Investors hope Watsco (NYSE: WSO) will top analyst estimates once again after beating predictions by $0.03 in the previous quarter. The company will unveil its latest earnings on Monday, July 18. 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 strongly back Watsco, with six of 11 rating it a buy and the remainder rating it a hold. Analysts like Watsco better than competitor Fastenal Company overall.
  • Revenue forecasts: On average, analysts predict $944.6 million in revenue this quarter. That would represent a rise of 9.2% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $1.30 per share. Estimates range from $1.23 to $1.37.

What our community says:
CAPS All-Stars are solidly behind the stock, with 90.5% assigning it an "outperform" rating. The community at large agrees with the All-Stars, with 93.3% awarding it a rating of "outperform." Fools have embraced Watsco, though the message boards have been quiet lately, with only 47 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 76.8%. 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 Q1 Q4 Q3 Q2
Gross Margin 25.3% 23.4% 24.1% 23.3%
Operating Margin 3.1% 3.3% 7.9% 8.2%
Net Margin 1.4% 1.6% 3.9% 4.1%
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