GET DAILY SIGNALSWatsco (WSO) Pulls Back -8.9% Over 30 Days Despite Record Revenue
Key Takeaways
- Watsco (WSO) shares pulled back roughly 8.9% over the trailing 30 days, extending a soft multi-month stretch for the HVAC/R distributor.
- Third-quarter revenue rose 7% to a record $2.22 billion, but diluted earnings per share of $3.77 fell 5% year over year and missed consensus estimates.
- Gross margin narrowed to 26.4% from 27.5%, while operating margin slipped to 10.1% from 11.4%, keeping profitability in sharp focus.
- Two acquisitions, Jackson Supply and The Granite Group, added 107 locations and approximately $730 million in annualized revenue.
- Digital momentum remains a bright spot, with e-commerce at 37% of trailing 12-month sales and roughly 12% growth.
Recent Market Action for Watsco (WSO)
Watsco shares have traded defensively in recent weeks, slipping from roughly $313 in late September to an intraday level near $285 by late October, a decline of about 8.9% over the trailing 30 days. The move extends a broader soft patch: the stock was approximately flat to slightly lower over the trailing three months and down by a low-teens percentage on a 12-month basis. The pullback came despite a record-revenue quarter, underscoring that investors have been repricing a premium valuation rather than reacting to any fundamental breakdown in demand. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
Watsco (WSO) Business Overview and Competitive Position
Watsco is the largest distributor of heating, ventilation, air conditioning, and refrigeration (HVAC/R) equipment, parts, and supplies in North America. The company serves contractors and dealers across the residential and light-commercial markets through a network of hundreds of locations spanning the United States, Canada, Mexico, and parts of Latin America and the Caribbean. Watsco distributes products from leading manufacturers, including Carrier Global (CARR), and competes in a highly fragmented distribution market where scale, inventory availability, and technology provide meaningful advantages.
What increasingly sets Watsco apart is its digital ecosystem. E-commerce, its OnCallAir homeowner-quoting platform, mobile tools, and newer initiatives such as SupplySync and AI-driven product tools have made Watsco both the market leader and the technology leader in HVAC/R distribution. A widely held ownership culture, with thousands of employee-owners, further supports its entrepreneurial operating model and acquisition strategy.
Recent Developments Driving WSO
The dominant catalyst in the period was Watsco's third-quarter earnings report, released on October 27. Revenue increased 7% to a record $2.22 billion, and gross profit reached a record $586 million. Residential HVAC equipment, Watsco's largest product group, grew 7% on gains in both unit volume and pricing. However, diluted EPS declined 5% to $3.77 and landed below analyst consensus, while gross margin contracted to 26.4% and operating margin to 10.1%. Management attributed part of the margin pressure to a prior-year refrigerant shortage that had flattered comparisons, along with the lower-margin mix from newly acquired Jackson Supply.
Acquisitions were a second major theme. Watsco completed its acquisition of The Granite Group, a Northeast distributor of plumbing and HVAC products with about $500 million in annual revenue and 82 locations, and earlier integrated Jackson Supply, a Sunbelt distributor with roughly $230 million in annual sales. Together these deals added 107 locations and approximately $730 million in annualized revenue. The company also signed a $750 million unsecured senior revolving credit facility, reinforcing balance-sheet flexibility as it funds its expansion strategy. From what I see, these moves strengthen Watsco's scale in key regions.
2026 Outlook and What Investors Should Watch
Looking ahead, the central question for Watsco is whether improving demand can translate back into margin expansion. Management pointed to a return to growth in residential unit volumes and said the regulatory A2L refrigerant transition should be largely complete by the end of 2026, potentially reducing a source of volatility. Investors will also watch how quickly the Jackson and Granite integrations reach Watsco's historical margin profile, and whether technology investments in SupplySync, VCR, and Hydros begin converting into measurable margin and share gains. Macroeconomic factors, including interest rates, housing activity, and replacement demand for an aging installed base of HVAC equipment, remain key swing factors for end-market demand. As always, these considerations carry risk, and the path toward Watsco's stated long-term gross margin goal of 30% is unlikely to be a straight line. I’m watching this closely as the company works through integration.
Exploring AI Tools in My Research
One tool I find particularly useful for analyzing stocks like Watsco is Tickeron’s AI Trading Bots, which offers a range of automated strategies that monitor thousands of tickers. These bots provide filtered views of top-performing approaches, helping me compare methodologies without relying on a single style. It has become a regular part of how I evaluate market trends and automated trading ideas.
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
Momentum Indicator for WSO turns negative, indicating new downward trend
WSO saw its Momentum Indicator move below the 0 level on October 28, 2026. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 85 similar instances where the indicator turned negative. In 63 of the 85 cases, the stock moved further down in the following days. The odds of a decline are at 74%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for WSO moved out of overbought territory on October 26, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 37 similar instances where the indicator moved out of overbought territory. In 26 of the 37 cases, the stock moved lower in the following days. This puts the odds of a move lower at 70%.
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In 37 of 55 cases where WSO's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are 67%.
WSO moved below its 50-day moving average on October 27, 2026 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where WSO declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 71%.
WSO broke above its upper Bollinger Band on October 22, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for WSO just turned positive on October 15, 2026. Looking at past instances where WSO's MACD turned positive, the stock continued to rise in 34 of 44 cases over the following month. The odds of a continued upward trend are 77%.
The 10-day moving average for WSO crossed bullishly above the 50-day moving average on October 27, 2026. This indicates that the trend has shifted higher and could be considered a buy signal. In 13 of 15 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are 87%.
Following a +8.34% 3-day Advance, the price is estimated to grow further. Considering data from situations where WSO advanced for three days, in 241 of 351 cases, the price rose further within the following month. The odds of a continued upward trend are 69%.
The Aroon Indicator entered an Uptrend today. In 118 of 187 cases where WSO Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 63%.
Fundamental Analysis (Ratings)
The Tickeron Seasonality Score of 43 (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron PE Growth Rating for this company is 49 (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is 55 (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of 67 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (4.007) is normal, around the industry mean (4.064). P/E Ratio (24.900) is within average values for comparable stocks, (0.131). Projected Growth (PEG Ratio) (1.199) is also within normal values, averaging (2.538). Dividend Yield (0.045) settles around the average of (0.485) among similar stocks. P/S Ratio (1.587) is also within normal values, averaging (3.013).
The Tickeron Price Growth Rating for this company is 72 (best 1 - 100 worst), indicating slightly worse than average price growth. WSO’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is 82 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. WSO’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 65, placing this stock worse than average.
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General Information
a distributer of central air conditioning, heating and refrigeration equipment
Industry ElectronicsDistributors
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