Shares of Watsco (NYSE: WSO) have fallen after each of the last three earnings announcements, causing investors to endure a string of dismal news.
The company's performance in the first quarter fell short of expectations, but investors are optimistic about the future thanks to management's optimistic outlook. After the industrial distributor Watsco announced its earnings, its stock price increased by 7% as of 2 p.m. ET.
Things can get dicey in the summer. Distributing HVAC (heating, ventilation, and air conditioning) components and finished goods across North America is Watsco's specialty. In 2023, the firm experienced a dip in demand from consumers as a result of economic instability.
Even in 2024, the challenges persisted. Wall Street was expecting $2.28 per share on $1.59 billion in revenues from Watsco for the quarter, but the company only managed $2.17 per share on $1.56 billion in revenue. Revenue increased by 1% when acquisitions were accounted for, but it decreased by 2% when compared to same-store sales.
However, investors might take heart from management's optimistic outlook as we enter the summer cooling season.
"While softer market conditions persisted during what is essentially the low-season for product sales, we are currently experiencing growth in end-market demand as we enter the summer selling season," Albert H. Nahmad, CEO, said in a press release. "We believe market share gains are continuing, and we are proud to have added three new companies to our family since the beginning of last year.
After its results release, is it a good time to buy Watsco stock? Despite sluggish end markets, Watsco is able to generate cash, which allowed the board of directors to increase the stock dividend by 10% earlier in the year. At the conclusion of the quarter, Watsco's cash and short-term investments totaled $479 million, and the company had no debt.
Watsco, at its worst, is a solid income-producing business that has the resources to maintain and even grow its dividend for the time being. In addition to financial gains, other benefits may accrue from growth drivers such as the adoption of more energy-efficient air conditioner standards in light of climate change and the electrification of heating systems. From here, investors can win big with Watsco