Watsco will announce the results on July 21st
Watsco, Inc. (NYSE: WSO) is the largest distributor of air conditioning, heating, cooling equipment, and related parts and consumables in the United States. Watsco also operates in Canada, Mexico and Puerto Rico and exports to Latin America and the Caribbean. This afternoon the WSO was last up 2.7% to $ 294.54.
On July 1, Watsco declared a regular quarterly cash dividend of $ 1.95 payable to shareholders of record on July 30th at close of business on July 15th. WSO currently has a forward dividend of $ 7.80 and a dividend yield of 2.70%. Watsco has paid dividends for 47 consecutive years.
Watsco stock was up 61% year-over-year when it hit a low of $ 182.36 in July 2020. Additionally, stocks in Watsco stock are up 30% year-to-date, but have fallen 7% since their record high, down from $ 307.81 in May.
WSO is expected to release earnings forecast on Wednesday July 21st. Watsco has exceeded earnings expectations in all four of its top earnings reports. For the second quarter of 2020, Watsco beat analyst estimates with a margin of $ 0.38 and reported earnings per share of $ 2.26. For the third quarter of 2020, WSO earnings rose to $ 2.76 per share, beating expectations by $ 0.28. For the fourth quarter of 2020, Watsco saw earnings decline to $ 1.14 per share, but still beat estimates by a margin of $ 0.15. For the first quarter of 2021, WSO reported earnings per share of $ 1.39, beating expectations by $ 0.50.
From a fundamental perspective, the biggest problem with Watsco stock is its valuation. WSO has an inflated price to earnings ratio of 38.46, and its forward price to earnings ratio of 33.78 is not enough of an improvement. On a positive note, Watsco has seen consistent sales and net income growth over the past few years. Overall, investors may want to wait for a better buying opportunity for higher growth potential and a more attractive dividend yield.
Also, the majority of analysts covering WSO are pessimistic. This is true of the seven out of eight brokers who make a lukewarm “hold” or “strong sell” recommendation.