Accordingly, Watsco has the opportunity to be a significant and important contributor toward climate change as it plays an important role to lower CO2e emissions. According to the Department of Energy, HVAC systems account for roughly half of U.S. household energy consumption. As such, replacing older systems at higher efficiency levels is a critical means for homeowners to reduce electricity consumption and their carbon footprint. Based on estimates validated by independent sources, Watsco averted an estim ...

Core Viewpoint - Watsco's shares have decreased by approximately 0.7% since the last earnings report, but have outperformed the S&P 500 index [1] Estimates Movement - Estimates for Watsco have trended upward over the past month [2] VGM Scores - Watsco has a strong Growth Score of A and a Momentum Score of A, but a Value Score of D, placing it in the bottom 40% for value investment strategy. The overall aggregate VGM Score is B [3] Outlook - The upward trend in estimates is promising, and Watsco holds a Zacks Rank of 3 (Hold), indicating an expectation of in-line returns in the coming months [4] Industry Performance - Watsco is part of the Zacks Building Products - Air Conditioner and Heating industry. Carrier Global, a competitor in the same industry, reported revenues of $5.15 billion for the last quarter, reflecting a year-over-year increase of 0.9% [5] - Carrier Global is expected to report earnings of $0.57 per share for the current quarter, which represents an 8.1% decrease from the previous year. The Zacks Consensus Estimate for Carrier has increased by 1.6% over the last 30 days [6]

Watsco, Inc. (WSO) is benefiting from strong residential demand and higher commercial equipment sales. The company’s growth is supported by consistent investments in technology and strategic acquisitions. Its e-commerce and digital sales platform is also contributing to performance. However, increased costs and expenses are a concern.Shares of Watsco have risen 5.5% in the past three months against the Zacks Building Products - Air Conditioner and Heating industry’s 7.7% decline. WSO also fared better than ...

MIAMI, March 11, 2025 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) today announced its participation in the upcoming J.P. Morgan 2025 Industrials Conference. Barry Logan, Executive Vice President, and Rick Gomez, Vice President, will participate in a fireside chat at the event on Wednesday, March 12, 2025 at 8:15 a.m. (EDT). A live webcast of the event will be available in the Investor Relations section of Watsco’s website at https://investors.watsco.com/events. About Watsco Watsco is the largest distributo ...

I hold a Master's in Accounting, am a small business owner, and am an assistant investing educator for beginning and intermediate individual investors. My investing analysis focus is on identifying and developing deep knowledge of great businesses. I have helped manage businesses, spend most of my extra time learning about investing and finance, and have been investing in the stock market for three years with a long-term investment focus. I do not consider myself an expert in stock analysis, but I seek to p ...

