A Business at a Glance
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WATSCO INC
WSO
$13.7B
Mkt Cap
$362.01
+0.60%
WATSCO INC (WSO) has a current P/E ratio of 29.6, compared to its historical median P/E of 24.2. The stock is currently considered Fair based on its historical valuation range.
WATSCO INC (WSO) has a 5-year average return on invested capital (ROIC) of 28.1%. This indicates strong capital allocation and a potential competitive advantage.
WATSCO INC (WSO) has a market capitalization of $13.7B. It is classified as a large-cap stock.
Yes, WATSCO INC (WSO) pays a dividend with a trailing twelve-month yield of 3.45%.
Based on historical P/E analysis, WATSCO INC (WSO) appears fair. The current P/E of 29.6 is 22% above its historical median of 24.2. The estimated fair value CAGR (P/E method) is 14.4%.
WATSCO INC (WSO) operates in the Wholesale-Hardware & Plumbing & Heating Equipment & Supplies industry, within the Consumer Cyclical sector.
WATSCO INC (WSO) reported annual revenue of $7.2 billion in its most recent fiscal year, based on SEC EDGAR filings.
Watsco is the largest distributor of air conditioning, heating, and refrigeration equipment and related parts and supplies (HVAC/R) in North America, operating from 695 locations across 43 U.S. states, Canada, Mexico, and Puerto Rico, serving more than 130,000 active contractors in replacement and new construction markets. The company distributes equipment manufactured by eight major OEMs (Carrier, Daikin, Rheem, Trane, Bosch, Lennox, Mitsubishi, and Nortek) as well as non-equipment products including parts, supplies, ductwork, air movement products, insulation, tools, thermostats, and air quality products from manufacturers such as Resideo, Johns Manville, and Owens Corning, with additional sales to the commercial refrigeration market. Watsco's business model is built on a combination of organic growth through additional locations, new product introduction, expansion with OEMs and vendors, and strategic acquisitions of established market-position companies, generating revenues of $7.2 billion in 2025 from a base of $64.1 million in 1989. The company operates in a highly fragmented industry with more than 2,100 distribution companies and an estimated market size of $74.0 billion, with the residential replacement market driven by an aging installed base of approximately 102 million central air conditioning and heating systems in the United States that have been in service for more than 10 years. Watsco's competitive advantages include technology platforms such as OnCall Air, pricing optimization tools, and a debt-free balance sheet, with a long-term gross margin target of 30% and ongoing initiatives to expand in the fragmented non-equipment market segment.
【Simplified operations ahead】 Management expects a more simplified business environment in 2026 following the substantial completion of the A2L product transition, with overall operating efficiency and SG&A performance expected to improve as the transition matures. The company is accelerating pricing optimization tools to progress toward its 30% gross margin target and has launched initiatives to compete and grow sales in the highly fragmented non-equipment market, which comprises approximately 50% of industry market share. Watsco expects inventory turns to increase and contribute positively to cash flow, with inventories targeted to reach near historical levels by year-end relative to company size. The company continues to invest in e-commerce technologies and customer tooling, with OnCall Air adoption expected to accelerate in years ahead, and management is developing aggressive growth strategies with key OEM partners for 2026.
| Metric | Target | Period |
|---|---|---|
| OnCall Air sales | exceed $2 billion | FY2026 |
| Gross profit margin target | 30% | Long-term |
OnCall Air sales (FY2026): “We expect sales of OnCall Air to exceed $2 billion this year.”
Gross profit margin target (Long-term): “We have a target of 30% gross profit margin, and a lot of things go into that. We're not gonna get there overnight, but we have a plan to get there.”
