Watsco (NYSE:WSO) Hits New 1-Year Low - Should You Sell?

Key Points

• Watsco shares fell 4.1% to a new 52-week low of $298.01, well below their 50-day and 200-day moving averages.
• The company missed quarterly expectations, reporting $4.00 in EPS versus $4.41 expected and revenue of $2.10 billion versus $2.14 billion, despite 2.1% year-over-year revenue growth.
• Analysts maintain a consensus “Hold” rating with an average price target of $395.50, while Watsco offers a $13.20 annualized dividend yielding about 4.4%; however, its payout ratio is elevated at 114.48%.

Watsco, Inc. (NYSE:WSO - Get Free Report) reached a new 52-week low during mid-day trading on Tuesday . The stock traded as low as $298.01 and last traded at $299.8580, with a volume of 113426 shares changing hands. The stock had previously closed at $310.80.

Wall Street Analysts Forecast Growth

WSO has been the subject of several research reports. DA Davidson decreased their target price on Watsco from $385.00 to $330.00 and set a "neutral" rating on the stock in a report on Thursday, July 30th. Morgan Stanley upped their target price on Watsco from $370.00 to $405.00 and gave the company an "equal weight" rating in a report on Friday, July 10th. Weiss Ratings reiterated a "hold (c)" rating on shares of Watsco in a research report on Friday, June 26th. Robert W. Baird set a $400.00 price target on Watsco in a research note on Thursday, July 30th. Finally, Stephens restated an "overweight" rating and set a $485.00 price objective on shares of Watsco in a report on Monday, August 17th. Two analysts have rated the stock with a Buy rating and nine have issued a Hold rating to the stock. According to MarketBeat, Watsco presently has an average rating of "Hold" and an average target price of $395.50.

Watsco Trading Down 4.1%

The stock has a market capitalization of $12.30 billion, a price-to-earnings ratio of 25.84 and a beta of 1.05. The stock has a 50-day simple moving average of $361.71 and a 200 day simple moving average of $385.15.

Watsco (NYSE:WSO - Get Free Report) last issued its earnings results on Wednesday, July 29th. The construction company reported $4.00 earnings per share for the quarter, missing analysts' consensus estimates of $4.41 by ($0.41). The business had revenue of $2.10 billion during the quarter, compared to analyst estimates of $2.14 billion. Watsco had a net margin of 6.53% and a return on equity of 14.40%. Watsco's revenue for the quarter was up 2.1% on a year-over-year basis. During the same quarter in the prior year, the company earned $4.52 EPS. Sell-side analysts expect that Watsco, Inc. will post 12.21 earnings per share for the current fiscal year.

Watsco Dividend Announcement

The business also recently disclosed a quarterly dividend, which was paid on Friday, July 31st. Shareholders of record on Thursday, July 16th were paid a $3.30 dividend. This represents a $13.20 annualized dividend and a yield of 4.4%. The ex-dividend date was Thursday, July 16th. Watsco's dividend payout ratio is currently 114.48%.

Institutional Investors Weigh In On Watsco

A number of institutional investors have recently modified their holdings of WSO. Empowered Funds LLC raised its holdings in shares of Watsco by 4.1% during the first quarter. Empowered Funds LLC now owns 5,927 shares of the construction company's stock worth $3,013,000 after acquiring an additional 232 shares in the last quarter. Bank of Nova Scotia grew its stake in Watsco by 95.0% in the second quarter. Bank of Nova Scotia now owns 1,297 shares of the construction company's stock valued at $573,000 after purchasing an additional 632 shares in the last quarter. Sei Investments Co. increased its position in Watsco by 7.6% in the 2nd quarter. Sei Investments Co. now owns 50,442 shares of the construction company's stock worth $22,275,000 after purchasing an additional 3,570 shares during the last quarter. Treasurer of the State of North Carolina increased its position in Watsco by 2.8% in the 2nd quarter. Treasurer of the State of North Carolina now owns 16,258 shares of the construction company's stock worth $7,180,000 after purchasing an additional 437 shares during the last quarter. Finally, Diversify Advisory Services LLC raised its stake in shares of Watsco by 12.0% during the 2nd quarter. Diversify Advisory Services LLC now owns 523 shares of the construction company's stock worth $221,000 after purchasing an additional 56 shares in the last quarter. Institutional investors and hedge funds own 89.71% of the company's stock.

Watsco Company Profile

Watsco, Inc is the largest distributor of heating, ventilation, air conditioning and refrigeration (HVAC/R) equipment, parts and supplies in the United States. Headquartered in Miami, Florida, the company operates a network of more than 600 branches across the continental U.S., Canada and Puerto Rico. Watsco serves residential and commercial contractors by providing essential components for climate control systems, including air conditioners, furnaces, heat pumps, coils, refrigerants, controls and electrical and piping supplies.

Founded in 1947, Watsco has grown from a single regional distributor into an industry leader through a combination of organic expansion, acquisitions and strategic partnerships with original equipment manufacturers such as Carrier, Trane, Goodman and Lennox.

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