Watsco Stock in Recovery Mode Heading Into Earnings

WSO is down over 20% since the start of 2022

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Watsco, Inc. (NYSE:WSO) is the largest distributor of air conditioning, heating, and refrigeration equipment in the HVAC/R distribution industry. WSO has approximately 6,900 employees, assisting approximately 350,000 contractors and dealers working in turn, service, repair, or replace of HVAC/R systems in homes and businesses. Watsco operates out of 671 locations in the United States, Canada, Mexico, and Puerto Rico, with additional exports to the Latin American and Caribbean markets.

Earlier this week, Watsco announced that it will host a conference call to discuss its second quarter of 2022 financial results on Tuesday, July 26. Prepared remarks regarding the results will be followed by a question-and-answer session with WSO's senior management team.

Watsco stock has outperformed earnings expectations on all four of their most recent earnings reports. In the most recent quarterly report, WSO reported an EPS (earnings per share) of $2.90 and beat expectations by a margin of $1.13. Right now, Wall Street analysts have the company’s EPS coming in way higher  at $4.84 for this upcoming earnings report.

Watsco stock price has decreased 12% year-over-year and is down by 22% from its 52-week high of $318.98 last December. Additionally, shares of WSO have dropped in price 18% year-to-date. Nonetheless, Watsco stock has recovered 13% since bottoming at a 52-week low of $220.68 less than a month ago.

The heating and cooling company is expected to report a 15.3% increase in revenues and a 31.7% increase in earnings for fiscal 2022. However, the high growth rate is expected to be short-lived, with estimates indicating just 1.8% revenue growth and a 0.9% decrease in earnings for fiscal 2023.

WSO holds an unfavorable balance sheet with $565.11 million in total debt and $110.61 million in cash. Watsco also maintains a slightly rich valuation at a forward price-earnings ratio of 18.94 and a price-sales ratio of 1.32. Still, the heating and cooling company offers a very attractive dividend yield of 3.53% with a forward dividend of $8.80, making Watsco stock best suited for long-term investors.

 

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