MIAMI - Watsco, Inc. (NYSE:WSO) reported third quarter earnings that missed analyst expectations, as the HVAC distributor faced challenges in regaining market share. The company's stock edged down 0.5% following the release.
Watsco posted Q3 adjusted earnings per share of $4.22, falling short of the $4.72 analyst consensus estimate. Revenue rose 2% year-over-year to $2.16 billion, but came in below expectations of $2.24 billion.
The company's gross margin contracted to 26.2% from 26.7% in the same quarter last year. Operating income decreased 2% to $250 million.
Watsco said it is working to regain sales and market share related to one of its primary OEM partners after product and supply chain disruptions impacted customer relationships in 2023. The company estimates these efforts have diluted gross margins by approximately 30 basis points year-to-date.
"Overall, we believe that our 2024 performance reflects market share gains and represents solid performance relative to trends in the market and the economy," said Albert H. Nahmad, Chairman and CEO of Watsco.
The company noted that business trends strengthened in October, reflecting meaningful unit growth and an overall mid-single digit growth rate in sales.
For the first nine months of 2024, Watsco reported a 3% increase in sales to $5.9 billion. Operating cash flow improved 50% to a record $394 million compared to the same period last year.
Watsco maintained its annual dividend of $10.80 per share, which was increased 10% in April 2024.
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