Watsco reports third-quarter profit below expectations on $2.22 billion revenue

The company raised its dividend in April and signed a new $750 million credit facility in October.

Watsco reported third-quarter earnings of $3.77 per share on a GAAP basis, the accounting standard US companies use for public results. That was $0.39 below expectations. Revenue came in at $2.22 billion, against $2.23 billion expected.

Chairman and CEO Albert H. Nahmad said third-quarter results and early fourth-quarter trends show end-market demand improving. He said residential unit volumes have returned to growth. He also said recent acquisitions added 107 locations and $730 million in annualized revenue.

In April, Watsco raised its annual dividend 10%, to $13.20 per share. In October, it signed a five-year, $750 million unsecured senior revolving credit facility, which increases its borrowing capacity and gives it more room under its loan terms.

The profit shortfall sits against management's view that demand is improving and that residential unit volumes have returned to growth. The coming quarters will show whether that recovery reaches earnings. The acquisitions make it harder to separate organic volume from purchased sales when judging the recovery. The higher dividend and the new credit line point to management's confidence in funding its plans, but neither shows that demand has improved.