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Factors Setting the Tone for Watsco's (WSO) Q3 Earnings

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Watsco, Inc. WSO is set to report third-quarter 2021 results on Oct 20, before market open.

In the last reported quarter, the company’s earnings and sales surpassed the Zacks Consensus Estimate by 17.8% and 9.6%, respectively. On a year-over-year basis, earnings and sales also increased 64% and 36%, respectively.

Watsco's earnings topped the consensus mark in each of the last four quarters, with the average being 23.1%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 1.7% to $3.55 from $3.49 per share over the past seven days. The estimated figure indicates 28.6% growth from the year-ago earnings of $2.76 per share. The consensus mark for revenues is $1.80 billion, suggesting 17.3% year-over-year growth.

Watsco, Inc. Price and EPS Surprise

Watsco, Inc. Price and EPS Surprise
Watsco, Inc. Price and EPS Surprise

Watsco, Inc. price-eps-surprise | Watsco, Inc. Quote

Factors to Note

Solid housing and repair & remodeling activities are expected to have aided the company’s revenues in the third quarter. Overall, a higher sales mix of high-efficiency systems, improved margins and operating efficiencies as well as acquisitions are expected to have aided Watsco’s quarterly performance. Acquisitions and technology have been vital part of the company’s strategy. Also, business combinations are one of the preferred modes of solidifying the product portfolio and leveraging new business opportunities.

Watsco has been optimistic about innovative technology and a diversified product portfolio. The company’s heating, ventilation and air conditioning business is likely to have benefited from the industry-leading technology in the quarter to be reported. Watsco has been deploying technology that improves order fill rates with speed and accuracy. Its OnCall Air service, CreditForComfort application, and contactless sales and servicing capabilities have been commendable. Technology deployment is likely to have driven the company’s e-commerce sales in the quarter to be reported.

However, supply-chain disruptions have been a major cause of concern.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Watsco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #2 and an Earnings ESP of +4.18%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Comfort Systems USA, Inc. FIX has an Earnings ESP of +6.34% and carries a Zacks Rank #3.

Jacobs Engineering Group Inc. J has an Earnings ESP of +6.49% and holds a Zacks Rank #2.

KBR, Inc. KBR has an Earnings ESP of +2.66% and a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Watsco, Inc. (WSO) : Free Stock Analysis Report

KBR, Inc. (KBR) : Free Stock Analysis Report

Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report

Jacobs Engineering Group Inc. (J) : Free Stock Analysis Report

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