Watsco, Inc. WSO reported impressive fourth-quarter 2024 results wherein earnings and revenues topped the Zacks Consensus Estimate and increased year over year.
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The quarterly results benefited from a robust sales trend in residential equipment and improved commercial equipment sales. Additionally, the recapture of sales and market share of one of WSO’s core OEMs, which faced supply chain inefficiencies in 2023, boded well for the quarter.
Although increased costs and expenses were restrictive to some extent, the company’s focus on capturing growth opportunities, advanced product offerings and growing top line aided the quarter’s bottom line during the fourth quarter.
WSO stock jumped 9.7% during the trading hours and gained 2.1% in the after-hours trading session on Tuesday post the earnings announcement. Investors’ sentiments are likely to have been boosted by the 11% hike in the annual dividend payment, along with favorable growth trends across key metrics.
Inside Watsco’s Headlines
The company reported quarterly earnings per share (EPS) of $2.37, which surpassed the Zacks Consensus Estimate of $2.13 by 11.3%. In the year-ago quarter, WSO reported EPS of $2.06.
Revenues of $1.75 billion also topped the consensus mark of $1.65 billion by 6.2% and grew 9% year over year.
Watsco, Inc. Price, Consensus and EPS Surprise
Watsco, Inc. price-consensus-eps-surprise-chart | Watsco, Inc. Quote
Sales of HVAC equipment (heating, ventilating and air conditioning, comprising 69% of net sales) were up 14% year over year. Sales of other HVAC products (27% of sales) remained flat year over year. Sales from commercial refrigeration products (4% of sales) grew 4% from the year-ago quarter.
Sales trends of Watsco’s residential HVAC equipment reflected new customer acquisition, market share gains, price and mix benefits and accelerated growth in e-commerce sales, highlighting double-digit unit growth year over year.
E-commerce sales increased 8% to $2.6 billion in 2024 and accounted for 35% of annual net sales. In the fourth quarter, e-commerce sales were up 16% year over year.
In 2024, OnCallAir presented quotes to about 313,000 households, marking a 22% increase from last year. Additionally, it generated $1.5 billion in gross merchandise value, a 25% jump year over year.
Operating Highlights of WSO
The gross margin expanded 90 basis points (bps) in the reported quarter to 26.7%. Our model predicted the gross margin to increase year over year to 26.6%. Selling, general and administrative (SG&A) expenses, as a percentage of sales, declined 20 bps to 19.3%. We expected SG&A expenses, as a percentage of sales, to contract 30 bps year over year.
The operating margin expanded 110 bps year over year to 7.8%. Our estimate for the metric was on par with the reported value.
Watsco’s 2024 Highlights
For the full year, the company reported net sales of $7.62 billion, up 5% year over year.
Gross margin was down year over year to 26.8% from 27.4%. The operating margin also contracted 60 bps to 10.3% from the prior-year quarter.
WSO reported full-year EPS of $13.30, which was down from $13.67 reported in 2023.
WSO’s Financial Operations
As of Dec. 31, 2024, Watsco’s cash and cash equivalents totaled $526.3 million, significantly up from $210.1 million at the end of 2023. The company has no borrowings under its revolving credit facility, providing substantial access to capital for new growth opportunities.
In 2024, net cash provided by operating activities was $773.1 million compared with $562 million last year.
WSO’s Zacks Rank & Recent Construction Releases
Watsco currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Leggett & Platt, Incorporated LEG reported fourth-quarter 2024 results, with earnings meeting the Zacks Consensus Estimate and revenues beating the same. On a year-over-year basis, both metrics declined.
The quarterly results indicated weak demand in the company’s residential end markets due to a challenging macro environment and soft consumer spending. Softening in Automotive and Hydraulic Cylinders further impacted its performance. Although LEG carried out its restructuring and operating efficiency improvement initiatives, the headwinds mentioned above overshadowed the prospects to a great extent.
Martin Marietta Materials, Inc. MLM reported mixed results for fourth-quarter 2024, with earnings beating the Zacks Consensus Estimate but revenues missing the same. Both the top and bottom lines increased on a year-over-year basis.
Despite challenges in 2024—such as bad weather, reduced construction demand and tighter monetary policies—the company still achieved earnings growth and record profits in the fourth quarter. This was driven by $6 billion in strategic acquisitions and divestitures, reshaping the portfolio to focus more on aggregates, improving margins and maintaining a strong balance sheet. Looking ahead, MLM is confident that strong infrastructure and data center demand will help it meet its 2025 adjusted EBITDA target of $2.25 billion.
Masco Corporation’s MAS fourth-quarter 2024 earnings topped the Zacks Consensus Estimate and grew year over year. Earnings topped expectations in six of the trailing seven quarters. On the other hand, the net sales missed the consensus mark and tumbled year over year.
The quarter’s top-line results reflect lower sales volume for North American plumbing products, lower net selling prices of decorative architectural products and an unfavorable sales mix of plumbing products. However, the bottom line was favored by lower selling, general and administrative expenses, favorable net selling prices and strategic cost savings initiatives. Moving into 2025, the company aims to continue maintaining shareholder value through its top-tier repair and remodel-oriented product portfolio, strong balance sheet and disciplined capital allocation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
