Watsco (WSO) AI Stock Analysis

• Market Cap: $14.92B
• Dividend Yield: 3.18%
• Average Volume (3M): 591.35K
• Price to Earnings (P/E): 28.7
• Beta (1Y): 1.07
• Revenue Growth: -0.71%
• EPS Growth: N/A
• Country: US
• Employees: 7,220
• Sector: Industrials
• Sector Strength: 72
• Industry: Industrial - Distribution
• EPS (TTM): 3.98
• Shares Outstanding: 34,902,824
• 10 Day Avg. Volume: 620,169
• 30 Day Avg. Volume: 591,354
• 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: 1.06
• Enterprise Value/Revenue: 2.12
• Enterprise Value/Gross Profit: 7.51
• Enterprise Value/Ebitda: 20.26
• 1Y Price Target: $425.00
• Price Target Upside: 15.49% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 7

• Rating: 73 Outperform
• Price Target: $411.00 ▲(11.68% Upside)

Watsco's strong financial management and strategic focus on technology adoption are key strengths. However, recent sales declines and bearish technical indicators temper the overall outlook.

Positive Factors

Strong Balance Sheet

A strong balance sheet with low leverage provides Watsco with financial stability and flexibility to invest in growth opportunities.

E-commerce Growth

Significant growth in e-commerce sales enhances customer accessibility and positions Watsco to capture more market share in the digital space.

Technology Adoption

Strong technology adoption improves customer engagement and operational efficiency, supporting long-term growth and competitive advantage.

Negative Factors

Sales Decline

Declining sales indicate challenges in market demand, which could impact revenue growth and profitability if not addressed.

Operating Expenses Increase

Rising operating expenses due to inefficiencies can pressure margins and reduce overall profitability if not managed effectively.

Free Cash Flow Decline

A significant decline in free cash flow growth may limit Watsco's ability to fund new initiatives and return value to shareholders.

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 sale of HVAC/R equipment, parts, and supplies to contractors and service providers. The company operates on a wholesale distribution model, where it purchases products from manufacturers and sells them to its customers at a markup. Key revenue streams include the sale of heating and cooling systems, refrigeration equipment, and related accessories. Additionally, Watsco benefits from its partnerships with leading manufacturers in the HVAC/R industry, which not only provides a diverse product range but also helps maintain competitive pricing. The company also focuses on expanding its e-commerce capabilities, which has become a significant revenue channel by enhancing customer accessibility and convenience. Seasonal demand fluctuations, particularly during peak heating and cooling seasons, also play a critical role in Watsco's revenue generation.

Watsco Financial Statement Overview

Summary

Watsco exhibits strong profitability with consistent margins and a solid balance sheet. However, recent revenue growth challenges and slight cash flow fluctuations are concerns.

Income Statement

Watsco's income statement shows strong profitability with a consistent gross profit margin around 28% and a net profit margin of approximately 7.4% in the TTM period. Despite a slight decline in revenue growth rate recently, the company maintains healthy EBIT and EBITDA margins, indicating operational efficiency. However, the negative revenue growth in the TTM period is a concern that slightly tempers the overall positive outlook.

Balance Sheet

The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.10, indicating conservative leverage. The return on equity remains robust at 19.3%, showcasing effective use of shareholder funds. The equity ratio stands at a healthy level, suggesting strong asset backing. Overall, Watsco's balance sheet demonstrates financial stability and prudent management of resources.

Cash Flow

Watsco's cash flow statement highlights a significant improvement in free cash flow growth at 33.5% in the TTM period, indicating enhanced cash generation capabilities. The operating cash flow to net income ratio is slightly below 1, suggesting efficient conversion of income into cash. The free cash flow to net income ratio is close to 1, reflecting strong cash profitability. However, the decline in operating cash flow compared to the previous year is a point to monitor.

