Watsco Earnings Preview

Watsco (NYSE: WSO  ) came in under analysts' estimates last quarter but now have a chance to fix things this quarter. The company will unveil its latest earnings Thursday. Watsco is an independent distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies in the United States.

What analysts say:

• Buy, sell, or hold?: Analysts are bullish on this stock with nine analysts rating it as a buy and only two rating it as a sell. Analysts like Watsco better than competitor Interline Brands overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared with three months ago.
• Revenue Forecasts: On average, analysts predict $916.7 million in revenue this quarter. That would represent a rise of 12.8% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $1.15 per share. Estimates range from $1.09 to $1.18.

What our community says:
CAPS All-Stars are solidly behind the stock with 88.1% awarding it an "outperform" rating. The community at large agrees with the All-Stars with 93.6% granting it a rating of "outperform." Fools are gung-ho about Watsco, though the message boards have been quiet lately with only 49 posts in the past 30 days. Even with a robust four out of five stars, Watsco's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Watsco's profit has risen year over year by an average of 48.7% over the past five quarters. Revenue has now gone up for three straight quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q2	Q1	Q4	Q3
Gross Margin	24.1%	25.3%	23.4%	24.1%
Operating Margin	8.5%	3.1%	3.3%	7.9%
Net Margin	4.1%	1.4%	1.6%	3.9%

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