Shares of Watsco (WSO, Financial) dropped 7.75% today, reaching a price of $464.19, following the company's announcement of disappointing first-quarter 2025 results. The revenue and EBITDA did not meet Wall Street's expectations, primarily due to decreased sales and operating income, exacerbated by reduced demand in both new housing and international markets.
Watsco Inc (WSO, Financial), a leading distributor of HVAC/R products in North America, has faced a challenging period with recent financial results. Despite a modest market capitalization of $18.78 billion, the company is experiencing several financial warnings. Specifically, the Dividend Payout Ratio is considered too high at 0.81, raising concerns about sustainability. Additionally, the stock's Price-to-Book (PB) Ratio is near a 10-year high, indicating potential overvaluation.
On the positive side, Watsco's Altman Z-Score stands strong at 11.89, suggesting financial stability. The company also boasts a good operating margin expansion, demonstrating effective cost management strategies. Furthermore, the Beneish M-Score of -2.75 indicates that Watsco is unlikely to be manipulating its financial statements.
In terms of valuation, Watsco's PE ratio is currently at 35.46, which is high compared to the industry median. The company's GF Value of $369.97 suggests that the stock is modestly overvalued, as per GuruFocus's evaluation. Investors looking for the GF Value can find more information on the GF Value page.
The company has a robust historical growth record, with a 10-year revenue growth rate of 7.6% and an EBITDA growth rate of 9.3%. Nevertheless, the recent downturn highlights the need for close monitoring of market dynamics and management's response to external challenges, especially in the current cyclical environment.
