Shareholders of Watsco, Inc. (NYSE:WSO) will be pleased this week, given that the stock price is up 10% to US$444 following its latest first-quarter results. Revenues of US$1.6b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$2.17, missing estimates by 4.5%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Watsco's 13 analysts are now forecasting revenues of US$7.72b in 2024. This would be a modest 5.7% improvement in revenue compared to the last 12 months. Per-share earnings are expected to swell 10% to US$14.31. Before this earnings report, the analysts had been forecasting revenues of US$7.74b and earnings per share (EPS) of US$14.38 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$406, showing that the business is executing well and in line with expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Watsco at US$500 per share, while the most bearish prices it at US$277. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Watsco's revenue growth is expected to slow, with the forecast 7.7% annualised growth rate until the end of 2024 being well below the historical 12% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.7% per year. So it's pretty clear that, while Watsco's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$406, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Watsco going out to 2026, and you can see them free on our platform here.
We also provide an overview of the Watsco Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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