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Watsco (WSO) Reaches 52-Week High: What's Driving the Stock?
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Watsco, Inc. (WSO - Free Report) touched a new 52-week high of $406.08 on Oct 10. The stock pulled back to end the trading session at $399.23, up 0.76% from the previous day’s closing price of $396.20.
This Zacks Rank #3 (Hold) company has been gaining strength from its continuous investment in industry-leading technologies, accretive acquisitions and a consistent focus on rewarding customers. The solid performance of heating, ventilation and air conditioning (“HVAC”) equipment and commercial refrigeration product segments added to the company’s uptrend.
Although higher costs and ongoing inflationary pressure are major concerns, the company remains optimistic about its innovative technology and expects to survive in this unprecedented period.
Image Source: Zacks Investment Research
Let’s discuss the factors in detail that are boosting investors’ sentiments and substantiating Watsco’s growth potential.
Investment in Technology to Boost Growth: Watsco continues to invest in technologies and e-commerce to transform and improve customer experience. The company is deploying technology that improves order fill rates with speed and accuracy. It is using various new technologies to transform the homeowner experience, which will help the company expand its customer base. Currently, it has the industry’s largest database of digitized product information, with nearly 1 million SKUs being used by more than 350,000 technical contractors and technicians annually via the Product Information Management database.
Driven by various technology platforms, e-commerce sales accounted for 34% of total sales in the second quarter of 2023. The company remains optimistic about its innovative technology and expects to survive in this unprecedented period. Watsco increased its technology spending by $5.7 million in the first half of 2023. Investments in technology were $55 million for the 12-month period that ended Jun 30, 2023.
Acquisitions for Expansion: Acquisitions have been Watsco’s preferred mode of solidifying its product portfolio and leveraging new business opportunities to increase its customer base and profitability. On Mar 3, 2023, one of WSO's wholly-owned subsidiaries acquired Capitol, a New York-based distributor of air conditioning and heating products. The acquisition is poised to benefit the company as it expands its presence and product offerings. Over the last three years (since Apr 1, 2020), $117 million of capital has been invested in acquisitions.
The company focuses on partnering with great businesses focused on the HVAC/R industry.
Strong Liquidity to Reward Shareholders: WSO has enough liquidity to manage the persistent crisis. The company ended the second quarter of 2023 with cash and cash equivalents of $162.5 million, reflecting an increase from $147.5 million at 2022-end. The company has sufficient funds to meet the short-term obligation of $93.1 million.
Watsco has been paying cash dividends for 49 consecutive years. It has been consistently sharing its cash flows with shareholders while maintaining a strong financial position. The company increased dividends in 21 out of the last 22 years. Effective from January 2023, it announced an annual dividend hike of 11% to $9.80 per share.
Key Picks
Quanta Services, Inc. (PWR - Free Report) remains uniquely positioned to capitalize on megatrends and opportunities to lead the energy transition and enable technological development, with initiatives such as electric vehicle charging infrastructure and the undergrounding of electrical infrastructure gaining momentum. More demand for infrastructure solutions that help support customers' energy-transition initiatives and modernization will continue to provide multi-year growth opportunities for Quanta.
PWR currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4%, on average. The Zacks Consensus Estimate for its 2023 sales and earnings indicates growth of 15.9% and 11.7%, respectively, from the previous year’s reported levels.
TopBuild Corp. (BLD - Free Report) has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 14.1%, on average. Shares of BLD have surged by 39% in the past year.
The Zacks Consensus Estimate for BLD’s 2023 sales and EPS indicates gains of 3.3% and 8.4%, respectively, from the year-ago period’s levels.
EMCOR Group, Inc. (EME - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 17.2%, on average. Shares of EME have risen 69.2% in the past year.
The Zacks Consensus Estimate for EME’s 2023 sales and EPS suggests growth of 11.3% and 35.4%, respectively, from the year-ago period’s levels.
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Watsco (WSO) Reaches 52-Week High: What's Driving the Stock?
