It has been about a month since the last earnings report for Watsco (WSO). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Watsco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Watsco Q2 Earnings Lag, Revenues Beat, Margins Down Y/Y

Watsco reported mixed second-quarter 2024 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same. On a year-over-year basis, both the top and bottom lines grew, given better residential end-markets and improved SG&A performance.

Watsco is steadily advancing toward its goal of expanding customer-focused technologies to a growing number of contractors. Its e-commerce sales have surged at nearly twice the pace of its overall sales, highlighting success in scaling industry-leading tools and platforms. Additionally, mobile platforms are engaging a record number of contractors and technicians, which is expected to enhance operating efficiencies over time.

In the first half of 2024, OnCallAir presented quotes to around 160,000 households, marking an 18% increase compared to the same period last year. Additionally, it generated $743 million in gross merchandise value, a 27% increase year over year.

Inside the Numbers

Watsco reported quarterly earnings per share (EPS) of $4.49, which lagged the Zacks Consensus Estimate of $4.70 by 4.5%. In the year-ago quarter, the company reported adjusted EPS of $4.42.

Revenues of $2.14 billion topped the consensus mark of $2.13 billion by 0.3% and grew 6.8% year over year.

Sales of HVAC equipment (heating, ventilating and air conditioning, comprising 71% of sales) were up 8% year over year. Sales of other HVAC products (25% of sales) dropped 1% from the year-ago quarter. On the other hand, sales from commercial refrigeration products (4% of sales) increased 1% year over year.

Second-quarter sales indicate a stronger residential market, with 6% growth in ducted residential units and a 3% rise in the average selling price. Additionally, sales of commercial products increased 8% during the quarter, building on 18% growth recorded in the year-ago quarter.

E-commerce sales continue to surpass overall sales growth, increasing 13% during the quarter and accounting for 36% of total sales, including revenues from recently acquired businesses. In some regions, e-commerce sales make up more than 60% of total sales.