International Markets and Watsco (WSO): A Deep Dive for Investors

Zacks Equity Research

Mon, Nov 4, 2024, 6:15 AM 4 min read

Have you evaluated the performance of Watsco's (WSO) international operations for the quarter ending September 2024? Given the extensive global presence of this heating and cooling company, analyzing the patterns in international revenues is crucial for understanding its financial strength and potential for growth.

In the current global economy, which is more interconnected than ever, a company's success in penetrating international markets is crucial for its financial health and growth journey. Investors must understand a company's dependence on overseas markets, as this offers a window into the company's earnings stability, its ability to benefit from varied economic cycles and its potential for long-term growth.

Being present in international markets serves as a counterbalance to domestic economic challenges while offering chances to engage with more rapidly evolving economies. However, this kind of diversification introduces challenges like currency fluctuations, geopolitical uncertainties and varying market trends.

While delving into WSO's performance for the past quarter, we observed some fascinating trends in the revenue from its foreign segments that are commonly modeled and observed by analysts on Wall Street.

The company's total revenue for the quarter amounted to $2.16 billion, showing rise of 1.6%. We will now explore the breakdown of WSO's overseas revenue to assess the impact of its international operations.

A Look into WSO's International Revenue Streams

Canada accounted for 4.47% of the company's total revenue during the quarter, translating to $96.6 million. Revenues from this region represented a surprise of -5.87%, with Wall Street analysts collectively expecting $102.63 million. When compared to the preceding quarter and the same quarter in the previous year, Canada contributed $95.7 million (4.47%) and $100.03 million (4.70%) to the total revenue, respectively.

Latin America and the Caribbean generated $108.44 million in revenues for the company in the last quarter, constituting 5.02% of the total. This represented a surprise of -66.69% compared to the $325.54 million projected by Wall Street analysts. Comparatively, in the previous quarter, Latin America and the Caribbean accounted for $117.13 million (5.48%), and in the year-ago quarter, it contributed $102.26 million (4.81%) to the total revenue.

Revenue Projections for Overseas Markets

The current fiscal quarter's total revenue for Watsco, as projected by Wall Street analysts, is expected to reach $1.64 billion, reflecting an increase of 2.5% from the same quarter last year. The breakdown of this revenue by foreign region is as follows: Canada is anticipated to contribute 5.7% or $93.79 million and Latin America and the Caribbean 7.1% or $-116.96 million.

For the full year, the company is expected to generate $7.54 billion in total revenue, up 3.5% from the previous year. Revenues from Canada and Latin America and the Caribbean are expected to constitute 5% ($375.16 million) and 5.4% ($403.9 million) of the total, respectively.

Final Thoughts

The dependency of Watsco on global markets for its revenues presents a mix of potential gains and hazards. Thus, monitoring the trends in its overseas revenues can be a key indicator for predicting the firm's future performance.

In an era of growing international ties and escalating geopolitical disputes, financial analysts on Wall Street pay keen attention to these developments to fine-tune their earnings estimations for businesses operating across borders. It's important to note, however, that a range of additional variables, like a company's local market status, also play a crucial role in shaping these forecasts.

At Zacks, a company's changing earnings outlook is given considerable attention due to its proven, strong influence on a stock's price performance in the near term. The connection here is straightforward and positive: when earnings estimates are revised upward, the stock price generally follows suit, increasing as well.

With an impressive externally audited track record, our proprietary stock rating tool - the Zacks Rank - harnesses the power of earnings estimate revisions and serves as an effective indicator of a stock's near-term price performance.

At the moment, Watsco has a Zacks Rank #5 (Strong Sell), signifying that it may underperform the overall market trend in the upcoming period. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Assessing Watsco's Stock Price Movement in Recent Times

Over the preceding four weeks, the stock's value has diminished by 1.4%, against an upturn of 0.4% in the Zacks S&P 500 composite. In parallel, the Zacks Construction sector, which counts Watsco among its entities, has appreciated by 3.4%. Over the past three months, the company's shares have seen an increase of 0.6% versus the S&P 500's 5.5% increase. The sector overall has witnessed an increase of 7.5% over the same period.

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