GET DAILY SIGNALSWhy Is Watsco (WSO) Stock Down -7.12% Today?
Key Takeaways
- Shares fell 7.12% to $283.59, down from a prior close of $305.33, following a third-quarter earnings miss.
- Primary catalyst: Q3 earnings per share of $3.77 came in well below the roughly $4.12 consensus estimate, an earnings miss of about 8%.
- Secondary driver: Margin compression — gross margin slipped to 26.4% from 27.5% a year earlier, while operating margin narrowed to 10.1% from 11.4%.
- Revenue was a bright spot: Sales rose 7.4% year over year to a record $2.22 billion, roughly in line with expectations.
- Stock-specific move: The selloff stood out against a firmer HVAC group, signaling investor disappointment rather than sector-wide rotation.
- What traders watch next: Management's margin commentary, acquisition integration, and the pace of residential equipment demand into 2027.
- Explore Price Targets, Earnings, and Forecast pages for deeper analysis of this ticker's outlook.
- Discover how AI-driven strategies are navigating moves like this on Trending AI Robots.
Opening Summary
WSO, the largest distributor of heating, ventilation, air conditioning, and refrigeration (HVAC/R) equipment in North America, saw its shares drop sharply on Tuesday. The stock declined 7.12% to $283.59, compared with a prior-session close of $305.33, after the company reported third-quarter earnings that fell short of Wall Street's expectations. The decline confirmed a bearish market reaction driven primarily by an earnings miss and continued margin pressure, even as the company delivered record quarterly revenue.
Earnings Miss Fuels the Selloff
The immediate catalyst was Watsco's third-quarter results. The company reported diluted earnings per share of $3.77, well below the consensus estimate of roughly $4.12 — a miss of about 8% and down 5% from $3.98 a year earlier. While revenue climbed 7.4% to a record $2.22 billion, largely in line with expectations, the profit shortfall outweighed the top-line strength and drove an earnings-driven move lower in the stock.
Margin Compression Raises Concerns
Beneath the headline numbers, investors focused on deteriorating profitability. Gross margin narrowed to 26.4% from 27.5% a year ago, while operating margin fell to 10.1% from 11.4%. Operating income declined 4% to roughly $225 million. Higher selling, general, and administrative expenses — up about 8%, partly reflecting recent acquisitions of Jackson Supply Company and The Granite Group — added to the pressure. The combination of softer margins and elevated costs reinforced concerns that Watsco is growing revenue without preserving profitability.
Market Context and Trading Activity
The decline appeared largely stock-specific rather than a broader sector rotation. HVAC peers held up better, while Watsco's drop stood out as investors de-risked the name into and after the print. The stock broke below its 50-day moving average, which had hovered near the $307 level, and traded closer to the lower end of its 52-week range, not far above its 52-week low of $277.34 versus a 52-week high of $459.00. The move reflected a sharp repricing of the company's near-term earnings power rather than any single macroeconomic shock.
What Comes Next for WSO
Investor attention now shifts to whether Watsco can stabilize margins as it integrates recent acquisitions and laps the unusually favorable pricing environment of prior years. Management pointed to improving end-market demand and a return to growth in residential unit volumes, but the durability of that recovery — and its translation into earnings — remains the central question. Analysts' consensus remains largely a "Hold," with the pace of estimate revisions and management's guidance on the earnings call likely to shape sentiment in the weeks ahead. Risks include further margin erosion, tariff effects, and a cooling in residential replacement demand.
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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.
WSO in upward trend: price rose above 50-day moving average on October 21, 2026
WSO moved above its 50-day moving average on October 21, 2026 date and that indicates a change from a downward trend to an upward trend. In 31 of 40 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are 77%.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 16, 2026. You may want to consider a long position or call options on WSO as a result. In 59 of 84 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 70%.
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%.
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 113 of 189 cases where WSO Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 60%.
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 35 similar instances where the indicator moved out of overbought territory. In 25 of the 35 cases, the stock moved lower in the following days. This puts the odds of a move lower at 71%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 6 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
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.
Fundamental Analysis (Ratings)
The Tickeron PE Growth Rating for this company is 38 (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 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 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 Price Growth Rating for this company is 60 (best 1 - 100 worst), indicating fairly steady 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 Valuation Rating of 73 (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 (4.206) is normal, around the industry mean (4.051). P/E Ratio (26.141) is within average values for comparable stocks, (0.790). Projected Growth (PEG Ratio) (1.199) is also within normal values, averaging (2.538). Dividend Yield (0.043) settles around the average of (0.491) among similar stocks. P/S Ratio (1.587) is also within normal values, averaging (3.013).
The Tickeron Profit vs. Risk Rating rating for this company is 80 (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 66, 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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