Watsco Inc. (WSO) recently reported its third quarter results. The company posted net income of 71 cents per share, in line with the Zacks Consensus Estimate, but 15.5% lower compared to last year. The company’s total revenue was up 56.1% year-over-year $741.9 million. The current year quarter included $337 million of revenues added by Carrier Enterprise, a joint venture formed on July 1, 2009 with Carrier Corporation. The joint-venture added 95 locations to the Watsco network. On a same-store basis, Watsco’s sales fell 15% compared to the third quarter of 2008. The sales decline was driven by lower demand as a result of economic conditions, lower pricing for certain commodity-based products, and significant weakness in the company’s western operations. These factors were partially offset by a richer sales mix of high-efficiency air conditioning systems. Third quarter’s same-store sales reflect a 9% decline in sales of ...

Watsco, Inc. (WSO) has increased its market share significantly through acquisitions. Since 1989, the company has acquired around 53 HVAC/R businesses. Despite the economic slowdown, Watsco continues to actively seek acquisition opportunities to allow further penetration into existing markets and expand into new geographic markets.

WSO is the largest distributor of air conditioning, heating, and refrigeration equipment, as well as related parts and supplies (HVAC/R), in the United States.

In our view, the company has plenty of room for growth. With the industry size approximated at $26 billion and annual growth set to grow well above 3%, Watsco represents a very small portion of the overall pie (8%). There are plenty of acquisition opportunities for the company as the HVAC/R distribution industry contains over 1,300 companies.

Apart from growth through acquisitions, Watsco aims to increase sales per location and gain market share by boosting its product offering.

The company recently formed a

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