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Watsco Inc Class A WSO

Morningstar Rating
$394.54 +0.42 (0.11%)
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Company Report

Watsco Earnings: 2023 Was a Strong Year Despite Industry Softness but Gross Margin Slide Continues

Shares of Watsco traded lower on Feb. 13 after the narrow-moat-rated heating, ventilation, and air conditioning distributor reported fourth-quarter results that fell short of FactSet consensus expectations. Fourth-quarter revenue of $1.6 billion increased 1% year over year (down 2%, excluding acquisitions) but was about 3% shy of the consensus estimate, while EPS of $2.06 decreased 12% compared with the prior-year adjusted figure and was roughly 15% below consensus. Even so, 2023 was a strong year for Watsco considering residential HVAC demand in the United States significantly softened after two years of above-average demand. Indeed, according to the Air-Conditioning, Heating & Refrigeration Institute, industry shipments of air conditioners, heat pumps, and furnaces declined about 18% year over year in 2023, returning to prepandemic levels.

Price vs Fair Value

WSO is trading at a 42% premium.
Price
$394.54
Fair Value
$934.00
Uncertainty
Medium
1-Star Price
$798.51
5-Star Price
$168.90
Economic Moat
Mnlmd
Capital Allocation
Chpzlnhgv

Bulls Say, Bears Say

Bulls

Watsco will continue to effectively employ its "buy and build" strategy to consolidate the HVAC distribution market and compound cash flow.

Bears

Watsco's revenue growth could slow amid a maturing residential HVAC replacement cycle and greater economic uncertainty.

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News

Trading Information

Previous Close Price
$394.12
Day Range
$391.39397.59
52-Week Range
$284.05433.19
Bid/Ask
$390.00 / $421.50
Market Cap
$15.58 Bil
Volume/Avg
248,631 / 301,163

Key Statistics

Price/Earnings (Normalized)
28.88
Price/Sales
1.98
Dividend Yield (Trailing)
2.48%
Dividend Yield (Forward)
2.48%
Total Yield
2.48%

Company Profile

Watsco is the largest heating, ventilation, air conditioning, and refrigeration products distributor in North America. The company primarily operates in the United States (91% of 2022 revenue) with significant exposure in the Sunbelt states. Watsco also has operations in Canada (5% of sales) and Latin America and the Caribbean (4% of sales). The company's customer base consists of more than 120,000 dealers and contractors that serve the replacement and new construction HVACR markets for residential and light commercial applications.
Sector
Industrials
Industry
Industrial Distribution
Stock Style Box
Mid Core
Total Number of Employees
7,425

Competitors

Valuation

Metric
WSO
LII
CARR
Price/Earnings (Normalized)
28.8826.3020.68
Price/Book Value
6.9958.995.47
Price/Sales
1.983.392.18
Price/Cash Flow
21.1423.2124.19
Price/Earnings
WSO
LII
CARR

Financial Strength

Metric
WSO
LII
CARR
Quick Ratio
1.420.651.86
Current Ratio
3.361.412.73
Interest Coverage
161.5514.096.34
Quick Ratio
WSO
LII
CARR

Profitability

Metric
WSO
LII
CARR
Return on Assets (Normalized)
17.17%22.86%8.43%
Return on Equity (Normalized)
31.92%1,795.12%28.60%
Return on Invested Capital (Normalized)
22.35%38.51%13.13%
Return on Assets
WSO
LII
CARR
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