Watsco (WSO) Tops Q2 EPS by 39c, Revenues Beat

Watsco (NYSE: WSO) reported Q2 EPS of $2.26, $0.39 better than the analyst estimate of $1.87. Revenue for the quarter came in at $1.36 billion versus the consensus estimate of $1.3 billion.

Second Quarter Results

Key performance metrics:

• Earnings per share of $2.26 on net income attributable to Watsco of $87 million
• Sales of $1.36 billion compared to $1.37 billion last year
• Gross profit of $319 million (gross margins declined 30 basis-points)
• Operating profit of $129 million with operating margins of 9.5%
• Selling, general and administrative (SG&A) expenses declined 1% (includes 26 acquired locations)
• On a same-store basis:
  • Sales decreased 6%
  • Operating profit decreased 7%
  • Operating margins were 9.7% versus 9.8% last year
  • SG&A declined 7% (a 20 basis-point improvement as a percentage of sales)
• Record operating cash flow of $219 million versus $16 million last year
• 85% reduction in borrowings year-over-year to $33 million

Sales trends (excluding acquisitions):

• 4% decrease in HVAC equipment (70% of sales), including flat sales in residential products
• 9% decrease in other HVAC products (27% of sales)
• 15% decrease in commercial refrigeration products (3% of sales)

Albert H. Nahmad, Chairman and CEO, commented: “Watsco’s entrepreneurial culture and decentralized operating philosophy, which empowers leaders to think and act locally, are critically important given the diverse business conditions in our various markets. In a short period of time, our leaders deployed more technology and implemented new ideas to enhance the customer experience in a challenging environment. During the quarter, our residential HVAC equipment business recovered steadily and drove record, double-digit sales and profit growth rates in June 2020 versus 2019 with on-going momentum into July. We will continue to innovate, drive performance and look for opportunities to grow our business.”

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

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