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Watsco (WSO) Q3 Earnings Surpass Estimates, Revenues Up Y/Y

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Watsco, Inc.’s (WSO - Free Report) shares jumped 1.1% on Oct 20, after reporting third-quarter 2021 results, wherein earnings topped the Zacks Consensus Estimate while revenues missed the same.  Nevertheless, the top and the bottom line grew impressively on a year-over-year basis.

The solid results were mainly backed by strong sales growth, a richer sales mix of high-efficiency systems, improved margins and operating efficiencies as well as strategic acquisitions. Also, stepped-up investments to increase customer adoption at various technology platforms, which boost customer experience, enhance operational efficiency and help contractors grow and better serve homeowners and businesses, are commendable.

Inside the Numbers

Watsco’s quarterly earnings of $3.62 per share topped the consensus estimate of $3.55 by 2% and increased 31% year over year.

Total revenues of $1,782.6 million missed the consensus mark of $1,819 million by 2%. Nonetheless, it increased 16% from the year-ago period. Sales also rose 8% on a same-store basis. The upside was primarily driven by investments in customer-focused technologies and the expansion of the company’s branch network. Also, continued investment in technologies designed to revolutionize customer experience added to the positives.

Sales of HVAC equipment (heating, ventilating and air conditioning; comprising 69% of sales) were up 7% year over year. Sales of other HVAC products (27% of sales) also increased 12% from the prior-year quarter. Sales from commercial refrigeration products (4% of sales) rose 27% year over year.

Operating Highlights

Gross margin expanded 280 basis points (bps) for the quarter to a record level of 27.1%. SG&A expenses increased 28% year over year, growing 143 bps as a percentage of sales.

Operating margin expanded 140 bps year over year to a record level of 11.6%.

Financial Operations

As of Sep 30, 2021, cash and cash equivalents were $137.2 million compared with $146.1 million at 2020-end. Cash from operations came in at $319.7 million for the first nine months of 2021 compared with $372.8 million a year ago.

Watsco, Inc. Price, Consensus and EPS Surprise

Watsco, Inc. Price, Consensus and EPS Surprise

Watsco, Inc. price-consensus-eps-surprise-chart | Watsco, Inc. Quote

Zacks Rank & Other Key Picks

Currently, Watsco carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the Zacks Construction sector include Acuity Brands, Inc. (AYI - Free Report) , TopBuild Corp. (BLD - Free Report) and Toll Brothers, Inc. (TOL - Free Report) . Acuity Brand sports a Zacks Rank #1 (Strong Buy), while TopBuild and Toll Brothers carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here..

Acuity Brands has a trailing four-quarter earnings surprise of 18.3%, on average.

TopBuild’s earnings for 2021 are expected to grow 47.1%.

Toll Brothers earnings for fiscal 2021 are expected to rise 80%.


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