Watsco Inc (WSO)
NYSE:WSO
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Watsco
(NYSE:WSO)
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Rating:70Outperform
Price Target:
$400.00
▼(-7.03% Downside)
Action:Reiterated
Date:06/04/26
The score is driven primarily by strong financial resilience (low leverage and strong free cash flow) and a generally constructive earnings outlook emphasizing stabilization and accelerating digital channels. These positives are tempered by weak technicals (downtrend with bearish momentum) and a valuation that looks demanding despite a solid dividend yield.
Positive Factors
Conservative Balance Sheet
Low leverage (debt-to-equity ≈0.17) and a materially rebuilt equity base provide durable financial flexibility. With TTM returns on capital near 18%, Watsco can fund acquisitions, sustain its dividend and continue technology investments without stressing liquidity, supporting resilience across cycles.
Negative Factors
Inventory & Working Capital
A material Q1 inventory build (~25% QoQ) ties up cash and increases the risk of slower turns or markdowns if demand softens. Elevated inventory drives operating cash flow pressure and creates recurring working-capital volatility that can weigh on free cash flow timing across the next several quarters.
Read all positive and negative factors
Positive Factors
Negative Factors
Conservative Balance Sheet
Low leverage (debt-to-equity ≈0.17) and a materially rebuilt equity base provide durable financial flexibility. With TTM returns on capital near 18%, Watsco can fund acquisitions, sustain its dividend and continue technology investments without stressing liquidity, supporting resilience across cycles.
Read all positive factors
Watsco Key Performance Indicators (KPIs)
Watsco (WSO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$16.20B
Dividend Yield3.38%
Average Volume (3M)349.49K
Price to Earnings (P/E)32.1
Beta (1Y)0.98
Revenue Growth-4.53%
EPS Growth-7.76%
CountryUS
Employees7,220
SectorIndustrials
Sector Strength72
IndustryIndustrial - Distribution
Share Statistics
EPS (TTM)12.06
Shares Outstanding35,016,650
10 Day Avg. Volume330,261
30 Day Avg. Volume349,490
Financial Highlights & Ratios
PEG Ratio-3.37
Price to Book (P/B)4.59
Price to Sales (P/S)1.76
P/FCF Ratio23.87
Enterprise Value/Market Cap0.98
Enterprise Value/Revenue2.20
Enterprise Value/Gross Profit7.75
Enterprise Value/Ebitda20.39
Forecast
1Y Price Target
$438.60Price Target Upside1.94% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
EPS Forecast (FY)12.67
Revenue Forecast (FY)$7.53B
Watsco Business Overview & Revenue Model
Company Description
Watsco, Inc., and its various operational units, specialize in the distribution of essential equipment for air conditioning, heating, and refrigeration (HVACR) systems, alongside a comprehensive selection of related components and materials. Their...
How the Company Makes Money
Watsco makes money primarily by distributing HVAC/R products and earning a gross margin on the difference between its purchase cost from manufacturers and the resale price to customers (primarily HVAC contractors). Its core revenue stream is the s...
Watsco Earnings Call Summary
Earnings Call Date:Apr 28, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Aug 04, 2026
Earnings Call Sentiment Positive
The call presented a predominately constructive tone: management highlighted stability returning after the A2L transition, modest top-line growth (2%), strong e-commerce and OnCallAir momentum (16% and 20% growth respectively, with GMV > $2B expected), a strategic acquisition (Jackson Supply, $230M, +25 locations), intact gross margins, flat SG&A and a debt-free balance sheet. Offsetting items were ongoing unit-volume pressure (though stabilizing), a notable Q1 inventory build, and uncertainty around forthcoming OEM price increases and seasonal comps. Overall the positive drivers (digital growth, acquisition, margin programs, strong balance sheet and improving seasonal momentum) outweigh the transitory operational uncertainties.Positive Updates
Modest Sales Growth in Q1
U.S. sales increased 2% in the first quarter, reflecting a maturing A2L product mix and improved sales mix toward higher-efficiency systems while unit sales were lower.
Negative Updates
Unit Volume Pressure Persisted
Although stabilizing, unit volumes were still below prior levels during the quarter and management signaled the market is 'not yet fully healed' after the A2L transition and other disruptions.
Read all updates
Q1-2026 Updates
Positive
Negative
Modest Sales Growth in Q1
U.S. sales increased 2% in the first quarter, reflecting a maturing A2L product mix and improved sales mix toward higher-efficiency systems while unit sales were lower.
