Why Watsco Stock Is Falling Today

Core Viewpoint - Watsco reported strong sales growth and improving cash flow, but results fell short of Wall Street expectations, leading to a decline in share price [3][4][8] Financial Performance - The company earned $4.49 per share on revenue of $2.14 billion, reflecting a 7% year-over-year sales growth [4] - The HVAC equipment segment, which constitutes 71% of total sales, experienced an 8% growth [4] - Operating cash flow improved by $100 million, reaching $58 million in the quarter [4] - Wall Street had anticipated earnings of $4.68 per share and sales of $2.2 billion, indicating a shortfall in expectations [5] Market Reaction - Following the earnings release, Watsco's shares fell approximately 5% [8] - The stock had previously increased over 20% for the year prior to the earnings announcement, suggesting it may have been overvalued [6] Management Insights - Management indicated that margin fluctuations are expected as manufacturers adjust pricing and inventories are replenished, but they foresee a return to normal business operations [7] - Long-term investors have historically seen market-beating returns from the company, and there are no indications from the earnings report that Watsco will not continue to perform well in the future [7]