MIAMI - Watsco, Inc. (NYSE:WSO), the largest distributor in the North American HVAC/R market, reported a 7% increase in second-quarter revenue, reaching a record $2.1 billion, though earnings per share fell short of analyst expectations.
The company's EPS for the quarter was $4.49, down from the analyst estimate of $4.68. Despite this, revenue exceeded the previous year's second quarter, reflecting robust customer adoption of Watsco's industry-leading technologies.
The sales increase was driven by a 4% rise on a same-store basis, with a notable 8% increase in HVAC equipment sales, which constitutes 71% of the total sales. However, the company experienced a 1% decline in other HVAC products. The revenue for the quarter was slightly below the consensus estimate of $2.19 billion.
Watsco's Chairman and CEO, Albert H. Nahmad, expressed satisfaction with the company's second-quarter performance, highlighting record sales and strong cash flow. He also emphasized the company's strengthened balance sheet during its peak selling season and strides in operating efficiencies as evidenced by SG&A performance. Nahmad pointed out that the second quarter sales were bolstered by healthier residential end-markets, with a 6% growth in ducted residential units and a 3% increase in average selling price.
For the first half of the year, Watsco reported a 4% increase in revenue at $3.7 billion, with a 1% increase on a same-store basis. The company's gross profit stood at $1.0 billion, reflecting a gross margin of 27.3%. Operating income for the first half was $395 million, resulting in an operating margin of 10.7%. The EPS for the first half was $6.69, a decrease from $7.25 in the previous year.
Watsco's President, A.J. Nahmad, highlighted the company's technological advancements, noting that e-commerce sales, which grew 13% during the quarter, now account for 36% of total sales. He also mentioned the increasing engagement with contractors and technicians through mobile platforms, which is expected to generate more operating efficiencies over time.
The company's long-term investment strategy includes a focus on technology to enhance customer experience and operating efficiencies, as well as a commitment to acquisitions that have contributed significantly to its growth. Watsco's debt-free balance sheet and strong cash flow position it to continue investing in growth opportunities and to partner with family businesses in the industry.
Watsco's financial strength was further demonstrated by its improved operating cash flow, which increased by $100 million compared to last year, and by the company's ability to raise new capital and increase its annual dividend rate by 10%.
While the company's revenue for the quarter marked a record high, the slight miss in EPS compared to analyst estimates indicates areas where the company may focus on improving financial performance in future quarters.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.