62.

Hedge Funds Weigh In On Watsco

A number of large investors have recently bought and sold shares of WSO. Confluence Investment Management LLC purchased a new stake in Watsco in the third quarter worth $96,991,000. Bank of America Corp DE bought a new stake in Watsco during the 2nd quarter valued at about $119,291,000. Bank of New York Mellon Corp purchased a new stake in Watsco in the 2nd quarter valued at about $97,937,000. Findlay Park Partners LLP bought a new position in Watsco in the 2nd quarter worth about $78,695,000. Finally, Corient Private Wealth LP bought a new position in Watsco in the 2nd quarter worth about $60,024,000. Hedge funds and other institutional investors own 89.71% of the company’s stock.

Watsco Price Performance

The stock’s 50-day moving average price is $307.02 and its 200 day moving average price is $367.03. The firm has a market capitalization of $11.95 billion, a PE ratio of 25.16 and a beta of 1.06.

About Watsco

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.