Update shared on 12 Dec 2025
Fair value Decreased 0.56%Analysts have trimmed their price target on Watsco by about 1 percent, or roughly $2. This reflects a slightly higher discount rate and modestly lower fair value assumptions amid increased near term earnings risk.
Analyst Commentary
Recent Street research reflects a cautious stance on Watsco, with several firms highlighting rising earnings risk and tightening valuation support as estimates move below prior expectations.
Bearish Takeaways
- Bearish analysts see a heightened probability of a sizeable near term earnings miss, particularly in Q3, driven by softer than expected HVAC demand.
- Survey feedback points to rough conditions in key Southern markets, raising concerns about Watsco's near term growth trajectory and operating leverage.
- Lowered earnings estimates and a reduced price target to $425 from $450 signal diminished conviction in upside to current valuation, with risk skewed to the downside if demand does not stabilize.
- With tougher year over year comparisons ahead and limited visibility into a demand rebound, bearish analysts argue that execution risk is rising while the shares still trade at a premium to peers.
What's in the News
- William Blair downgraded Watsco shares to Market Perform from Outperform, citing survey data that points to a sizeable Q3 earnings miss and material near term earnings risk as HVAC demand softens in key Southern markets (Periodicals).
- The downgrade was accompanied by earnings estimate cuts below consensus, as analysts see little near term visibility for a demand rebound and expect tougher comparisons over the next two quarters (Periodicals).
- Watsco is scheduled to host an Analyst and Investor Day, providing management with an opportunity to address the weaker demand backdrop, updated outlook, and capital allocation priorities (Key Developments).
Valuation Changes
- Fair Value: Trimmed slightly to approximately $406.60 from about $408.90. This implies a modest downward revision in intrinsic value estimates.
- Discount Rate: Increased slightly to about 7.95 percent from roughly 7.93 percent. This reflects a marginally higher required return and risk assessment.
- Revenue Growth: Effectively unchanged at around 3.69 percent, indicating stable assumptions for long term top line expansion.
- Net Profit Margin: Essentially flat at about 7.80 percent, with only immaterial adjustments to long run profitability expectations.
- Future P/E: Reduced slightly to roughly 30.15x from around 30.29x, signaling a modest contraction in the valuation multiple applied to forward earnings.
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