Watsco, Inc. WSO
Watsco is showing early signs of revenue stabilization — Q2 2026 revenue grew 2.1% YoY to $2.10B after five consecutive quarters of decline — and the just-announced Granite Group acquisition adds roughly $500M in sales with plumbing diversification, but EPS keeps falling (Q2 2026 EPS of $4.05 vs $4.52 prior year) and the company has missed consensus EPS estimates in four of the last six quarters. At 28.1x earnings, a 14% premium to the peer median PE of 24.6x, the market is pricing in a recovery that has not yet materialized in profitability.
With gross margin expanding to 28.1% in FY2025, FCF of $535M, and minimal leverage of $479M debt against $2.78B equity, the foundation is solid, but paying a premium multiple for declining earnings with net insider selling of $43.3M over 24 months warrants waiting for proof of earnings inflection.
What could go wrong
- Persistent EPS erosion. EPS has declined for three consecutive years from $15.41 in FY2022 to $12.25 in FY2025, and Q2 2026 EPS of $4.05 is down from $4.52 a year earlier — the trough is not yet confirmed.
- Earnings estimate misses. WSO missed consensus EPS estimates in four of the last six quarters, including a 9.3% miss in Q2 2026 ($4.00 actual vs $4.41 estimated), eroding credibility with the Street.
- Granite Group integration risk. The acquisition of The Granite Group adds approximately $500M in revenue across seven Northeast states but introduces plumbing distribution — a new product category — with unknown integration costs and margin dilution risk.
- Valuation premium despite deterioration. At 28.1x PE versus a peer median of 24.6x and EV/EBITDA of 18.4x versus 15.8x, WSO trades at a premium despite three years of earnings decline, limiting downside protection if the recovery stalls.
What would change my mind
Where this comes from: quarterly_results, Q2 2026 · fundamentals, FY2022 and FY2025 · quarterly_results, Q2 2026 and Q2 2025 · peer_relative. Orin's read on WSO; not advice.
Twelve months actual closes to 2026-09-24 · actual filings
50-day average 200-day average · volume below
On file
All WSO filingsLargest holders · 13F Q2 2026
Money flow| Filer | Position | Of fund |
|---|---|---|
| Capital Research Global Investors | $792.7M | 0.1% of fund |
| Vanguard Portfolio Management | $737.8M | 0.0% of fund |
| Fmr | $710.6M | 0.0% of fund |
| Vanguard Capital Management | $658.1M | 0.0% of fund |
| Charles Schwab Investment Management | $607.9M | 0.1% of fund |
| State Street | $551.3M | 0.0% of fund |
79 filers · quarter ended Q2 2026 · positions, not flows
Insiders, last 24 months: 33 Form 4 filings, net −$43.3M. Of the 33 on hand, 0 were open-market purchases and 4 sales— the rest are grants, option exercises and tax withholding.
Ask Orin about WSO
Orin answers questions about WSO from its filings, transcripts and numbers — with the source behind every claim. Your own desk starts with 3 free days, card required.
Start 3 free days →Where it trades
| Metric | Now | Own median | Sector |
|---|---|---|---|
| P/E | 27.7× | — | 44.5× |
| EV/EBITDA | 18.1× | — | — |
| P/S | 1.81× | — | — |
| P/B | 4.1× | — | — |
10.6%
free-cash-flow growth every year for 10 years, discounted at 10%, is what today’s price implies — starting from $0.5B of trailing free cash flow. It is an assumption the market is making, not a forecast Orin is making.
What Wall Street published
$405
$330 – $485 · +26% against today's price
- 8 buy or overweight
- 17 hold
- 2 underweight or sell
The analysts’ consensus and their own ratings, not Orin’s. A target is a twelve-month opinion published by the firm that wrote it.
Against the companies it is compared to
| Company | Market cap | P/E | EV/EBITDA | Gross | Net | ROE |
|---|---|---|---|---|---|---|
| WSOWatsco, Inc. | $13B | 27.7× | 18.1× | 27.9% | 6.5% | 17% |
| AITApplied Industrial Technologies, Inc. | $12B | 29.9× | 22.9× | 30.3% | 8.3% | 22% |
| ALLEAllegion plc | $13B | 19.9× | 14.7× | 44.8% | 15.4% | 32% |
| CSLCarlisle Companies Incorporated | $13B | 17.9× | 11.9× | 35.3% | 14.2% | 41% |
| GGGGraco Inc. | $12B | 23.9× | 16.4× | 52.6% | 23.5% | 20% |
| IEXIDEX Corporation | $17B | 32.8× | 20.0× | 44.7% | 14.5% | 13% |
| ITTITT Inc. | $19B | 41.8× | 25.0× | 34.6% | 8.9% | 10% |
| NDSNNordson Corporation | $18B | 32.6× | 20.8× | 55.3% | 18.6% | 18% |
| POOLPool Corporation | $6B | 14.8× | 12.5× | 29.6% | 7.4% | 32% |
| TXTTextron Inc. | $13B | 14.3× | 9.1× | 16.5% | 6.1% | 12% |
| WCCWESCO International, Inc. | $18B | 24.7× | 14.8× | 21.4% | 2.8% | 14% |
The median is of the 10 peers listed above and nothing else — check it against the column. This company trades 13.9% above it. The peer set is the vendor’s, so a company can appear here that a person would not have chosen.
What it has traded at
What its sector has traded at
Two scales, drawn separately on purpose: a sector median and one company’s multiple are not the same number and putting them on one axis invites a comparison neither series supports.
Every estimate on one scale
The vertical rule is the current price. Ranges and point estimates are the backend’s, published as they were calculated; an arrow means the estimate sits beyond this scale, and its number is on the right.