Mizuho analyst Brett Linzey has revised the price target for Watsco (WSO, Financial), reducing it from $525 to $490, while maintaining a Neutral rating on the company's stock. This adjustment comes in response to the company's recent report indicating a shortfall in both revenue and operating margin.
Linzey's decision to lower the target price reflects a more cautious outlook, as the firm's revised estimates are adjusted to account for these softer financial results. The updated analysis suggests investors should be wary of the current challenges Watsco faces in maintaining its previous financial performance.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 10 analysts, the average target price for Watsco Inc (WSO, Financial) is $490.51 with a high estimate of $550.00 and a low estimate of $424.12. The average target implies an upside of 9.88% from the current price of $446.40. More detailed estimate data can be found on the Watsco Inc (WSO) Forecast page.
Based on the consensus recommendation from 17 brokerage firms, Watsco Inc's (WSO, Financial) average brokerage recommendation is currently 2.8, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Watsco Inc (WSO, Financial) in one year is $390.80, suggesting a downside of 12.46% from the current price of $446.4. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Watsco Inc (WSO) Summary page.
WSO Key Business Developments
Release Date: April 23, 2025
- Sales Growth: Core HVAC replacement business sales increased by 10% on higher volumes.
- Gross Margins: Improved following the launch of new systems.
- Cash Position: $430 million in cash.
- Debt: No debt reported.
- Equity: Over $3 billion in equity.
- Dividend Increase: Annual dividend raised by 11% to $12 per share.
- Domestic Sales: 91% of first quarter sales were domestic.
- International Sales: 9% of sales were in Canada and Latin America.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Watsco Inc (WSO, Financial) reported a strong start to the year with a 10% increase in sales for their core HVAC replacement business, driven by higher volumes and a richer mix of high-efficiency systems.
- The company successfully transitioned a significant portion of its inventory to the new A2L system, which is expected to positively impact around 55% of total sales.
- Gross margins improved following the launch of the new systems, indicating a positive trend for future profitability.
- Watsco Inc (WSO) maintains a strong balance sheet with $430 million in cash, no debt, and over $3 billion in equity, allowing for financial flexibility.
- The company raised its annual dividend by 11% to $12 per share, marking the 51st consecutive year of paying dividends, demonstrating a commitment to returning value to shareholders.
Negative Points
- There is uncertainty regarding the impact of proposed tariffs, particularly affecting the 9% of sales in Canada and Latin America.
- International sales were weak, contributing to a softer first quarter performance.
- The transition to the new A2L system has created some short-term disruptions, particularly in the commercial products segment.
- There are concerns about potential shortages of the 454B refrigerant due to container issues, which could impact the selling season.
- The company faces challenges with price increases from OEMs and the potential impact on consumer demand, especially in a high-interest rate environment.
