Shares of Watsco, Inc. (WSO - Free Report) scaled a 52-week high of $167.94 on Nov 8, eventually closing lower at $165.52.
Notably, the stock gained 20.6% over the past six months, higher than the S&P 500’s gain of 8.2%. Watsco has also outperformed the industry’s gain of 13.3% in the past six months with respect to price performance.
Further, Watsco carries a Zacks Rank #3 (Hold). The company has an impressive Growth Style Score of A. Our Growth Style Score highlights all the vital metrics of a company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities.
What's Driving Watsco?
Despite being adversely affected by Hurricanes — Harvey, Irma and Maria — Watsco projects continued record performance in 2017 with full-year earnings per share in the range of $5.50-$5.60. The company continues to make progress with its industry-leading technologies and estimates e-commerce sales to touch $1 billion this year.
Notably, Watsco is continuing to catch up with the digital revolution by investing in scalable platforms for mobile apps, e-commerce, business intelligence and supply-chain optimization. The company’s technology evolution continues to make progress. It maintained its annual run rate for technology spending at $23 million.
Watsco’s balance sheet remains conservative, with the debt-to-EBITDA ratio under 1x. The company, thus, continues to look for investments to grow its network, constantly looking for investments, acquisitions or mergers. Watsco expects to deliver on its stated goal of cash flow exceeding net income gains this year. It will also consider increasing dividends at the beginning of the next year.
Further, Watsco has immense growth potential in the replacement market, attributed to an aging stock of air conditioners and heating systems in the United States. Moreover, the company is likely to benefit from the expansion of its product offerings, as well as logistical and productivity improvements.
All these measures have raised investors’ confidence and are anticipated to boost the company’s share price in the days ahead.
Stocks to Consider
Better-ranked stocks in the same space include Potlatch Corporation (PCH - Free Report) , NVR, Inc. (NVR - Free Report) and United Rentals, Inc. (URI - Free Report) , all three sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Potlatch Corporation has an expected long-term growth rate of 5%.
NVR, Inc. has an expected long-term growth rate of 14.9%.
United Rentals has an expected long-term growth rate of 15.6%.
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