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In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 8.2% but sales beat the same by 0.5%. On a year-over-year basis, earnings and sales increased 11.3% and 14.2%, respectively.
Watsco's earnings topped the consensus mark in two of the last four quarters and missed on the other two occasions, with the average being 16.9%.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $2.12 per share in the past 30 days. The estimated figure indicates 5% growth from the year-ago quarter’s reported earnings of $2.02 per share. The consensus mark for revenues is pegged at $1.6 billion, suggesting 6.1% year-over-year growth from the year-ago reported revenues of $1.51 billion.
Factors to Note
Watsco’s top line is likely to have witnessed growth due to the decent sales volume of residential HVAC equipment, effective price realization and sustained development of higher-efficiency systems. The company tends to earn consistent revenues from its repair and maintenance segment also. However, the company’s services are subject to seasonal changes. The company’s first and fourth quarter of each calendar is disproportionately affected by seasonality due to the nature and timing of HVAC systems replacement. Similarly, demand for heating equipment is generally impacted in the second and third quarters.
Meanwhile, acquisitions are also a vital part of WSO’s growth strategy. Business combinations are one of the preferred modes of solidifying the product portfolio and leveraging new business opportunities, thereby contributing to sales growth.
Also, Watsco’s technology platforms will help the company to enhance order fill rates with speed and accuracy, thereby improving efficiency. This is likely to have benefited the company’s fourth-quarter results.
The company’s bottom line in the to-be-reported quarter is likely to have been affected by higher SG&A costs due to additional hiring of field personnel and intensive technology spending. Also, persisting inflationary pressures and supply chain disruptions increase cost risks like freight costs and input costs.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Watsco this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Watsco has an Earnings ESP of +1.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company has a Zacks Rank #4 (Sell).
A Stock With the Favorable Combination
Here is one company from the Zacks Construction sector, which, according to our model, has the right combination of elements to post an earnings beat in the quarter to be reported.
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +2.48% and a Zacks Rank #2.
FLR’s earnings topped the consensus mark in one of the last four quarters and missed on three occasions, with the negative average being 38.2%. Earnings for the to-be-reported quarter are expected to increase 74.2% year over year.
Recent Construction Releases
AECOM (ACM - Free Report) reported better-than-expected results for first-quarter fiscal 2023, where earnings and revenues surpassed the Zacks Consensus Estimate. Post the results, shares of the technical and management support services provider slipped 0.01% on Feb 6.
On a year-over-year basis, ACM’s bottom line declined despite top-line growth. The company’s strong top-line performance was backed by strong organic NSR growth.
United Rentals, Inc.’s (URI - Free Report) fourth-quarter 2022 earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention to buy back $1 billion of common stock in 2023.
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Watsco (WSO) to Release Q4 Earnings: What's in the Cards?
Watsco, Inc. (WSO - Free Report) is slated to report fourth-quarter 2022 results on Feb 16, before market open.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 8.2% but sales beat the same by 0.5%. On a year-over-year basis, earnings and sales increased 11.3% and 14.2%, respectively.
Watsco's earnings topped the consensus mark in two of the last four quarters and missed on the other two occasions, with the average being 16.9%.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $2.12 per share in the past 30 days. The estimated figure indicates 5% growth from the year-ago quarter’s reported earnings of $2.02 per share. The consensus mark for revenues is pegged at $1.6 billion, suggesting 6.1% year-over-year growth from the year-ago reported revenues of $1.51 billion.
Factors to Note
Watsco’s top line is likely to have witnessed growth due to the decent sales volume of residential HVAC equipment, effective price realization and sustained development of higher-efficiency systems. The company tends to earn consistent revenues from its repair and maintenance segment also. However, the company’s services are subject to seasonal changes. The company’s first and fourth quarter of each calendar is disproportionately affected by seasonality due to the nature and timing of HVAC systems replacement. Similarly, demand for heating equipment is generally impacted in the second and third quarters.
Watsco, Inc. Price and EPS Surprise
Watsco, Inc. price-eps-surprise | Watsco, Inc. Quote
Meanwhile, acquisitions are also a vital part of WSO’s growth strategy. Business combinations are one of the preferred modes of solidifying the product portfolio and leveraging new business opportunities, thereby contributing to sales growth.
Also, Watsco’s technology platforms will help the company to enhance order fill rates with speed and accuracy, thereby improving efficiency. This is likely to have benefited the company’s fourth-quarter results.
The company’s bottom line in the to-be-reported quarter is likely to have been affected by higher SG&A costs due to additional hiring of field personnel and intensive technology spending. Also, persisting inflationary pressures and supply chain disruptions increase cost risks like freight costs and input costs.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Watsco this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP: Watsco has an Earnings ESP of +1.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company has a Zacks Rank #4 (Sell).
A Stock With the Favorable Combination
Here is one company from the Zacks Construction sector, which, according to our model, has the right combination of elements to post an earnings beat in the quarter to be reported.
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +2.48% and a Zacks Rank #2.
FLR’s earnings topped the consensus mark in one of the last four quarters and missed on three occasions, with the negative average being 38.2%. Earnings for the to-be-reported quarter are expected to increase 74.2% year over year.
Recent Construction Releases
AECOM (ACM - Free Report) reported better-than-expected results for first-quarter fiscal 2023, where earnings and revenues surpassed the Zacks Consensus Estimate. Post the results, shares of the technical and management support services provider slipped 0.01% on Feb 6.
On a year-over-year basis, ACM’s bottom line declined despite top-line growth. The company’s strong top-line performance was backed by strong organic NSR growth.
United Rentals, Inc.’s (URI - Free Report) fourth-quarter 2022 earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention to buy back $1 billion of common stock in 2023.