Watsco (WSO) AI Stock Analysis

• Market Cap: $15.68B
• Dividend Yield: 3.38%
• Average Volume (3M): 334.49K
• Price to Earnings (P/E): 30.2
• Beta (1Y): 1.05
• Revenue Growth: -0.71%
• EPS Growth: -0.17%
• Country: US
• Employees: 7,220
• Sector: Industrials
• Sector Strength: 72
• Industry: Industrial - Distribution
• EPS (TTM): 3.98
• Shares Outstanding: 34,923,800
• 10 Day Avg. Volume: 441,912
• 30 Day Avg. Volume: 334,489
• PEG Ratio: -13.73
• Price to Book (P/B): 6.69
• Price to Sales (P/S): 2.33
• P/FCF Ratio: 23.92
• Enterprise Value/Market Cap: 1.02
• Enterprise Value/Revenue: 2.16
• Enterprise Value/Gross Profit: 7.64
• Enterprise Value/Ebitda: 20.26
• 1Y Price Target: $382.71
• Price Target Upside: -1.98% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 9
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 71 Outperform
• Price Target: $377.00 ▼(-3.44% Downside)

Watsco's overall stock score reflects strong financial performance and effective management, offset by technical weaknesses and valuation concerns. The company's robust cash flow and strategic focus on technology adoption are significant positives, while sales challenges and high valuation temper the outlook.

Positive Factors

Strong Cash Flow Management

Robust cash flow generation supports strategic investments and operational stability, enhancing long-term growth prospects and financial resilience.

E-commerce Growth

Significant growth in e-commerce sales reflects successful digital transformation, expanding market reach and improving customer engagement, crucial for future competitiveness.

Technology Adoption

Strong adoption of technology platforms enhances operational efficiency and customer interaction, positioning Watsco as a leader in digital innovation within the HVAC industry.

Negative Factors

Sales Decline

Declining sales indicate potential market challenges and demand issues, which could impact revenue growth and market position if not addressed.

Operating Expenses Increase

Rising operating expenses due to inefficiencies can strain profitability and highlight challenges in managing product transitions effectively.

Soft Sales Outlook

A weak sales outlook suggests ongoing market pressures and potential revenue headwinds, requiring strategic adjustments to sustain growth.

Watsco Business Overview & Revenue Model

Company Description

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, refrigeration equipment, and related parts and supplies. The company distributes equipment comprising residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts, including replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. As of December 31, 2021, it operated from 671 locations in the United States, Canada, Mexico, and Puerto Rico, as well as exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.

How the Company Makes Money

Watsco generates revenue primarily through the distribution of HVAC/R equipment and supplies. Its revenue model is built on selling products to contractors and other customers, which includes both wholesale and retail sales. Key revenue streams come from selling major brands and proprietary equipment, along with aftermarket parts and supplies. The company benefits from strategic partnerships with leading manufacturers in the industry, which enhance its product offerings and market position. Additionally, Watsco's extensive distribution network and e-commerce platform allow it to reach customers efficiently, providing a competitive advantage that contributes to steady revenue growth.

Watsco Financial Statement Overview

Summary

Watsco demonstrates strong financial performance with robust profitability, low leverage, and efficient cash flow management. Despite a slight decline in revenue growth, the company maintains healthy margins and a solid balance sheet, positioning it well for future growth and stability.

Income Statement

Watsco's income statement shows a stable performance with a slight decline in revenue growth at -1.24% TTM, indicating a potential slowdown. However, the company maintains healthy margins with a gross profit margin of 28.27% and a net profit margin of 7.41% TTM. The EBIT and EBITDA margins are also strong at 9.90% and 10.48% respectively, reflecting efficient operations. The overall profitability remains robust despite the revenue dip.

Balance Sheet

The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.16 TTM, indicating low leverage and financial stability. The return on equity is strong at 20.18%, showcasing effective use of equity to generate profits. The equity ratio stands at 61.82%, highlighting a strong equity base relative to total assets, which enhances financial resilience.

Cash Flow

Watsco's cash flow statement indicates a positive trajectory with a 31.31% growth in free cash flow TTM, suggesting improved cash generation capabilities. The operating cash flow to net income ratio is 0.68, and the free cash flow to net income ratio is 0.94, both indicating efficient cash conversion from earnings. The company demonstrates strong cash flow management, supporting its operational and strategic initiatives.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	7.41B	7.62B	7.28B	7.27B	6.28B	5.05B
Gross Profit	2.10B	2.04B	1.99B	2.03B	1.67B	1.22B
EBITDA	790.17M	792.10M	803.72M	840.59M	656.65M	426.94M
Net Income	549.75M	536.29M	536.34M	601.17M	418.94M	269.58M
Balance Sheet
Total Assets	4.55B	4.53B	3.73B	3.49B	3.09B	2.48B
Cash, Cash Equivalents and Short-Term Investments	524.35M	781.94M	210.11M	147.50M	118.27M	146.07M
Total Debt	457.51M	447.46M	505.06M	390.53M	454.21M	216.14M
Total Liabilities	1.25B	1.47B	1.11B	1.24B	1.09B	704.59M
Stockholders Equity	2.81B	2.66B	2.23B	1.89B	1.66B	1.49B
Cash Flow
Free Cash Flow	517.83M	743.01M	526.48M	536.31M	324.10M	517.94M
Operating Cash Flow	548.74M	773.10M	561.95M	571.96M	349.57M	534.38M
Investing Cash Flow	5.53M	-290.67M	-41.34M	-33.84M	-148.58M	-16.34M
Financing Cash Flow	-521.27M	-158.53M	-460.08M	-503.96M	-228.60M	-448.49M

Watsco Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 390.43
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WSO, the sentiment is Positive. The current price of 390.43 is above the 20-day moving average (MA) of 379.93, above the 50-day MA of 358.11, and below the 200-day MA of 399.82, indicating a bullish trend. The MACD of 10.96 indicates Negative momentum. The RSI at 76.54 is Negative, neither overbought nor oversold. The STOCH value of 76.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WSO.

Watsco Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GWW	77 Outperform	$52.12B	30.97	45.50%	0.86%	4.83%	-3.60%
FERG	76 Outperform	$49.85B	25.77	32.90%	1.35%	4.92%	18.72%
FAST	75 Outperform	$51.43B	41.10	33.30%	2.10%	6.92%	5.98%
WSO	71 Outperform	$15.68B	30.16	17.61%	3.38%	-0.71%	-0.17%
CNM	71 Outperform	$10.67B	24.26	23.85%	―	8.09%	6.33%
POOL	65 Neutral	$9.45B	23.14	29.16%	2.15%	-0.60%	-5.99%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

Watsco Corporate Events

Watsco Files Current Report on Form 8-K

Watsco has filed a Current Report on Form 8-K, which includes Exhibit 99.1, to furnish information under the Securities Exchange Act of 1934. The report clarifies that the information is furnished and not filed, thus not subject to the liabilities of Section 18 of the Act.

The most recent analyst rating on (WSO) stock is a Buy with a $419.00 price target. To see the full list of analyst forecasts on Watsco stock, see the WSO Stock Forecast page.