Revenue Growth and Market Expansion - Watsco's revenues in HVAC/R distribution increased from $64.1 million in 1989 to $7.6 billion in 2024, reflecting a significant growth strategy through acquisitions and product introductions [17]. - The HVAC/R distribution industry in the U.S. has an estimated annual market size of $74.0 billion, with residential HVAC/R products valued at approximately $134.0 billion [19]. - The company has acquired 70 HVAC/R distribution businesses since 1989, contributing to substantial sales and earnings growth through strategic acquisitions and market expansion [32]. - Watsco, Inc. reported a revenue increase of 12% year-over-year, reaching $1.5 billion for the latest quarter [157]. - Watsco, Inc. provided an optimistic outlook, projecting a revenue growth of 8-10% for the next fiscal year [157]. - Market expansion efforts include entering three new states, aiming for a 5% market share increase in those regions [157]. Employee and Workforce Management - The voluntary turnover rate for U.S. employees was approximately 18% in 2024, down from 20% in 2022, suggesting improved employee retention strategies [36]. - Watsco employs around 7,295 individuals, with 8% located in Canada and Mexico, and utilizes independent contractors to supplement its workforce [35]. - Watsco's culture promotes employee ownership, with around 4,200 employees holding shares in the company, aligning their interests with long-term shareholder value [41]. - The company has approximately 1,100 salespeople, averaging 11 years of experience in the HVAC/R distribution industry [46]. Product and Service Offerings - The company focuses on expanding its product lines and introducing private-label products to capture market share and enhance service offerings [30]. - HVAC equipment sales accounted for 69% of revenues in both 2024 and 2023, while other HVAC products comprised 27% and commercial refrigeration products accounted for 4% [45]. - The replacement market for residential air conditioning equipment is estimated to account for approximately 85%-90% of industry unit sales in the U.S., expected to increase as older units are replaced [60]. - The company completed the transition of its inventory to higher SEER products during 2023, in line with new efficiency standards effective from 2023 [72]. - The company focuses on customer convenience through mobile applications and e-commerce, allowing 24/7 access to product information and order management [57]. Financial Performance and Shareholder Returns - The company achieved a net income of $150 million, reflecting a 10% increase compared to the same quarter last year [157]. - The company has committed to increasing its dividend payout by 5% in the upcoming quarter [157]. - The cumulative total shareholder return for Watsco, Inc. common stock increased from 100.00 to 305.64 from December 31, 2019, to December 31, 2024 [129]. - The company implemented a Dividend Reinvestment Plan (DRIP) on March 29, 2024, allowing shareholders to reinvest dividends into additional shares [107]. Strategic Partnerships and Supplier Relationships - Joint ventures with Carrier represented 54% of revenues in 2024, highlighting the strategic importance of these partnerships [55]. - The company maintains a diverse supplier base, with the top ten suppliers accounting for 85% of purchases, including 62% from Carrier and 9% from Rheem [61]. - The company maintains trade name and distribution agreements with Carrier and Rheem, providing exclusive distribution rights in specified territories [85]. Sustainability and Environmental Impact - The company estimates it has averted approximately 22.8 million metric tons of CO2e emissions from January 1, 2020, to December 31, 2024, equivalent to nearly 5.3 million gas-powered vehicles driven for one year [77]. - Demand for higher-efficiency products is expected to increase due to the U.S. Inflation Reduction Act of 2022, which includes $4.3 billion for state-administered consumer rebate programs [78]. - A strategic focus on sustainability initiatives is expected to reduce operational costs by 3% over the next two years [157]. Risks and Challenges - The company faces risks from cybersecurity threats that could disrupt operations and adversely impact financial performance [91]. - The company maintains a dedicated cybersecurity team to assess and manage risks associated with cybersecurity threats [115]. - The company relies on credit markets for financial commitments, and disruptions in these markets could adversely affect liquidity and operational performance [99]. - The company is subject to various international risks, including changes in local laws and political instability, which could adversely affect operations [100]. Corporate Governance and Compliance - The management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of the end of the reporting period [135][136]. - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2024, that materially affected the internal control [138]. - The company has adopted an insider trading policy to promote compliance with insider trading laws and regulations [148]. - No disagreements with accountants on accounting and financial disclosure were reported [134]. Future Plans and Investments - The company is investing $50 million in new product development and technology enhancements [157]. - The company plans to implement a new customer relationship management system to improve user engagement and retention [157]. - The company plans to pursue additional acquisitions of complementary businesses, which may require incurring additional debt or issuing shares, potentially diluting existing shareholders [87].

Core Viewpoint - Watsco (WSO) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system reflects changes in earnings estimates, which are strongly correlated with stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [4][6]. - For the fiscal year ending December 2025, Watsco is expected to earn $14.68 per share, representing a 10.4% increase from the previous year, with a 1.5% rise in the Zacks Consensus Estimate over the past three months [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [7]. - The upgrade of Watsco to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for higher stock movement in the near term [10].

