Watsco (WSO) AI Stock Analysis

• Market Cap: $18.06B
• Dividend Yield: 2.71%
• Average Volume (3M): 262.57K
• Price to Earnings (P/E): 34.2
• Beta (1Y): 1.03
• Revenue Growth: 3.92%
• EPS Growth: 1.09%
• Country: US
• Employees: 7,220
• Sector: Industrials
• Sector Strength: 90
• Industry: Industrial - Distribution
• EPS (TTM): 1.93
• Shares Outstanding: 34,885,200
• 10 Day Avg. Volume: 272,902
• 30 Day Avg. Volume: 262,567
• PEG Ratio: 0.35
• Price to Book (P/B): 4.69
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 16.48
• Enterprise Value/Market Cap: 0.50
• Enterprise Value/Revenue: 0.30
• Enterprise Value/Gross Profit: 4.45
• Enterprise Value/Ebitda: 2.89
• 1Y Price Target: $492.50
• Price Target Upside: 14.01% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 8

• Rating: 70 Outperform
• Price Target: $504.00 ▲(16.67%Upside)

Watsco scores well in financial performance, with robust revenue growth and strong margins. The earnings call provided positive guidance, though technical indicators suggest bearish trends, and the high P/E ratio indicates potential overvaluation. Overall, while the company shows strong fundamentals, market and valuation concerns weigh on the stock score.

Positive Factors

Growth Potential

There is an M&A opportunity as HVAC and plumbing converge, indicating growth potential.

Sales and Market Position

WSO's scale and willingness to invest in technology-driven solutions to improve customer efficiency and profitability positions WSO for long-term share gains versus fragmented, regional competitors.

Negative Factors

Economic Conditions

Weak economies in Canada and Mexico and softer new home construction are identified as key issues affecting performance.

Market Challenges

Concerns on near-term residential HVAC demand create uncertainty for potential stock upside.

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 makes money primarily through the distribution and sale of HVAC/R products. Its revenue model is based on purchasing HVAC/R equipment and parts from manufacturers and selling them to contractors and dealers who install and maintain these systems. Key revenue streams include the sale of air conditioning and heating equipment, refrigeration systems, and replacement parts. Watsco's extensive distribution network and strong relationships with leading manufacturers like Carrier, Goodman, and Trane enable it to offer a comprehensive portfolio of products. The company's earnings are further supported by its focus on value-added services, such as technical support and training for contractors, which help build customer loyalty and drive repeat business.

Watsco Financial Statement Overview

Summary

Watsco's financial performance is strong, with consistent revenue and profit growth. The company's income statement shows impressive margins, and its balance sheet demonstrates low leverage and high equity. Cash flows are healthy, though there is room for improvement in free cash flow growth.

Income Statement

Watsco's income statement reflects strong profitability and consistent revenue growth. The gross profit margin for TTM (Trailing-Twelve-Months) stands at a healthy 26.8%, with a net profit margin of 7.0%. The company has experienced steady revenue growth, with a notable increase of 20.5% from 2020 to 2021 and continued growth thereafter. EBIT and EBITDA margins are robust at 10.0% and 10.2%, respectively, showcasing operational efficiency.

Balance Sheet

The balance sheet indicates solid financial stability with a low debt-to-equity ratio of 0.07 in TTM, suggesting minimal reliance on debt financing. The equity ratio is strong at 100%, reflecting a healthy balance between assets and liabilities. Return on equity is commendable at 11.9%, indicating efficient use of shareholder funds. The company maintains a solid cash position, although cash reserves have decreased compared to previous years.

