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Watsco (WSO) Shares Dip 3.2% on Q3 Earnings Miss, Sales Top
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Watsco, Inc.’s (WSO - Free Report) shares slipped 3.2% on Oct 20, after it reported third-quarter 2022 results, wherein the company’s earnings missed the Zacks Consensus Estimate but sales beat the same. Nonetheless, the company achieved higher sales and profitability reflecting normalized residential HVAC equipment volumes, effective price realization, a continued shift toward higher-efficiency HVAC equipment and expansion in sales of other higher-margin HVAC products.
Looking ahead, Watsco’s chairman and CEO, Albert H. Nahmad, said, “We remain optimistic given our healthy balance sheet and Watsco’s ability to make additional investments to grow our network and expand our leadership position. To that end, the new regulatory framework and tax incentives affecting our industry provide long-term growth benefits for contractors and energy savings for homeowners.”
Watsco reported quarterly earnings of $4.03 per share, which lagged the consensus mark of $4.39 by 8.2% but increased 11% year over year on solid quarterly sales.
Total sales of $2.04 billion topped the consensus mark of $2.03 million by 0.5% and increased 14% from the year-ago quarter’s levels. The upside was primarily driven by strong performance across geographies and product categories backed by solid unit growth, higher selling prices, a richer mix of high-efficiency systems and technology-driven gains in market share.
Sales of HVAC equipment (heating, ventilating and air conditioning; comprising 69% of sales) were up 13% year over year. Sales of other HVAC products (27% of sales) also increased 15% from the prior-year quarter’s levels. Sales from commercial refrigeration products (4% of sales) rose 18% year over year.
Operating Highlights
Gross margin remained flat year over year at 27.1%. SG&A expenses, as a percentage of sales, grew to 15.8% and remained unchanged from the year-ago level.
The operating margin also remained flat year over year at 11.6%.
Financial Operations
As of Sep 30, 2022, cash and cash equivalents were $130.2 million compared with $118.3 million at 2021-end. Cash provided by operations came in at $358.9 million for the first nine months of 2022 compared with $319.7 million a year ago.
Acuity Brands, Inc. (AYI - Free Report) reported solid fourth-quarter fiscal 2022 results. The top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
AYI’s solid performance was backed by strong demand across the end markets, along with price increases and product and productivity improvement.
RPM International Inc. (RPM - Free Report) reported impressive results in first-quarter fiscal 2023 (ended Aug 31, 2022), with earnings and sales surpassing their respective Zacks Consensus Estimate and increasing on a year-over-year basis.
RPM’s quarterly performance was driven by the continued implementation of MAP operational improvement initiatives, double-digit sales growth across the segments, strong pricing offset, supply-chain woes, cost inflation, macroeconomic challenges and foreign exchange headwinds.
Fastenal Company (FAST - Free Report) reported third-quarter 2022 results, wherein earnings and revenues topped the respective Zacks Consensus Estimate.
FAST’s top and bottom lines improved on a year-over-year basis, given the strong demand in markets associated with industrial capital goods and commodities.
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Watsco (WSO) Shares Dip 3.2% on Q3 Earnings Miss, Sales Top
Watsco, Inc.’s (WSO - Free Report) shares slipped 3.2% on Oct 20, after it reported third-quarter 2022 results, wherein the company’s earnings missed the Zacks Consensus Estimate but sales beat the same. Nonetheless, the company achieved higher sales and profitability reflecting normalized residential HVAC equipment volumes, effective price realization, a continued shift toward higher-efficiency HVAC equipment and expansion in sales of other higher-margin HVAC products.
Looking ahead, Watsco’s chairman and CEO, Albert H. Nahmad, said, “We remain optimistic given our healthy balance sheet and Watsco’s ability to make additional investments to grow our network and expand our leadership position. To that end, the new regulatory framework and tax incentives affecting our industry provide long-term growth benefits for contractors and energy savings for homeowners.”
Watsco, Inc. Price, Consensus and EPS Surprise
Watsco, Inc. price-consensus-eps-surprise-chart | Watsco, Inc. Quote
Inside the Numbers
Watsco reported quarterly earnings of $4.03 per share, which lagged the consensus mark of $4.39 by 8.2% but increased 11% year over year on solid quarterly sales.
Total sales of $2.04 billion topped the consensus mark of $2.03 million by 0.5% and increased 14% from the year-ago quarter’s levels. The upside was primarily driven by strong performance across geographies and product categories backed by solid unit growth, higher selling prices, a richer mix of high-efficiency systems and technology-driven gains in market share.
Sales of HVAC equipment (heating, ventilating and air conditioning; comprising 69% of sales) were up 13% year over year. Sales of other HVAC products (27% of sales) also increased 15% from the prior-year quarter’s levels. Sales from commercial refrigeration products (4% of sales) rose 18% year over year.
Operating Highlights
Gross margin remained flat year over year at 27.1%. SG&A expenses, as a percentage of sales, grew to 15.8% and remained unchanged from the year-ago level.
The operating margin also remained flat year over year at 11.6%.
Financial Operations
As of Sep 30, 2022, cash and cash equivalents were $130.2 million compared with $118.3 million at 2021-end. Cash provided by operations came in at $358.9 million for the first nine months of 2022 compared with $319.7 million a year ago.
Zacks Rank
Currently, Watsco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Acuity Brands, Inc. (AYI - Free Report) reported solid fourth-quarter fiscal 2022 results. The top and bottom lines surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
AYI’s solid performance was backed by strong demand across the end markets, along with price increases and product and productivity improvement.
RPM International Inc. (RPM - Free Report) reported impressive results in first-quarter fiscal 2023 (ended Aug 31, 2022), with earnings and sales surpassing their respective Zacks Consensus Estimate and increasing on a year-over-year basis.
RPM’s quarterly performance was driven by the continued implementation of MAP operational improvement initiatives, double-digit sales growth across the segments, strong pricing offset, supply-chain woes, cost inflation, macroeconomic challenges and foreign exchange headwinds.
Fastenal Company (FAST - Free Report) reported third-quarter 2022 results, wherein earnings and revenues topped the respective Zacks Consensus Estimate.
FAST’s top and bottom lines improved on a year-over-year basis, given the strong demand in markets associated with industrial capital goods and commodities.