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Factors Setting the Tone for Watsco's (WSO) Q3 Earnings
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Watsco, Inc.’s (WSO - Free Report) third-quarter 2020 earnings and revenues are expected to have registered an improvement on a year-over-year basis.
In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 18.3% and 3.9%, respectively. However, on a year-over-year basis, earnings and revenues decreased 5.8% and 6%, respectively, as soft demand in a few international markets served and coronavirus-led shutdown had a significant impact on the busines.
However, the company has a dismal earnings surprise history. It missed analysts’ expectations in four of the trailing six quarters, met once and beat the same on another occasion.
Trend in Estimate Revision
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.49, suggesting an increase of 13.2% from the year-ago quarter. Over the past seven days, the company’s earnings estimates for the third quarter have increased 1.2%. For revenues, the consensus mark is pegged at $1.51 billion, indicating an improvement of 8.3% from the prior-year reported figure.
Innovative technology is expected to have aided its third-quarter revenues and earnings. The company has been deploying technology that improves order fill rates with speed and accuracy. It has the industry’s largest database of digitized product information, with more than 728,000 SKUs. Moreover, technology deployment is likely to have driven the company’s e-commerce sales in the quarter to be reported. It has been optimistic about its innovative technology and expects to survive in this unprecedented period.
Also, acquisitions have been Watsco’s preferred mode of solidifying the product portfolio and leveraging new business opportunities in a bid to increase the customer base and profitability. Its earlier buyouts are expected to have contributed to the company’s quarterly revenues. Moreover, Watsco — which shares space with Lennox International Inc. (LII - Free Report) — has significant prospects in the replacement and heating equipment market. Meanwhile, solid housing market fundamentals and repair & remodeling activity are expected to have aided the company’s top line.
However, higher material cost and intense competition are likely to have weighed on the company’s performance. Also, seasonal influence on the business is a cause of concern. Demand for its heating equipment is generally tepid in the second and third quarters.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Watsco in the quarter to be reported. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is exactly the case here as you will see below.
Earnings ESP: The company has an Earnings ESP of +0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Currently, Watsco carries a Zacks Rank #2.
Here are some other stocks from the Zacks Construction space that investors may also consider, as our model shows that these too have the right combination of elements to deliver an earnings beat this season.
Installed Building Products, Inc. (IBP - Free Report) has an Earnings ESP of +1.72% and a Zacks Rank #1.
Masonite International Corporation (DOOR - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #3.
Zacks’ 2020 Election Stock Report
In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.
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Factors Setting the Tone for Watsco's (WSO) Q3 Earnings
Watsco, Inc.’s (WSO - Free Report) third-quarter 2020 earnings and revenues are expected to have registered an improvement on a year-over-year basis.
In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 18.3% and 3.9%, respectively. However, on a year-over-year basis, earnings and revenues decreased 5.8% and 6%, respectively, as soft demand in a few international markets served and coronavirus-led shutdown had a significant impact on the busines.
However, the company has a dismal earnings surprise history. It missed analysts’ expectations in four of the trailing six quarters, met once and beat the same on another occasion.
Trend in Estimate Revision
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.49, suggesting an increase of 13.2% from the year-ago quarter. Over the past seven days, the company’s earnings estimates for the third quarter have increased 1.2%. For revenues, the consensus mark is pegged at $1.51 billion, indicating an improvement of 8.3% from the prior-year reported figure.
Watsco, Inc. Price and EPS Surprise
Watsco, Inc. price-eps-surprise | Watsco, Inc. Quote
Factors Likely to Impact Upcoming Results
Innovative technology is expected to have aided its third-quarter revenues and earnings. The company has been deploying technology that improves order fill rates with speed and accuracy. It has the industry’s largest database of digitized product information, with more than 728,000 SKUs. Moreover, technology deployment is likely to have driven the company’s e-commerce sales in the quarter to be reported. It has been optimistic about its innovative technology and expects to survive in this unprecedented period.
Also, acquisitions have been Watsco’s preferred mode of solidifying the product portfolio and leveraging new business opportunities in a bid to increase the customer base and profitability. Its earlier buyouts are expected to have contributed to the company’s quarterly revenues. Moreover, Watsco — which shares space with Lennox International Inc. (LII - Free Report) — has significant prospects in the replacement and heating equipment market. Meanwhile, solid housing market fundamentals and repair & remodeling activity are expected to have aided the company’s top line.
However, higher material cost and intense competition are likely to have weighed on the company’s performance. Also, seasonal influence on the business is a cause of concern. Demand for its heating equipment is generally tepid in the second and third quarters.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Watsco in the quarter to be reported. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is exactly the case here as you will see below.
Earnings ESP: The company has an Earnings ESP of +0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Currently, Watsco carries a Zacks Rank #2.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks Poised to Beat Earnings Estimates
Here are some other stocks from the Zacks Construction space that investors may also consider, as our model shows that these too have the right combination of elements to deliver an earnings beat this season.
Installed Building Products, Inc. (IBP - Free Report) has an Earnings ESP of +1.72% and a Zacks Rank #1.
Masonite International Corporation (DOOR - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #3.
Zacks’ 2020 Election Stock Report
In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.
Check out the 2020 Election Stock Report >>