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Watsco, Inc. Class B
(NYSE:WSO.B)
Select Model
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Rating:73Outperform
Price Target:
$343.00
Action:Reiterated
Date:10/27/26
The score is driven primarily by strong financial quality (notably the conservative balance sheet and consistent profitability) and a constructive, upbeat earnings-call outlook highlighting improving demand and technology-driven growth. Offsetting these positives are a mixed technical picture (still below longer-term moving averages) and a premium P/E that is only partly mitigated by the high dividend yield.
Positive Factors
Conservative balance sheet
Low leverage and substantial equity growth give Watsco financial flexibility to fund acquisitions, technology, and distribution expansion without relying heavily on debt. This strengthens resilience through demand cycles and supports continued investment while preserving capacity for future opportunities.
Negative Factors
Gross margin below long-term target
The persistent gap between current gross margin and the 30% objective limits near-term earnings conversion and leaves performance dependent on favorable mix, pricing, and execution. Management expects progress to be uneven, so margin expansion may take multiple periods and remain volatile.
Read all positive and negative factors
Positive Factors
Negative Factors
Conservative balance sheet
Low leverage and substantial equity growth give Watsco financial flexibility to fund acquisitions, technology, and distribution expansion without relying heavily on debt. This strengthens resilience through demand cycles and supports continued investment while preserving capacity for future opportunities.
Read all positive factors
Watsco, Inc. Class B (WSO.B) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$12.11B
Dividend YieldN/A
Average Volume (3M)30.00
Price to Earnings (P/E)25.6
Beta (1Y)0.74
Revenue Growth0.30%
EPS GrowthN/A
CountryUS
Employees7,050
SectorIndustrials
Sector Strength72
IndustryIndustrial - Distribution
Share Statistics
EPS (TTM)11.37
Shares Outstanding5,663,438
10 Day Avg. Volume0
30 Day Avg. Volume30
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 Cap1.00
Enterprise Value/Revenue1.63
Enterprise Value/Gross Profit6.00
Enterprise Value/Ebitda16.37
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)12
Revenue Forecast (FY)$7.59B
Watsco, Inc. Class B Business Overview & Revenue Model
Company Description
Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, and refrigeration equipment, and related parts and supplies in the United States, Canada, Latin America, and the Caribbean. It distributes equi...
How the Company Makes Money
Watsco makes money primarily by distributing HVAC/R products and related supplies to contractors and dealers and earning a gross margin on the resale of those goods. Its core revenue stream is product sales across two broad categories: (1) HVAC eq...
Watsco, Inc. Class B Earnings Call Summary
Earnings Call Date:Oct 27, 2026
(Q3-2026)
| Next Earnings Date:Feb 17, 2027
Earnings Call Sentiment Positive
The call was broadly positive. Watsco reported record sales and gross profit, improving organic demand, stronger industry volumes, significant digital and technology traction, successful Jackson performance, completion of the Granite acquisition, improved operating cash flow, and a strong cash-and-no-debt balance sheet. The main challenges were gross margin of 26.4% versus the 30% long-term goal, higher quarterly variable expenses, an incompletely recovered replacement market, elevated inventory, product-cost pressure, and modest margin pressure from customer mix and consolidation. Highlights significantly outweighed the lowlights.Positive Updates
Record Third-Quarter Sales and Profitability
Third-quarter sales increased 7% to a record $2.22 billion, including 4% same-store growth. Gross profit reached a record $586 million, operating income was $225 million with a 10.1% operating margin, and earnings per share was $3.77.
Negative Updates
Gross Margin Below Long-Term Target
Third-quarter gross margin was 26.4%, while Watsco's long-term goal is 30%. Management said gross margins have been in a narrow range and that reaching 30% will not be a straight-line progression, with quarter-to-quarter choppiness expected.
Read all updates
Q3-2026 Updates
Positive
Negative
Record Third-Quarter Sales and Profitability
Third-quarter sales increased 7% to a record $2.22 billion, including 4% same-store growth. Gross profit reached a record $586 million, operating income was $225 million with a 10.1% operating margin, and earnings per share was $3.77.
Read all positive updates
Company Guidance
Management said the impact from the A2L transition will be largely over by the end of this year, its long-term gross-margin goal is 30%, and it is heading from 27%-ish to 30%-ish, although “it will not be a straight line” with “choppiness, certainly quarter-to-quarter”; fourth-quarter margin is generally better, with about 20, 30 basis points of improvement over a 10-year average, though “I’m not giving guidance,” while the expectation is that OEM pricing actions will come “early and more conventional and kind of more ordinary” over the next 12 months, and the company expects some price increases this fall going into next year. Hydros will continue to scale in 2027, October is “looking healthy to date,” and management “hope and expect to carry it through the end of the year,” while year-end inventory has an opportunity to be more or less equal to last year, excluding the two acquisitions; Granite inventory was about $140 million-$150 million, and side discharge was “probably in the 8%-10% range of the total market today” and “going to continue to grow.”Watsco, Inc. Class B Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
86
Very Positive
Cash Flow
72
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 7.44B | 7.24B | 7.62B | 7.28B | 7.27B | 6.28B |
| Gross Profit | 2.02B | 2.03B | 2.04B | 1.99B | 2.03B | 1.67B |
| EBITDA | 740.74M | 781.43M | 792.10M | 803.72M | 840.59M | 656.65M |
| Net Income | 469.52M | 496.99M | 536.29M | 536.34M | 601.17M | 418.94M |
Balance Sheet | ||||||
| Total Assets | 5.23B | 4.46B | 4.53B | 3.73B | 3.49B | 3.09B |
| Cash, Cash Equivalents and Short-Term Investments | 648.70M | 733.28M | 781.94M | 210.11M | 147.50M | 118.27M |
| Total Debt | 553.72M | 478.79M | 447.46M | 404.79M | 390.53M | 369.71M |
| Total Liabilities | 1.70B | 1.23B | 1.47B | 1.11B | 1.24B | 1.09B |
| Stockholders Equity | 3.03B | 2.78B | 2.66B | 2.23B | 1.89B | 1.66B |
Cash Flow | ||||||
| Free Cash Flow | 666.97M | 535.06M | 743.01M | 526.48M | 536.31M | 324.10M |
| Operating Cash Flow | 703.42M | 569.61M | 773.10M | 561.95M | 571.96M | 349.57M |
| Investing Cash Flow | 20.45M | -98.12M | -290.67M | -41.34M | -33.84M | -148.58M |
| Financing Cash Flow | -549.07M | -568.12M | -158.53M | -460.08M | -503.96M | -228.60M |
Watsco, Inc. Class B Technical Analysis
Negative
―
Price Trends
304.05
Negative
334.72
Negative
363.05
Negative
Market Momentum
0.27
Negative
43.33
Neutral
21.54
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WSO.B, the sentiment is Negative. The current price of undefined is equal to the 20-day moving average (MA) of 296.27, equal to the 50-day MA of 304.05, and equal to the 200-day MA of 363.05, indicating a bearish trend. The MACD of 0.27 indicates Negative momentum. The RSI at 43.33 is Neutral, neither overbought nor oversold. The STOCH value of 21.54 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WSO.B.
Watsco, Inc. Class B Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
Performance Comparison
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.