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Watsco (WSO) Buys N&S Supply, Boosts Northeast U.S. Presence

Zacks Equity Research

Watsco, Inc. WSO has acquired Fishkill, NY-based N&S Supply — a distributor of air conditioning, heating and plumbing products. This buyout expands Watsco’s sales presence in the Northeast United States. Although financial terms of the transaction have been kept under wraps, the company stated that the purchase consideration includes a combination of cash and Watsco’s common stock.

Benefits of the Buyout

N&S Supply — which generated roughly $44 million revenues over the past 12 months — serves more than 10,000 customers and offers approximately 40,000 stock keeping units or SKUs that include air conditioning and heating equipment, hydronic heating equipment, complimentary parts and supplies, along with a variety of plumbing products.

With this acquisition, Watsco expanded its presence in the Northeast United States. The company has been able to boost sales in the region from approximately $70 million in 2010 to a present run-rate of more than $700 million. N&S Supply compliments other Watsco buyouts completed in 2019.

Acquisitions have been Watsco’s preferred mode of solidifying its product portfolio and leveraging new business opportunities in a bid to increase the customer base and profitability. Watsco invested $133 million of capital in the first nine months of 2019 through a combination of cash and shares in market-leading businesses. On Aug 1, 2019, it acquired Peirce-Phelps, Inc., which is one of the largest HVAC distributors in North America. Operating in 19 locations in Pennsylvania, New Jersey and Delaware, Peirce-Phelps serves more than 9,000 contractor-customers.

This year, the company also acquired DASCO Supply, a seller of HVAC products. DASCO operates in seven locations, and serves more than 2,500 customers in New Jersey, New York and Connecticut. It also purchased an additional 1.8% ownership interest in Russell Sigler, Inc. (RSI), which sells HVAC products from 30 locations throughout the Western United States. Again, the buyout of 20% of Homans Associates from Carrier Corporation raised Watsco’s ownership from 80% to 100%.

It has acquired more than 60 businesses since 1989 to become the largest distributor of heating, ventilation and air conditioning equipment, as well as related parts and supplies (HVAC/R) in the United States. These buyouts have been aiding the company in leveraging technology investment, enhancing productivity and reducing costs.


 

Courtsey of the above-mentioned tailwinds, Watsco — which shares space with AAON, Inc. AAON, Comfort Systems USA, Inc. FIX and Lennox International, Inc. LII in the Zacks Building Products - Air Conditioner and Heating industry — has outperformed its industry so far this year. Earnings estimates for 2019 and 2020 have increased 1.1% and 1.4%, respectively, over the past 30 days, reflecting the stock's prospects. This Zacks Rank #3 (Hold) company has an expected three-five year EPS growth rate of 12.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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