Watsco (WSO)

Photo by Tim Mossholder on Unsplash

Key Statistics

EV/EBIT = 17.7x

ROE = 27.65%

Debt/Equity = 34%

FCF Yield = 2.7%

Dividend Yield = 2.86%

Market Cap = $13.4 billion

The Company

Watsco, Inc. (WSO) is North America's largest distributor of air conditioning, heating, and refrigeration equipment and parts, boasting a network of over 670 locations across the U.S., Canada, Mexico, and Puerto Rico. Their clientele includes a vast network of more than 120,000 contractors and dealers.

The journey of Watsco commenced in 1956 in Hialeah, Florida, under the name Wagner Tool & Supply Corp. Transitioning to a public entity in 1968, it entered a transformative phase under the leadership of Albert Nahmad in 1972.

Prior to focusing on HVAC, the company experimented with a wide variety of a different ventures.

The 1970s witnessed diverse acquisitions, including ventures into hair care and manufacturing. In 1982, a strategic move saw the company divest its Professional Hair Care division and invest in Florida Commercial Banks.

By 1986, with Nahmad's vision for expansion, Watsco honed in on acquiring heating and cooling distribution companies in the Sun Belt.

Guided by Nahmad, Watsco focused on dominating the air conditioning distribution market. Once it acquired this focus, the company began experiencing substantial revenue growth.

In 1989, a key move saw Watsco heavily invest in the air conditioning distribution business, acquiring 80% of Gemaire Distributors, one of Florida's most prominent residential air conditioning distributors, for $17 million. Subsequent acquisitions, including the Harry Alter Co. and a 50.5% interest in Heating & Cooling Supply in 1990, further solidified Watsco's market share.