Watsco, Inc. (WSO - Free Report) reported first-quarter 2019 results, wherein earnings met the Zacks Consensus Estimate, while revenues missed the same.
The company reported quarterly earnings of 88 cents per share, in line with the consensus estimate. However, total revenues of $931.3 million lagged the consensus mark of $944 million by 1.4%.
On a year-over-year basis, the company’s top line grew 1% but bottom line declined 1.1%. Watsco has been experiencing unfavorable weather in certain markets served. The company’s first quarter, which has one less selling-day than the corresponding period of 2018, is the weakest period of the year on a seasonal basis.
Watsco, Inc. Price, Consensus and EPS Surprise
Product Line Sales Discussion
Sales of HVAC equipment (heating, ventilating and air conditioning; accounting for 67% of sales) increased 2% from a year ago. However, sales of other HVAC products (29% of sales) and commercial refrigeration products (4% of sales) declined 2% and 4%, respectively, from the prior-year quarter.
Cost of sales grew 0.3% to $697.5 million from the year-ago quarter. Gross margin improved 20 basis points (bps) to 25.1%.
Selling, general & administrative expenses (SG&A) increased 1% from the year-ago quarter to $180.1 million. On a same-store basis, the metric remained flat year over year. However, SG&A expenses, as a percentage of sales, improved 10 bps to 19.2%.
Operating income increased 2% from the prior-year period to $55.1 million during the quarter. Operating margin also improved 10 bps year over year to 5.9%. On a same-store basis, operating income rose 4%, while operating margin expanded 30 bps to a record of 6.1%.
As of Mar 31, 2019, cash and cash equivalents were $77.3 million compared with $82.9 million at 2018-end. Cash from operations was $52.9 million in the first quarter compared with $41.6 million a year ago.
At the end of the first quarter, Watsco’s debt-to-total capitalization ratio was 8%.
On Apr 4, 2019, the company announced the completion of the acquisition of a distributor of air conditioning and heating products, DASCO Supply. Based in Whippany, NJ, DASCO will provide its resources and technology in order to aid Watsco in accomplishing growth plans.
Zacks Rank & Key Picks
Watsco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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