Shares in heating, ventilation, air conditioning, and refrigeration (HVACR) parts distributor Watsco (NYSE: WSO) rose 15.6% in the week to midday Thursday. The more significant part of the move happened on Thursday itself, as the company released fourth-quarter earnings ahead of Wall Street estimates.
Fourth-quarter sales were a bit light on estimates, coming in at $1.58 billion compared to the consensus of $1.61 billion. However, a record operating income of $137 million was significantly ahead of estimates of $131 million. Consequently, adjusted earnings per share of $2.35 was ahead of the $2.15 the market was looking for.
Watsco is primarily focused on the U.S. residential sector, and given the slump in orders for new HVACR equipment, investors had reason to be concerned. That said, Watsco is a distributor of aftermarket parts, so its revenue is more sticky in a housing downturn. In addition, customers may end up ordering more spare parts if, for example, they continue to run old AC units rather than replace them.
For further details see:
Why Shares in Dividend Investors' Favorite, Watsco, Soared This Week