In its most recent monthly report on Watsco shares, Thompson/First Call listed two Strong Buy recommendations, one Buy, eight Hold, two Underperform and zero Sell.
Joshua Pokrzywinski, executive director and senior analyst at MKM Partners LLC, is neutral on Watsco shares at the present but is very positive on the company’s strategy and performance.
“We like Watsco’s growth strategy,” Pokrzywinski said. “The company has been consistent in its mix of organic growth through contractor partnering and expanded product offerings, as well as well as inorganic growth by buying and building other HVAC distributors,” he noted.
The company “consistently takes share from smaller competitors and tends to outperform many of the other players in the broader HVAC universe by being brand agnostic. With the Carrier JV and the expanded geographical reach it brings, Watsco is less susceptible to regional weather volatility.”
While he believes Watsco’s international expansion is a positive initiative, the MKM analyst sees the greatest potential for the company in the U.S. housing market. “The housing recovery in the core U.S. market still represents the biggest market, and we believe that will always be the case based on relative size,” he said. “While housing has picked up off the bottom, the average efficiency of replacement air conditioners has not yet recovered and homeowners have been replacing with minimum efficiency, lower upfront-cost units. As the recovery gains momentum, we believe homeowners will return to energy-efficient units, which carry a higher purchase price.
“We believe the company is a best in class HVAC distributor.”