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Watsco's (WSO) Q3 Earnings & Revenues Top Estimates, Shares Up
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Watsco, Inc. (WSO - Free Report) reported better than expected third-quarter 2023 results, with earnings and revenues topping the Zacks Consensus Estimate.
Watsco delivered record sales and earnings per share, driven by solid HVAC equipment sales growth, improved residential unit volumes and strong price realization. Also, the commercial end markets remained healthy in the quarter.
Shares of Watsco dropped 3.9% during the trading session on Oct 19 but gained 2% in the after-hour trading session on the same day.
Inside the Numbers
Watsco reported quarterly earnings of $4.35 per share, surpassing the consensus estimate of $4.31 by 0.9% and increasing 8% year over year on record operating profit.
Total sales of $2.13 billion surpassed the consensus mark of $2.05 billion by 3.6%, increasing 4% from the year-ago period’s levels. The upside reflects sustainable market share gains, solid heat pump sales, solid commercial business and product diversity. Also, continued investment in technologies designed to revolutionize customer experience added to the positives.
Sales of HVAC equipment (heating, ventilating and air conditioning, comprising 70% of sales) were up 6% year over year. Sales of other HVAC products (26% of sales) dropped 3% from the prior-year quarter. Sales from commercial refrigeration products (4% of sales) rose 9% year over year.
Operating Highlights
Gross margin contracted 40 basis points (bps) in the third quarter to 26.7%. However, our model predicted gross margin to expand 30 bps year over year. SG&A expenses, as a percentage of sales, improved 80 bps year over year in the quarter, much ahead of our expectation of the improvement of 30 bps year over year
The operating margin declined 50 bps in the third quarter to 12.1%. Our estimate for the metric was 12.2%.
Financial Operations
As of Sep 30, 2023, cash and cash equivalents were $175 million compared with $147.5 million at 2022-end. For the first nine months of 2023, the net cash provided by operating activities was $263.3 million compared with $358.9 million in the prior year period.
KB Home (KBH - Free Report) reported better-than-expected results in third-quarter fiscal 2023 (ended Aug 31, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in three consecutive quarters.
About KBH’s quarterly results, Jeffrey Mezger, chairman, president and chief executive officer, stated, “Demand was steady throughout the quarter, leading to a community absorption pace of 4.3 net orders per month, even though mortgage interest rates rose as the quarter progressed.”
Lennar Corporation (LEN - Free Report) reported better-than-expected results for third-quarter fiscal 2023. Its earnings and revenues surpassed the Zacks Consensus Estimate.
Both the top and the bottom line of LEN declined on a year-over-year basis. Improving the supply chain and labor market has positively impacted the company’s production times and reduced cycle time sequentially to 32 days.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for fourth-quarter fiscal 2023 (ended Aug 31, 2023), with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. Earnings beat the consensus mark for the 14th consecutive quarter. Revenues missed the same for four quarters in a row following six straight quarters of beat.
Despite a sales decline in the lighting business, AYI reported strong fiscal fourth-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.
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Watsco's (WSO) Q3 Earnings & Revenues Top Estimates, Shares Up
Watsco, Inc. (WSO - Free Report) reported better than expected third-quarter 2023 results, with earnings and revenues topping the Zacks Consensus Estimate.
Watsco delivered record sales and earnings per share, driven by solid HVAC equipment sales growth, improved residential unit volumes and strong price realization. Also, the commercial end markets remained healthy in the quarter.
Shares of Watsco dropped 3.9% during the trading session on Oct 19 but gained 2% in the after-hour trading session on the same day.
Inside the Numbers
Watsco reported quarterly earnings of $4.35 per share, surpassing the consensus estimate of $4.31 by 0.9% and increasing 8% year over year on record operating profit.
Total sales of $2.13 billion surpassed the consensus mark of $2.05 billion by 3.6%, increasing 4% from the year-ago period’s levels. The upside reflects sustainable market share gains, solid heat pump sales, solid commercial business and product diversity. Also, continued investment in technologies designed to revolutionize customer experience added to the positives.
Watsco, Inc. Price, Consensus and EPS Surprise
Watsco, Inc. price-consensus-eps-surprise-chart | Watsco, Inc. Quote
Sales of HVAC equipment (heating, ventilating and air conditioning, comprising 70% of sales) were up 6% year over year. Sales of other HVAC products (26% of sales) dropped 3% from the prior-year quarter. Sales from commercial refrigeration products (4% of sales) rose 9% year over year.
Operating Highlights
Gross margin contracted 40 basis points (bps) in the third quarter to 26.7%. However, our model predicted gross margin to expand 30 bps year over year. SG&A expenses, as a percentage of sales, improved 80 bps year over year in the quarter, much ahead of our expectation of the improvement of 30 bps year over year
The operating margin declined 50 bps in the third quarter to 12.1%. Our estimate for the metric was 12.2%.
Financial Operations
As of Sep 30, 2023, cash and cash equivalents were $175 million compared with $147.5 million at 2022-end. For the first nine months of 2023, the net cash provided by operating activities was $263.3 million compared with $358.9 million in the prior year period.
Zacks Rank & Recent Construction Releases
Watsco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
KB Home (KBH - Free Report) reported better-than-expected results in third-quarter fiscal 2023 (ended Aug 31, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. The company’s earnings and revenues surpassed the consensus mark in three consecutive quarters.
About KBH’s quarterly results, Jeffrey Mezger, chairman, president and chief executive officer, stated, “Demand was steady throughout the quarter, leading to a community absorption pace of 4.3 net orders per month, even though mortgage interest rates rose as the quarter progressed.”
Lennar Corporation (LEN - Free Report) reported better-than-expected results for third-quarter fiscal 2023. Its earnings and revenues surpassed the Zacks Consensus Estimate.
Both the top and the bottom line of LEN declined on a year-over-year basis. Improving the supply chain and labor market has positively impacted the company’s production times and reduced cycle time sequentially to 32 days.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for fourth-quarter fiscal 2023 (ended Aug 31, 2023), with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. Earnings beat the consensus mark for the 14th consecutive quarter. Revenues missed the same for four quarters in a row following six straight quarters of beat.
Despite a sales decline in the lighting business, AYI reported strong fiscal fourth-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.