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	776.94M	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	4.48B	3.73B	3.49B	3.09B	2.48B
Cash, Cash Equivalents and Short-Term Investments	324.35M	781.94M	210.11M	147.50M	118.27M	146.07M
Total Debt	444.89M	447.46M	505.06M	390.53M	454.21M	216.14M
Total Liabilities	1.25B	1.42B	1.11B	1.24B	1.09B	704.59M
Stockholders Equity	3.30B	2.66B	2.23B	1.89B	1.66B	1.49B
Cash Flow
Free Cash Flow	526.33M	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: Negative
• Last Price: 368.01
• 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 368.01 is below the 20-day moving average (MA) of 370.23, below the 50-day MA of 385.50, and below the 200-day MA of 444.25, indicating a bearish trend. The MACD of -7.74 indicates Negative momentum. The RSI at 46.51 is Neutral, neither overbought nor oversold. The STOCH value of 42.57 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
WSO	―	$14.92B	28.71	17.61%	3.18%	-0.71%	―
GWW	―	$46.83B	24.70	48.98%	0.90%	4.83%	-3.60%
FERG	―	£48.88B	26.74	32.29%	1.34%	3.80%	9.26%
CNM	―	$10.26B	23.23	24.42%	―	11.02%	7.08%
FAST	―	$47.24B	38.58	32.74%	2.13%	6.92%	5.98%
POOL	―	$9.95B	24.37	29.16%	1.84%	-0.60%	-5.99%
Sector *	―	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

Watsco Corporate Events

Watsco Inc. Reports Resilient Q3 Earnings Amid Challenges

Watsco Inc., a leading distributor in the North American HVAC market, has reported its third-quarter earnings amidst challenging market conditions. The company, known for its innovative technology platforms, continues to leverage its strong financial position to drive growth and improve customer experience.

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.

Watsco Inc. Reports Strong Margins Amid A2L Transition

Watsco Inc. is the largest distributor of heating, ventilation, and air conditioning (HVAC) products in the North American market, known for its extensive network and innovative technology platforms that enhance customer engagement and operational efficiency. The company recently reported its second-quarter 2025 earnings, highlighting record gross profit margins and expanded operating margins despite a slight decline in revenues. Watsco’s financial performance in the second quarter of 2025 showed a 4% decrease in revenues to $2.06 billion, while gross profit increased by 4% to a record $603 million, resulting in a gross profit margin of 29.3%. The company also experienced a 1% increase in operating income to $272 million, with an operating margin expansion to 13.2%. These results were achieved amidst a transition to next-generation HVAC equipment with A2L refrigerants, which have a lower global warming potential. Watsco’s strategic initiatives include significant investments in technology, such as AI-driven platforms and digital sales tools, which have enhanced customer experience and operational efficiencies. The company’s e-commerce sales reached approximately $2.5 billion, comprising 34% of overall sales, and its digital platforms continue to gain traction among contractors and technicians. Looking ahead, Watsco remains focused on leveraging its strong balance sheet and innovative strategies to capture market share and drive growth. The company’s management is optimistic about the potential of its technology initiatives and the ongoing transition to environmentally friendly HVAC products, positioning Watsco for continued success in the evolving market.

Watsco Inc’s Mixed Earnings Call: Challenges and Growth

Watsco Inc’s recent earnings call presented a mixed performance for the company. While Watsco achieved record gross profit margins and maintained a strong financial position, it faced challenges such as declining sales, increased SG&A costs, and inventory management issues. Despite these hurdles, the company’s investments in technology and expansion through acquisitions paint a positive outlook for the future.

Watsco Reports Q2 Revenue Drop, Record Profit Margin

In its second quarter 2025 results, Watsco reported a 4% decrease in revenues to $2.06 billion, but achieved a record gross profit margin of 29.3% amidst the transition to A2L refrigerants. Despite softer market conditions, the company expanded its operating margin and continued to invest in technology and customer training to support the regulatory transition, positioning itself to capture market share as the industry adopts new digital tools.

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.