Watsco (WSO) Tops Q3 EPS by 29c, Revenues Beat

Watsco (NYSE: WSO) reported Q3 EPS of $2.76, $0.29 better than the analyst estimate of $2.47. Revenue for the quarter came in at $1.54 billion versus the consensus estimate of $1.51 billion.

Third Quarter Performance Metrics

• 25% EPS increase to a record $2.76
• 25% operating income increase to a record $157 million
• 120 basis-point operating margin expansion to a record 10.2%
• 28% growth in net income attributable to Watsco to a record $106 million
• 10% sales growth to a record $1.54 billion (8% same-store increase, including 15% in U.S. markets)
• 12% gross profit increase to a record $374 million (30 basis-point increase in gross margin)
• 4% SG&A expense increase, including new locations
• Flat same-store SG&A expenses (100 basis-point decrease as a percentage of sales)

Sales trends (excluding acquisitions):

• 10% growth in HVAC equipment (70% of sales), including 19% growth in U.S. residential products
• 2% increase in other HVAC products (27% of sales)
• Flat sales in commercial refrigeration products (3% of sales)

Albert H. Nahmad, Watsco’s Chairman and CEO commented: “We are pleased to deliver another record quarter, especially during a complex business environment. Our core U.S. residential business has remained solid and continues to see above-average growth trends. We further strengthened our balance sheet, as evidenced by our record cash flow and debt reduction. Watsco is virtually debt-free and capable of investing in almost any-sized opportunity to grow our network and leadership position in the estimated $40 billion North American HVAC distribution industry. We express our gratitude to our more than 5,700 employees for their extraordinary efforts during this challenging period.”

For earnings history and earnings-related data on Watsco (WSO) click here.

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