Watsco Stock Drops After Missing Earnings Expectations
Watsco (NYSE: WSO) stock fell nearly 15% in early trading after the HVAC equipment distributor reported disappointing second-quarter earnings. The company earned $4 per share, below analysts' expectations of $4.41 and marked a year-over-year decline of 12%. Revenue growth was also weak at just 2%, with gross profit declining while operating costs rose. Watsco is attempting to drive growth through acquisitions, having recently purchased Jackson Supply, one of the largest HVAC distributors in the Sunbelt region. The company has significant free cash flow—over $700 million over the past year—and plans to continue acquiring businesses despite current debt levels being close to its available liquidity. Analysts are skeptical about Watsco's valuation and growth prospects given its modest performance, with one noting that it trades at around 20 times free cash flow but is not growing significantly. The company’s stock currently appears overpriced unless the acquisition strategy leads to meaningful improvement.
Tickers: $WSO
Topics: Earnings HVAC Industry Stock Price Drop