Watsco (WSO) | News Based Sentiment Analysis

• On September 2, 2025, Watsco reported Q2 2025 earnings per share of $4.52, missing analyst expectations by $0.32 and revenue of $2.06 billion, falling short of the expected $2.24 billion – a 3.6% year-over-year decrease. This miss contributed to a 13.12% decline in the stock price over the past year, signaling investor disappointment, but was partially offset by a record gross profit margin.
• Despite the revenue decline, Watsco expanded its gross profit margin to a record 29.3% as of August 30, 2025, resulting in $603 million in gross profit. This margin expansion helped to offset some of the negative impact of lower sales, showcasing the company’s ability to manage profitability even in challenging conditions.
• Insider selling activity raised concerns, with Lead Independent Director J. Custer selling US$986,000 worth of shares and Executive VP Barry Logan selling US$5.6 million worth of shares at $508 per share on September 4, 2025. These sales, totaling $6.586 million, represent a potential lack of confidence from company leadership, despite the shares trading well below the sale price by September 10th.
• Watsco’s stock entered oversold territory with a Relative Strength Index (RSI) of 29.1 on September 10, 2025, and traded as low as $386.49 per share. Class B shares hit a new 12-month low of $425.50, closing at $418.55, indicating significant downward pressure on the stock.
• Bayforest Capital Ltd increased its holdings in Watsco by 479.6% during the first quarter, now owning 1,362 shares valued at $692,000 as of September 11, 2025. This substantial increase suggests continued confidence from some institutional investors, despite recent challenges.
• On September 7, 2025, a Fool.com contributor identified Watsco as a “beaten-down high-yield dividend stock to double up on and buy,” noting the shares were down 16.6% year-to-date and offering a 3% dividend yield. This recommendation provides a counterpoint to the negative sentiment surrounding the earnings miss.
• Despite the stock's struggles, Watsco declared a quarterly dividend of $3.00 per share on September 5, 2025, translating to an annualized dividend of $12.00 and a payout ratio of 92.02%. This consistent dividend payment for 42 consecutive years demonstrates a continued commitment to returning capital to shareholders.
• Analysts offered mixed views, with JPMorgan Chase & Co. raising its target price from $445.00 to $460.00 (Neutral rating) on September 12, 2025, while UBS Group decreased its target from $455.00 to $450.00 (Neutral rating). The average analyst target price remains $484.17, with a general “Hold” rating.

The Investment Story: September was a challenging month for Watsco, marked by disappointing earnings and a significant stock price decline. However, the company maintained strong margins and continued its long-standing commitment to shareholder returns through its consistent dividend policy.

What It Means for Investors: The negative developments suggest increased short-term uncertainty, but Watsco’s strong margins and institutional support provide some reassurance. The insider selling is a concern, but the dividend yield and a recent recommendation from Fool.com offer a counterpoint.

Looking Ahead: Investors should closely monitor Watsco’s Q3 2025 earnings release to assess the impact of the A2L refrigerant transition and any improvements in market conditions. The current consensus EPS estimate is $14.62.

The Bottom Line: Watsco is navigating a difficult environment with external headwinds and cautious analyst sentiment. While the near-term outlook is uncertain, the company’s focus on profitability and shareholder returns makes it a potentially attractive investment for patient investors willing to weather the current volatility.