Core Insights - Watsco, Inc. (WSO) reported strong fourth-quarter 2024 results with earnings and revenues exceeding Zacks Consensus Estimates and showing year-over-year growth [1][5] - The quarterly performance was driven by robust sales in residential and commercial equipment, alongside the recovery of market share from a core OEM affected by supply chain issues in 2023 [2][3] Financial Performance - WSO's earnings per share (EPS) for the quarter was $2.37, surpassing the Zacks Consensus Estimate of $2.13 by 11.3%, and up from $2.06 in the same quarter last year [5] - Revenues reached $1.75 billion, exceeding the consensus mark of $1.65 billion by 6.2% and reflecting a 9% increase year over year [5] - The gross margin expanded by 90 basis points to 26.7%, while the operating margin increased by 110 basis points to 7.8% [9] Sales Breakdown - Sales of HVAC equipment, which constitutes 69% of net sales, increased by 14% year over year, while sales of other HVAC products remained flat [6] - Commercial refrigeration product sales grew by 4% from the previous year [6] - E-commerce sales rose by 8% to $2.6 billion in 2024, accounting for 35% of annual net sales, with a 16% increase in the fourth quarter [7] Annual Highlights - For the full year 2024, WSO reported net sales of $7.62 billion, a 5% increase year over year, although gross margin decreased to 26.8% from 27.4% [10] - Full-year EPS was $13.30, down from $13.67 in 2023 [10] Cash Position - As of December 31, 2024, WSO's cash and cash equivalents totaled $526.3 million, significantly up from $210.1 million at the end of 2023, with no borrowings under its revolving credit facility [11] - Net cash provided by operating activities was $773.1 million compared to $562 million the previous year [11] Market Reaction - Following the earnings announcement, WSO stock increased by 9.7% during trading hours and gained an additional 2.1% in after-hours trading, likely influenced by an 11% increase in the annual dividend payment [4]

Financial Data and Key Metrics Changes - Watsco achieved record sales, expanded margins, improved operating efficiency, and generated record earnings and cash flow, with a 14% growth in equipment sales and a 16% growth in residential products [4][5] - The company announced an 11% dividend increase to $12 per share, indicating a strong financial position [5] Business Line Data and Key Metrics Changes - Equipment sales grew by 14%, while residential products saw a 16% increase [4] - E-commerce sales increased by 16%, now representing 35% of annual sales, totaling approximately $2.6 billion [7] - OnCall Air, the digital sales platform, generated $1.5 million in gross merchandise value, marking a 25% increase [8] Market Data and Key Metrics Changes - The transition to next-generation A2L products is underway, influencing 50% to 60% of sales [6] - The company is making significant investments to transition close to $1 billion in inventories to capitalize on this opportunity [6] Company Strategy and Development Direction - Watsco is focused on long-term growth through technology investments and acquisitions, having completed its 70th acquisition since 1989 [9][10] - The company aims to enhance its competitive advantage through technology platforms and training for customers [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future opportunities, particularly with the transition to A2L products and the growth of technology platforms [5][6] - The company anticipates a significant transition to A2L products by the beginning of the second quarter of 2025 [30][33] Other Important Information - The company reported a strong financial position, allowing for investments in growth opportunities and market share expansion [9] - Management emphasized the importance of technology in enhancing customer engagement and sales processes [42][45] Q&A Session Summary Question: Impact of A2L on pricing and transition timeline - Management indicated that A2L had minimal impact in Q4, with pricing actions expected to be around 8% due to tariffs [15][40] Question: Inventory transition timeline for 410A - The company expects to run down 410A inventory to almost nothing by the beginning of the second quarter of 2025 [30][33] Question: Non-equipment sales performance - Management noted a double-digit increase in parts sales, indicating a positive trend in the aftermarket [75] Question: M&A environment and pipeline - The company sees ongoing opportunities for acquisitions, with many family-owned businesses in the market [61][66] Question: New customer growth drivers - New customer growth has been significant, with a focus on mid-tier contractors benefiting from Watsco's technology [94][96] Question: Refrigerant price volatility - Management reported no significant price spikes for 410A, but noted potential higher costs for new refrigerants [142] Question: Repair versus replace trends - Both repair and replacement sales have increased, indicating resilience in the market [134]

Core Insights - Watsco reported revenue of $1.75 billion for the quarter ended December 2024, reflecting a year-over-year increase of 9.4% and exceeding the Zacks Consensus Estimate by 6.18% [1] - The company's EPS for the quarter was $2.37, up from $2.06 in the same quarter last year, surpassing the consensus estimate of $2.13 by 11.27% [1] Revenue Breakdown - HVAC Equipment revenue reached $1.21 billion, exceeding the average estimate of $1.14 billion from three analysts [4] - Commercial Refrigeration Products generated $70.16 million, compared to the estimated $63.69 million [4] - HVAC Products revenue was $473.57 million, surpassing the average estimate of $441.99 million [4] Stock Performance - Watsco's shares have returned -2.5% over the past month, while the Zacks S&P 500 composite increased by 4.7% [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance against the broader market in the near term [3]