Watsco (WSO) Earnings Expected to Grow: Should You Buy?

Watsco (WSO) is anticipated to report Q2 2025 earnings of $4.84 per share (+7.8% YoY) and revenues of $2.21 billion (+3.5% YoY) on July 30. Despite a minor upward revision in consensus EPS estimates, the company's negative Zacks Earnings ESP of -2.14% and a history of missing estimates in three of the last four quarters suggest it is not a strong candidate for an earnings beat, prompting investors to consider broader factors beyond consensus expectations.

Analysis

Watsco (WSO) is approaching its Q2 2025 earnings report with consensus expectations of notable top and bottom-line growth, forecasting a 7.8% year-over-year increase in EPS to $4.84 and a 3.5% rise in revenues to $2.21 billion. Despite a marginal 0.17% upward revision in the consensus EPS estimate over the last 30 days, several leading indicators suggest a heightened risk of an earnings miss. The company exhibits a negative Zacks Earnings ESP of -2.14%, which signifies that the most recent analyst estimates are more bearish than the broader consensus, a historically significant predictor. This concern is amplified by Watsco's recent performance history, where it has missed consensus EPS estimates in three of the last four quarters, including a substantial -15.72% shortfall in the last reported period. In contrast, industry peer Carrier Global (CARR) presents a more favorable pre-earnings profile with a positive Earnings ESP of +0.76% and a track record of beating estimates for four consecutive quarters, highlighting WSO's specific challenges. The combination of a neutral Zacks Rank #3 (Hold) and the negative predictive indicators makes Watsco an unconvincing candidate for a positive earnings surprise.

Key Decisions for Investors

• Investors should exercise caution ahead of the July 30 earnings release, as the negative Earnings ESP of -2.14% and a history of recent misses signal a higher probability of underperforming consensus expectations.
• Pay close attention to management's forward-looking guidance on the earnings call, as this will be critical for determining the stock's direction, especially if the reported numbers disappoint.
• Consider the contrasting outlook for peer Carrier Global, which shows stronger indicators for an earnings beat, potentially offering a relative value or pairs trade opportunity within the sector.
• Given the conflicting signals of expected YoY growth versus the high probability of a miss, holding existing positions may be prudent, but initiating new long positions carries significant near-term risk until results are clarified.