Watsco, Inc. (WSO - Free Report) touched a new 52-week high of $406.08 on Oct 10. The stock pulled back to end the trading session at $399.23, up 0.76% from the previous day’s closing price of $396.20.
WSO’s shares have moved up 50.6% in a year compared with the Zacks Building Products - Air Conditioner and Heating industry’s 58.5% growth, the Zacks Construction sector’s 38.1% rise and the S&P 500 index’s 22.2% growth.
This Zacks Rank #3 (Hold) company has been gaining strength from its continuous investment in industry-leading technologies, accretive acquisitions and a consistent focus on rewarding customers. The solid performance of heating, ventilation and air conditioning (“HVAC”) equipment and commercial refrigeration product segments added to the company’s uptrend.
Although higher costs and ongoing inflationary pressure are major concerns, the company remains optimistic about its innovative technology and expects to survive in this unprecedented period.
Image Source: Zacks Investment Research
Let’s discuss the factors in detail that are boosting investors’ sentiments and substantiating Watsco’s growth potential.
Investment in Technology to Boost Growth: Watsco continues to invest in technologies and e-commerce to transform and improve customer experience. The company is deploying technology that improves order fill rates with speed and accuracy. It is using various new technologies to transform the homeowner experience, which will help the company expand its customer base. Currently, it has the industry’s largest database of digitized product information, with nearly 1 million SKUs being used by more than 350,000 technical contractors and technicians annually via the Product Information Management database.
Driven by various technology platforms, e-commerce sales accounted for 34% of total sales in the second quarter of 2023. The company remains optimistic about its innovative technology and expects to survive in this unprecedented period. Watsco increased its technology spending by $5.7 million in the first half of 2023. Investments in technology were $55 million for the 12-month period that ended Jun 30, 2023.
Acquisitions for Expansion: Acquisitions have been Watsco’s preferred mode of solidifying its product portfolio and leveraging new business opportunities to increase its customer base and profitability. On Mar 3, 2023, one of WSO's wholly-owned subsidiaries acquired Capitol, a New York-based distributor of air conditioning and heating products. The acquisition is poised to benefit the company as it expands its presence and product offerings. Over the last three years (since Apr 1, 2020), $117 million of capital has been invested in acquisitions.
The company focuses on partnering with great businesses focused on the HVAC/R industry.
Strong Liquidity to Reward Shareholders: WSO has enough liquidity to manage the persistent crisis. The company ended the second quarter of 2023 with cash and cash equivalents of $162.5 million, reflecting an increase from $147.5 million at 2022-end. The company has sufficient funds to meet the short-term obligation of $93.1 million.
Watsco has been paying cash dividends for 49 consecutive years. It has been consistently sharing its cash flows with shareholders while maintaining a strong financial position. The company increased dividends in 21 out of the last 22 years. Effective from January 2023, it announced an annual dividend hike of 11% to $9.80 per share.
Key Picks
Quanta Services, Inc. (PWR - Free Report) remains uniquely positioned to capitalize on megatrends and opportunities to lead the energy transition and enable technological development, with initiatives such as electric vehicle charging infrastructure and the undergrounding of electrical infrastructure gaining momentum. More demand for infrastructure solutions that help support customers' energy-transition initiatives and modernization will continue to provide multi-year growth opportunities for Quanta.
PWR currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4%, on average. The Zacks Consensus Estimate for its 2023 sales and earnings indicates growth of 15.9% and 11.7%, respectively, from the previous year’s reported levels.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TopBuild Corp. (BLD - Free Report) has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 14.1%, on average. Shares of BLD have surged by 39% in the past year.
The Zacks Consensus Estimate for BLD’s 2023 sales and EPS indicates gains of 3.3% and 8.4%, respectively, from the year-ago period’s levels.
EMCOR Group, Inc. (EME - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 17.2%, on average. Shares of EME have risen 69.2% in the past year.
The Zacks Consensus Estimate for EME’s 2023 sales and EPS suggests growth of 11.3% and 35.4%, respectively, from the year-ago period’s levels.