Read all positive updates
Company Guidance
Guidance emphasized a return to a simpler, more stable 2026: Q1 U.S. sales rose 2% with unit volumes stabilizing and March exiting the quarter up high-single-digits (momentum sustained into the first three weeks of April), e‑commerce sales grew 16% and OnCallAir customer sales jumped 20% with management forecasting OnCallAir gross merchandise value to exceed $2.0 billion this year; gross margins “largely intact” in Q1 with a long‑term gross‑margin target of 30%, SG&A flat, and the company remaining debt‑free. Management expects inventory turns to improve (Q1 inventory rose but March-end units were fewer year‑over‑year), plans to reduce inventory investment to boost cash flow, and anticipates likely OEM price increases (details expected in Q2). They also announced the Jackson Supply acquisition (≈$230 million in annual sales, +25 locations, expected to close in Q2), noted non‑equipment is ~30% of Watsco (parts <10% of the company) and highlighted an $800 million Florida business with ~70% e‑commerce penetration.Watsco Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
86
Very Positive
Cash Flow
79
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 7.24B | 7.24B | 7.62B | 7.28B | 7.27B | 6.28B |
| Gross Profit | 2.05B | 2.03B | 2.04B | 1.99B | 2.03B | 1.67B |
| EBITDA | 780.71M | 781.43M | 792.10M | 803.72M | 840.59M | 656.65M |
| Net Income | 496.01M | 496.99M | 536.29M | 536.34M | 601.17M | 418.94M |
Balance Sheet | ||||||
| Total Assets | 4.65B | 4.46B | 4.53B | 3.73B | 3.49B | 3.09B |
| Cash, Cash Equivalents and Short-Term Investments | 592.68M | 733.28M | 781.94M | 210.11M | 147.50M | 118.27M |
| Total Debt | 476.20M | 478.79M | 447.46M | 505.06M | 390.53M | 454.21M |
| Total Liabilities | 1.43B | 1.23B | 1.47B | 1.11B | 1.24B | 1.09B |
| Stockholders Equity | 2.76B | 2.78B | 2.66B | 2.23B | 1.89B | 1.66B |
Cash Flow | ||||||
| Free Cash Flow | 695.21M | 535.06M | 743.01M | 526.48M | 536.31M | 324.10M |
| Operating Cash Flow | 728.35M | 569.61M | 773.10M | 561.95M | 571.96M | 349.57M |
| Investing Cash Flow | -249.54M | -98.12M | -290.67M | -41.34M | -33.84M | -148.58M |
| Financing Cash Flow | -520.41M | -568.12M | -158.53M | -460.08M | -503.96M | -228.60M |
Watsco Technical Analysis
Neutral
430.26
Price Trends
403.01
Negative
396.21
Negative
378.26
Positive
Market Momentum
-0.94
Negative
50.04
Neutral
78.44
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WSO, the sentiment is Neutral. The current price of 430.26 is above the 20-day moving average (MA) of 378.52, above the 50-day MA of 403.01, and above the 200-day MA of 378.26, indicating a neutral trend. The MACD of -0.94 indicates Negative momentum. The RSI at 50.04 is Neutral, neither overbought nor oversold. The STOCH value of 78.44 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for WSO.
Watsco Risk Analysis
Watsco disclosed 17 risk factors in its most recent earnings report. Watsco reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Watsco Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $63.33B | 35.38 | 47.84% | 0.86% | 6.61% | -4.69% | |
77 Outperform | $52.95B | 40.00 | 33.25% | 2.10% | 10.94% | 12.68% | |
70 Outperform | $16.20B | 32.15 | 17.84% | 3.38% | -4.53% | -7.76% | |
65 Neutral | $46.02B | 22.14 | 35.56% | 1.35% | 2.57% | 9.40% | |
65 Neutral | $9.40B | 20.38 | 22.73% | ― | 0.46% | 8.94% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
60 Neutral | $7.13B | 17.81 | 32.50% | 2.15% | 1.79% | 1.72% |
* Industrials Sector Average
WSO
Watsco
387.72
-30.48
-7.29%
FAST
Fastenal Company
45.60
4.92
12.10%
POOL
Pool
194.84
-99.33
-33.77%
GWW
WW Grainger
1,320.48
288.08
27.90%
FERG
Ferguson PLC
234.05
18.22
8.44%
CNM
Core & Main
46.45
-12.95
-21.80%
Watsco Corporate Events
Executive/Board ChangesShareholder Meetings
Watsco Shareholders Approve Directors, Pay and Auditor Oversight
Positive
Jun 3, 2026
Watsco, Inc. held its 2026 Annual Meeting of Shareholders on June 1, 2026, where shareholders elected Ana Lopez-Blazquez as a Common stock director and Cesar L. Alvarez and Denise Dickins as Class B Common stock directors, each with terms expiring...
Business Operations and StrategyM&A TransactionsPrivate Placements and Financing
Watsco to Acquire Jackson Supply HVAC Distribution Business
Positive
Apr 29, 2026
On April 23, 2026, Watsco, Inc. agreed to acquire the assets and assume certain liabilities of the HVAC distribution business of Jackson Supply Company through its subsidiary, Jackson Supply LLC, in a stock-based transaction valued at $198 million...
Business Operations and StrategyDividendsFinancial DisclosuresM&A Transactions
Watsco Posts Flat Q1 Results, Boosts Dividend, Pursues Acquisition
Positive
Apr 28, 2026
On April 28, 2026, Watsco reported first-quarter 2026 results that showed flat revenue of $1.53 billion and gross profit of $428 million, with operating income down 2% and earnings per share down 3% to $1.87, reflecting lower unit volumes but high...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.