Generated solely from the company's own reports listed below — not from third-party data. Hallucination risk is low. · Sources: 10-K, Q4 FY2025 Earnings Call, Q3 FY2025 Earnings Call, Q2 FY2025 Earnings Call, Q1 FY2025 Earnings Call
| Metric | TTM | FY2025 | FY2024 | FY2023 | FY2022 | FY2021 |
|---|---|---|---|---|---|---|
| Revenue | 7.2B | 7.2B | 7.6B | 7.3B | 7.3B | 6.3B |
| Net Income | 464M | 464M | 499M | 499M | 601M | 382M |
| EPS | $12.25 | $12.25 | $13.30 | $13.67 | $15.41 | $10.78 |
| Free Cash Flow | 535M | 535M | 743M | 526M | 536M | 324M |
| ROIC | 19.3% | 23.7% | 26.0% | 28.3% | 34.6% | 28.0% |
| Gross Margin | 28.0% | 28.0% | 26.8% | 27.4% | 27.9% | 26.6% |
| Debt/Equity | 0.17 | 0.17 | 0.17 | 0.19 | 0.18 | 0.28 |
| Dividends/Share | $12.50 | $11.70 | $10.55 | $9.80 | $8.55 | $7.63 |
| Operating Income | 720M | 720M | 782M | 795M | 832M | 629M |
| Operating Margin | 10.0% | 10.0% | 10.3% | 10.9% | 11.4% | 10.0% |
| ROE | 16.7% | 17.1% | 20.4% | 24.2% | 33.8% | 24.2% |
| Shares Outstanding | 38M | 38M | 38M | 37M | 39M | 35M |
| Metric | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Income Statement | |||||||||||||
| Revenue | 3.9B | 4.1B | 4.2B | 4.3B | 4.5B | 4.8B | 5.1B | 6.3B | 7.3B | 7.3B | 7.6B | 7.2B | 7.2B |
| Gross Margin | 24.2% | 24.5% | 24.5% | 24.5% | 24.6% | 24.3% | 24.2% | 26.6% | 27.9% | 27.4% | 26.8% | 28.0% | 28.0% |
| R&D | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| SG&A | 651M | 671M | 689M | 716M | 757M | 800M | 833M | 1.1B | 1.2B | 1.2B | 1.3B | 1.3B | 1.3B |
| EBIT | 306M | 337M | 346M | 354M | 372M | 367M | 401M | 629M | 832M | 795M | 782M | 720M | 720M |
| Op. Margin | 7.8% | 8.2% | 8.2% | 8.2% | 8.2% | 7.7% | 7.9% | 10.0% | 11.4% | 10.9% | 10.3% | 10.0% | 10.0% |
| Net Income | 140M | 159M | 168M | 191M | 223M | 226M | 246M | 382M | 601M | 499M | 499M | 464M | 464M |
| Net Margin | 3.5% | 3.9% | 4.0% | 4.4% | 4.9% | 4.7% | 4.9% | 6.1% | 8.3% | 6.9% | 6.5% | 6.4% | 6.4% |
| Non-Recurring | 1.3M | 487K | 189K | -115K | -27K | 585K | -17K | -350K | 1.6M | 143K | -536K | -407K | -407K |
| Returns on Capital | |||||||||||||
| ROIC | 15.5% | 16.0% | 16.8% | 21.4% | 21.5% | 18.1% | 20.6% | 28.0% | 34.6% | 28.3% | 26.0% | 23.7% | 19.3% |
| ROE | 16.2% | 17.3% | 17.1% | 16.6% | 16.9% | 16.2% | 16.9% | 24.2% | 33.8% | 24.2% | 20.4% | 17.1% | 16.7% |
| ROA | 8.1% | 8.9% | 9.2% | 9.7% | 10.6% | 9.6% | 9.8% | 13.7% | 18.3% | 13.8% | 12.2% | 10.4% | 10.5% |
| Cash Flow | |||||||||||||
| Op. Cash Flow | 145M | 223M | 282M | 307M | 171M | 336M | 534M | 350M | 572M | 562M | 773M | 570M | 570M |
| Free Cash Flow | 123M | 199M | 238M | 289M | 153M | 318M | 518M | 324M | 536M | 526M | 743M | 535M | 535M |
| Owner Earnings | 116M | 191M | 249M | 271M | 133M | 294M | 486M | 296M | 511M | 497M | 697M | 491M | 491M |
| CapEx | 22M | 24M | 44M | 18M | 17M | 18M | 16M | 25M | 36M | 35M | 30M | 35M | 35M |
| Maint. CapEx | 18M | 19M | 20M | 22M | 22M | 25M | 26M | 28M | 32M | 35M | 41M | 44M | 44M |
| Growth CapEx | 3.6M | 4.6M | 24M | 0 | 0 | 0 | 0 | 0 | 4.0M | 388K | 0 | 0 | 0 |
| D&A | 18M | 19M | 20M | 22M | 22M | 25M | 26M | 28M | 32M | 35M | 41M | 44M | 44M |
| CapEx/OCF | 14.8% | 10.7% | 15.5% | 5.8% | 10.1% | 5.3% | 3.1% | 7.3% | 6.2% | 6.3% | 3.9% | 6.1% | 6.1% |
