) recently delivered solid first quarter results, and management
provided a bullish outlook for 2012.
This prompted analysts to revise their estimates higher, sending
the stock to a Zacks #1 Rank (Strong Buy) stock.
Based on consensus estimates, analysts project solid double-digit
EPS growth for Watsco over the next several years. On top of this,
the company pays a dividend that yields a solid 3.4%.
Watsco, Inc. distributes air conditioning and heating equipment and
related parts and supplies in the United States. It is
headquartered in Coconut Grove, Florida and has a market cap of
First Quarter Results
Watsco recently reported first quarter earnings per share of 24
cents, 14% higher than the same quarter last year. It was in-line
with the Zacks Consensus Estimate.
Revenues rose 19% to a record $634 million, well ahead of the
consensus of $581 million. This was driven by a 12% increase in
sales of air conditioning and heating (HVAC) equipment. And
same-store sales were up a solid 7%.
The gross margin did contract 150 basis points, however, to 23.8%
of sales. But operating income increased 19% as the operating
margin held steady at 3.2%.
In its Q1 press release, the company stated that it expects 2012
EPS between $3.25 and $3.40, representing 19-24% growth over 2011
EPS. This prompted analysts to revise their estimates higher,
sending the stock to a Zacks #1 Rank (Strong Buy).
The 2012 Zacks Consensus Estimate is now $3.35, within guidance,
and corresponding with 22% growth. The 2013 consensus estimate is
currently $3.98, representing 19% growth.
While Watsco has been growing its bottom line, it has also been
aggressively raising its dividend. Since 2001, the company has
increased it at an average annual rate of 31%.
It currently yields a stellar 3.4%.
The valuation pictures looks reasonable for Watsco with shares
trading at 20x 12-month forward earnings, a slight discount to the
industry median. Its PEG ratio is 1.2 based on a 5-year consensus
growth rate of 16.7%.
Watsco offers investors solid earnings growth potential and a juicy
dividend yield at a reasonable price.
Todd Bunton is the Growth & Income Stock Strategist for
WATSCO INC (WSO): Free Stock Analysis Report
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