Watsco announced quarterly earnings of $4.52 per share, which is lower than the expected $4.84 per share. Last year, the company reported earnings of $4.49 per share, adjusting for one-time items. This quarter, the earnings missed expectations by 6.61%. In the previous quarter, the miss was even larger at 15.72%. Over the last four quarters, Watsco has only met earnings estimates once. For the quarter that ended in June 2025, Watsco reported revenues of $2.06 billion, below the expected $2.21 billion. Revenues from the same quarter last year were $2.14 billion, and they exceeded estimates only once in the last four quarters. Watsco’s stock has decreased about 1.9% since the start of the year, while the S&P 500 has risen by 8.3%. The management’s comments during the earnings call will likely affect the stock in the future. The forecast for the next quarter is an EPS estimate of $4.81, with expected revenues of $2.28 billion. For the current fiscal year, the outlook is $14.16 EPS on $7.83 billion in revenues. The Building Products – Air Conditioner and Heating industry ranks in the top 37% of Zacks’ industries. Watsco’s consistent inability to meet earnings and revenue targets reflects bearish sentiment around the stock. This issue is not new; a similar, more significant miss occurred in the last quarter. For traders, this trend suggests a potential for further declines in the stock price in the near future. Purchasing put options may be a good strategy to prepare for a possible drop in the stock’s price. The stock’s 1.9% decline since January, while the S&P 500 has risen, indicates a negative trend. Traders may consider strike prices below the current level, expecting that weaker results will continue to affect the stock before the next earnings report. This perspective is supported by recent economic data. The National Association of Realtors reported sluggish existing home sales in June 2025 for the third month in a row, which impacts HVAC replacement cycles. Persistently high interest rates through mid-2025 are likely hurting demand for large home improvements. After the earnings announcement, implied volatility probably decreased, making options cheaper. This environment may be good for creating bear put spreads, allowing traders to enter at a lower cost while still profiting from a moderate decrease in the stock price. Looking back at 2022-2023, rising rates also dampened the housing market, causing fluctuations in building-supply stocks. Despite its challenges, Watsco’s industry remains robust, ranking in the top 37% of its peers. This suggests that the problems may be specific to Watsco, making the management’s discussion on the earnings call crucial for traders. Any unexpectedly positive insights on cost controls or market share could shift the current sentiment quickly.

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