| Capital Allocation | |||||||||||||
| Dividends Paid | 70M | 99M | 128M | 164M | 209M | 241M | 266M | 295M | 332M | 383M | 424M | 474M | 474M |
| Dividend Yield | 3.1% | 3.4% | 3.9% | 4.3% | 4.5% | 5.3% | 4.5% | 3.4% | 3.5% | 3.3% | 2.6% | 2.9% | 3.5% |
| Share Buybacks | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Buyback Yield | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 0.0% |
| Stock-Based Comp | 11M | 13M | 12M | 13M | 16M | 17M | 22M | 25M | 29M | 30M | 35M | 35M | 35M |
| Debt Repayment | 381K | 0 | 0 | 0 | 790K | 0 | 196K | 22K | 33M | 56M | 0 | 0 | 0 |
| Balance Sheet | |||||||||||||
| Net Debt | 583M | 456M | 415M | -36M | 188M | 463M | 70M | 340M | 187M | 210M | -334M | -254M | 46M |
| Cash & Equiv. | 24M | 35M | 56M | 80M | 83M | 74M | 146M | 118M | 148M | 210M | 526M | 433M | 433M |
| Long-Term Debt | 304M | 246M | 236M | 22M | 136M | 312M | 144M | 285M | 244M | 305M | 337M | 362M | 362M |
| Debt/Equity | 0.69 | 0.51 | 0.47 | 0.03 | 0.20 | 0.37 | 0.15 | 0.28 | 0.18 | 0.19 | 0.17 | 0.17 | 0.17 |
| Interest Coverage | 58.7 | 60.7 | 93.1 | 55.6 | 135.8 | 91.0 | 323.7 | 631.1 | 384.1 | 161.5 | 37.5 | 41.6 | 41.6 |
| Equity | 884M | 957M | 1.0B | 1.3B | 1.3B | 1.4B | 1.5B | 1.7B | 1.9B | 2.2B | 2.7B | 2.8B | 2.8B |
| Total Assets | 1.8B | 1.8B | 1.9B | 2.0B | 2.2B | 2.6B | 2.5B | 3.1B | 3.5B | 3.7B | 4.5B | 4.4B | 4.4B |
| Total Liabilities | 659M | 585M | 623M | 496M | 559M | 841M | 705M | 1.1B | 1.2B | 1.1B | 1.4B | 1.2B | 1.2B |
| Intangibles | 186M | 160M | 159M | 161M | 148M | 172M | 170M | 187M | 175M | 218M | 208M | 210M | 210M |
| Retained Earnings | 421M | 495M | 550M | 595M | 628M | 633M | 636M | 761M | 1.0B | 1.2B | 1.3B | 1.3B | 1.3B |
| Working Capital | 870M | 911M | 925M | 921M | 1.1B | 1.1B | 997M | 1.2B | 1.4B | 1.7B | 2.1B | 2.2B | 2.2B |
| Current Assets | 1.2B | 1.2B | 1.2B | 1.3B | 1.4B | 1.5B | 1.5B | 2.0B | 2.3B | 2.4B | 3.1B | 3.0B | 3.0B |
| Current Liabilities | 287M | 270M | 315M | 416M | 358M | 462M | 487M | 727M | 907M | 712M | 984M | 718M | 718M |
| Per Share Data | |||||||||||||
| EPS | 4.32 | 4.90 | 5.15 | 5.81 | 6.49 | 6.50 | 7.01 | 10.78 | 15.41 | 13.67 | 13.30 | 12.25 | 12.25 |
| Owner EPS | 3.57 | 5.88 | 7.64 | 8.26 | 3.87 | 8.48 | 13.83 | 8.36 | 13.11 | 13.60 | 18.59 | 12.94 | 12.94 |
| Book Value | 27.29 | 29.45 | 30.83 | 39.53 | 39.20 | 41.37 | 42.29 | 47.03 | 48.43 | 61.04 | 70.83 | 73.40 | 73.40 |
| Cash Flow/Share | 4.48 | 6.85 | 8.64 | 9.33 | 4.96 | 9.68 | 15.20 | 9.87 | 14.66 | 15.38 | 20.61 | 15.03 | 13.40 |
| Dividends/Share | 2.00 | 2.80 | 3.60 | 4.60 | 5.60 | 6.40 | 6.93 | 7.63 | 8.55 | 9.80 | 10.55 | 11.70 | 12.50 |
| Shares Out. | 32.4M | 32.5M | 32.6M | 32.8M | 34.4M | 34.7M | 35.2M | 35.4M | 39.0M | 36.5M | 37.5M | 37.9M | 37.9M |
| Valuation | |||||||||||||
| P/E Ratio | 17.6 | 17.7 | 21.5 | 22.8 | 17.0 | 23.1 | 28.3 | 25.2 | 14.7 | 29.6 | 34.9 | 28.2 | 29.6 |
| P/FCF | 20.0 | 14.2 | 15.2 | 15.1 | 24.7 | 16.4 | 13.5 | 29.7 | 16.5 | 28.1 | 23.4 | 24.5 | 25.6 |
| EV/EBIT | 9.6 | 9.6 | 11.8 | 13.0 | 11.0 | 16.3 | 19.0 | 17.1 | 10.8 | 20.4 | 23.6 | 19.3 | 19.1 |
| Price/Book | 3.0 | 3.2 | 3.9 | 3.7 | 3.1 | 4.0 | 5.1 | 6.3 | 4.7 | 7.1 | 7.0 | 5.0 | 4.9 |
