Watsco, Inc. WSO is slated to release fourth-quarter 2024 results on Feb. 18, before market open.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 12.8% and decreased 3% year over year. Meanwhile, sales missed the consensus mark by 3.9%, but increased 2% year over year.

Watsco's earnings missed the consensus mark in the trailing four quarters, the negative average being 10%.

Trend in WSO’s Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings increased to $2.13 from $2.05 per share in the past 30 days. The estimated figure indicates a 3.4% rise from the year-ago earnings of $2.06 per share.

Watsco, Inc. Price and EPS Surprise

Watsco, Inc. price-eps-surprise | Watsco, Inc. Quote

The consensus mark for revenues is pegged at $1.65 billion, indicating 3% year-over-year growth.

Factors Likely to Shape Watsco’s Quarterly Results

Watsco’s fourth-quarter revenues are expected to have increased year over year on the back of strong results in the heating, ventilation and air conditioning (“HVAC”) equipment segment. For the quarter to be reported, HVAC demand is likely to have remained strong, particularly in the commercial end market.

Also, Watsco’s ongoing investments in cutting-edge technologies, value-enhancing acquisitions and strong E-commerce sales are likely to have aided the performance.

Our model predicts HVAC Equipment sales (which accounted for 71% of total sales in third-quarter 2024) to have registered 2.3% year-over-year growth to $1.13 billion in the quarter. HVAC Products (25.2%) is expected to have grown 1.3% to $483.3 million in the quarter. Meanwhile, Commercial Refrigeration Products sales (4%) are expected to have risen 1.3% to $64.9 million in the quarter.

However, the company’s top line is likely to have been impacted by lower demand for residential central-air-conditioning replacements. Historically, seasonal factors in the first and fourth quarters have affected WSO’s performance due to the timing of HVAC system replacements.

From the margin’s perspective, a better price/mix is expected to have positively impacted the gross margin in the quarter. We expect the gross margin to have improved 80 basis points year over year to 26.6%. Also, SG&A expenses, as a percentage of net sales, are expected to have decreased to 19.2% in the quarter from 19.5% a year ago.

What the Zacks Model Unveils for WSO

Our proven model predicts an earnings beat for Watsco this time around. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here.

Earnings ESP of WSO: Watsco has an Earnings ESP of +0.94% at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

WSO’s Zacks Rank: Watsco currently carries a Zacks Rank #2.

Other Stocks With Favorable Combination

Here are some other stocks from the Zacks Construction sector that investors may consider as our model shows that these, too, have the right combination of elements to deliver an earnings beat this time around.

Frontdoor, Inc. FTDR currently has an Earnings ESP of +60.00% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FTDR’s earnings for the fourth quarter of 2024 are expected to decline 45%. The company reported better-than-expected earnings in each of the last four quarters, the average surprise being 269%.

Trex Company, Inc. TREX has an Earnings ESP of +20.00% and a Zacks Rank of 2 at present.

TREX reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 9%. The company’s earnings for the fourth quarter of 2024 are expected to decrease 75%.

Louisiana-Pacific Corporation LPX currently has an Earnings ESP of +21.14% and a Zacks Rank of 3.

LPX’s earnings for the fourth quarter of 2024 are expected to increase 11.3%. The company reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 30.7%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Watsco, Inc. (WSO) : Free Stock Analysis Report

Louisiana-Pacific Corporation (LPX) : Free Stock Analysis Report

Trex Company, Inc. (TREX) : Free Stock Analysis Report

Frontdoor Inc. (FTDR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research