Cash Flow

Cash flow analysis reveals a positive outlook, with a substantial operating cash flow to net income ratio of 0.93, indicating effective cash generation relative to net income. Free cash flow is strong, although it has seen a decline in growth rate compared to prior years. The free cash flow to net income ratio is 0.88, suggesting efficient conversion of income into cash.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
7.58B	7.62B	7.28B	7.27B	6.28B	5.05B
	Gross Profit
2.04B	2.04B	1.99B	2.03B	1.67B	1.22B
	EBIT
757.61M	781.77M	771.42M	831.58M	628.53M	401.03M
	EBITDA
788.04M	792.10M	803.72M	863.26M	656.65M	426.94M
	Net Income Common Stockholders
529.34M	536.29M	536.34M	601.17M	418.94M	269.58M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
431.82M	781.94M	210.11M	147.50M	118.27M	146.07M
	Total Assets
4.45B	4.48B	3.73B	3.49B	3.09B	2.48B
	Total Debt
459.69M	447.46M	404.79M	390.53M	360.52M	216.14M
	Net Debt
27.87M	-78.81M	194.68M	243.02M	335.95M	70.08M
	Total Liabilities
1.37B	1.42B	1.11B	1.24B	1.09B	704.59M
	Stockholders Equity
2.67B	2.66B	2.23B	1.89B	1.66B	1.49B
Cash Flow		Free Cash Flow
459.97M	743.01M	526.48M	536.31M	324.10M	517.94M
	Operating Cash Flow
491.75M	773.10M	561.95M	571.96M	349.57M	534.38M
	Investing Cash Flow
164.85M	-290.67M	-41.34M	-33.84M	-148.58M	-16.34M
	Financing Cash Flow
-498.61M	-158.53M	-460.08M	-503.96M	-228.60M	-448.49M

Watsco Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 431.99
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WSO, the sentiment is Negative. The current price of 431.99 is below the 20-day moving average (MA) of 454.32, below the 50-day MA of 469.92, and below the 200-day MA of 485.64, indicating a bearish trend. The MACD of -8.21 indicates Negative momentum. The RSI at 40.87 is Neutral, neither overbought nor oversold. The STOCH value of 75.62 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WSO.

Watsco Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FAST	77 Outperform	$48.93B	42.55	32.35%	2.05%	3.08%	-0.76%
GWW	77 Outperform	$51.82B	27.54	57.19%	0.84%	3.71%	7.23%
AIT	74 Outperform	$8.77B	23.09	22.23%	0.80%	0.50%	4.48%
WSO	70 Outperform	$18.06B	34.23	18.91%	2.71%	3.92%	1.09%
Sector *	66 Neutral	$4.52B	12.34	5.41%	3.62%	4.15%	-12.18%
POOL	65 Neutral	$11.28B	28.13	31.49%	1.67%	-3.56%	-16.75%
FERG		£31.02B	25.43	29.28%	1.24%	―	―

Watsco Corporate Events

Watsco Holds Annual Shareholders Meeting, Elects New Directors

On June 2, 2025, Watsco, Inc. held its Annual Meeting of Shareholders, where key proposals were voted on. The election of directors resulted in Gary L. Tapella, J. Michael Custer, and Valerie F. Schimel being elected to serve until 2028. Additionally, a non-binding advisory resolution on executive compensation was approved, and Deloitte & Touche LLP was ratified as the independent registered public accounting firm for the 2025 fiscal year.

The most recent analyst rating on (WSO) stock is a Hold with a $425.00 price target. To see the full list of analyst forecasts on Watsco stock, see the WSO Stock Forecast page.

Watsco Navigates Product Transition Amid Revenue Dip

In the first quarter of 2025, Watsco experienced a 2% decrease in revenues to $1.53 billion, with a flat gross profit of $430 million and improved gross profit margin. The company is undergoing a large-scale product transition due to regulatory changes affecting 55% of its sales, transitioning to HVAC systems with lower global warming properties. Despite a decline in international sales, the U.S. residential replacement market saw a 10% increase, supported by new customer acquisition and improved product mix. Watsco’s strong balance sheet and strategic investments in technology and inventory position it well for future growth, with expectations of resilient demand in the upcoming selling season.