| Price/Sales | 0.6 | 0.8 | 0.8 | 1.0 | 1.1 | 1.0 | 1.3 | 1.5 | 1.3 | 1.7 | 2.3 | 2.4 | 1.9 |
| FCF Yield | 4.6% | 6.5% | 6.0% | 6.1% | 3.7% | 5.6% | 6.8% | 3.1% | 6.1% | 3.3% | 4.0% | 3.8% | 3.9% |
| Market Cap | 2.7B | 3.1B | 3.9B | 4.7B | 4.1B | 5.7B | 7.6B | 10.6B | 8.8B | 15.9B | 18.7B | 14.0B | 13.7B |
| Avg. Price | 68.56 | 87.94 | 100.62 | 116.03 | 134.60 | 130.57 | 168.00 | 242.85 | 245.11 | 321.63 | 442.62 | 426.64 | 362.01 |
| Year-End Price | 76.18 | 86.73 | 110.97 | 132.37 | 110.01 | 150.23 | 198.49 | 271.71 | 226.35 | 405.05 | 463.90 | 345.34 | 362.01 |
WATSCO INC passes 6 of 9 quality checks, suggesting mixed fundamentals.
WATSCO INC trades at 29.6x trailing earnings, compared to its 15-year median P/E of 24.2x, suggesting it is currently Fair relative to its historical range. On a free-cash-flow basis, the stock trades at 23.6x vs a median of 19.9x. The company's 5-year average ROIC is 28.1% with a gross margin of 27.3%. Total shareholder yield (dividends) is 3.5%. At current prices, the estimated annualized return to fair value is +13.9%.
WATSCO INC (WSO) has a net profit margin of 6.4%. This is a modest margin.
WATSCO INC (WSO) generated $535 million in free cash flow in its most recent fiscal year. Positive free cash flow supports dividends, buybacks, and debt reduction.
WATSCO INC (WSO) has a debt-to-equity ratio of 0.17. This indicates a conservatively financed balance sheet.
WATSCO INC (WSO) reported earnings per share (EPS) of $12.25 in its most recent fiscal year.
WATSCO INC (WSO) has a return on equity (ROE) of 17.1%. This indicates the company generates strong returns for shareholders.
WATSCO INC (WSO) has a 5-year average gross margin of 27.3%. This lower margin is typical of capital-intensive or commodity businesses.
The Ledger Terminal provides 18 years of financial data for WATSCO INC (WSO), sourced directly from SEC EDGAR filings. This includes income statements, balance sheets, cash flow statements, and key financial ratios.
WATSCO INC (WSO) has a book value per share of $73.40, based on its most recent annual SEC filing.
Based on recent SEC filings and earnings disclosures, Management expects a more simplified business environment in 2026 following the substantial completion of the A2L product transition, with overall operating efficiency and SG&A performance expected to improve as the transition matures. The company is accelerating pricing optimization tools to progress toward its 30% gross margin target and has launched initiatives to compete and grow sales in the highly fragmented non-equipment market, which comprises approximately 50% of industry market share. Watsco expects inventory turns to increase and contribute positively to cash flow, with inventories targeted to reach near historical levels by year-end relative to company size. The company continues to invest in e-commerce technologies and customer tooling, with OnCall Air adoption expected to accelerate in years ahead, and management is developing aggressive growth strategies with key OEM partners for 2026.
Based on recent SEC filings and earnings calls, WATSCO INC (WSO) has provided the following forward guidance: OnCall Air sales: exceed $2 billion (FY2026); Gross profit margin target: 30% (Long-term).