On Wednesday, Loop Capital adjusted its price target on Watsco (NYSE:WSO) shares, a distributor of air conditioning, heating, and refrigeration equipment, to $440 from the previous $415, while maintaining a Hold rating on the stock.
The firm's decision follows Watsco's second-quarter earnings per share (EPS), which fell short of the consensus forecast by 5%. Despite the miss, the results were in line with Loop Capital's projections. The analysts noted that sales were impacted by lower parts and supply transactions, which was somewhat compensated by effective management of selling, general, and administrative expenses (SG&A).
Loop Capital's updated estimates reflect optimism about the ongoing transition to A2L refrigerants and the continued demand for heat pumps. These factors are expected to support growth and gross margin improvement into 2025.
The firm's reiterated Hold rating indicates that while their forecasts have improved, they believe the stock's potential for price-to-earnings (P/E) ratio expansion is limited unless Watsco can achieve further margin growth. The new price target of $440 represents Loop Capital's revised expectation based on these factors.
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