Will International Revenue Pressures and Analyst Downgrade Change Watsco's (WSO) Narrative?

• In the quarter ending September 2025, Watsco reported declines in international revenue from Canada and Latin America and the Caribbean, missing Wall Street expectations for the period.
• This shortfall, paired with analysts now projecting an annual revenue decrease and rating the company a Strong Sell, signals significant headwinds from international operations.
• We’ll examine how renewed international revenue pressures challenge the previous growth outlook for Watsco’s broader investment narrative.

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Watsco Investment Narrative Recap

To be a Watsco shareholder, you need to have confidence in the long-term demand for HVAC products and the company’s ability to navigate challenges like tariffs and international market volatility. The recent report of declining international revenue and a negative analyst outlook raises concerns around the most pressing short-term catalyst, the transition to high-efficiency A2L systems, and spotlights international headwinds as the biggest current risk. For now, these international pressures appear material, potentially dampening momentum from ongoing product transitions.

The most relevant recent development is Watsco's October Q3 earnings announcement, which confirmed not only lower sales but also a drop in net income for the third consecutive quarter. This aligns directly with the warnings on international revenue pressures and gives investors fresh numbers to consider when weighing the potential impact of these headwinds on future performance.

By contrast, what investors might miss is how additional cost uncertainty, such as new tariffs, could further complicate...

Read the full narrative on Watsco (it's free!)

Watsco's outlook anticipates $9.1 billion in revenue and $758.2 million in earnings by 2028. This requires 6.5% annual revenue growth and a $262.7 million earnings increase from the current $495.5 million level.

Uncover how Watsco's forecasts yield a $415.60 fair value, a 19% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members have set fair value estimates for Watsco ranging from US$104.90 to US$415.60, based on three different analyses. With international operations contributing to recent revenue disappointments, your outlook could shift depending on how you weigh global market risks.

Explore 3 other fair value estimates on Watsco - why the stock might be worth less than half the current price!

Build Your Own Watsco Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Watsco research is our analysis highlighting 4 key rewards that could impact your investment decision.
• Our free Watsco research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Watsco's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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