Watsco's Q2 Earnings Miss Estimates, Revenue Down 3.6% YoY

Watsco (NYSE:WSO) reported Q2 CY2025 sales of $2.06 billion, a 3.6% year-on-year decline and a 7.2% miss from analyst estimates. GAAP profit was $4.52 per share, 5.6% below analysts' consensus estimates. The company's adjusted EBITDA was $282.8 million, a 13.7% margin and a 7% miss from estimates.

Watsco (NYSE: WSO) reported its Q2 CY2025 financial results, revealing a 3.6% year-on-year decline in sales to $2.06 billion, a 7.2% miss from analyst estimates. The company's GAAP profit was $4.52 per share, 5.6% below analysts' consensus estimates. Adjusted EBITDA stood at $282.8 million, with a 13.7% margin and a 7% miss from estimates.

Watsco's revenue performance has been mixed over the past two years, with annualized growth of 2.3%, below its five-year compounded annual growth rate of 9.2%. The recent decline in sales was driven by a 3.6% year-on-year decrease, marking a significant slowdown compared to its historical growth trajectory. Despite this, sell-side analysts expect revenue to grow 8.6% over the next 12 months, suggesting an improvement in top-line performance.

The company's operating margin remained stable at 13.2%, in line with the same quarter last year, indicating a stable cost structure. However, EPS growth has slowed, with a two-year annual decline of 6.2%, reversing its five-year trend of 16.4% compounded annual growth. This quarter, EPS was $4.52, up from $4.49 in the same quarter last year, but it still missed analysts' estimates.

Watsco's free cash flow was negative at -$14.04 million, down from $51.38 million in the same quarter last year, signaling a decline in cash generation. The stock traded down 4.4% to $444 immediately after reporting, reflecting investor concerns over the company's recent performance.

In summary, Watsco's Q2 CY2025 results were mixed, with revenue and EPS both missing analysts' estimates. The company's long-term growth prospects remain positive, but the recent slowdown in sales and cash flow generation may warrant a cautious approach.

References:

[1] https://finance.yahoo.com/news/watsco-nyse-wso-reports-sales-123447271.html
[2] https://finviz.com/news/118521/carrier-globals-nyse-carr-q2-earnings-results-revenue-in-line-with-expectations