Watsco (WSO) on Buyout Spree, Inks Acme Refrigeration Deal

·3-min read

Watsco, Inc. WSO has inked an acquisition deal with Acme Refrigeration. The company is a prime distributor of air conditioning, heating and refrigeration products in Baton Rouge, LA. However, the financial terms of the transaction have been kept under wraps.

Acme Refrigeration provides nearly 7,000 SKUs to more than 4,000 active customers across 18 locations in Louisiana and Mississippi. The company generated $60-million revenues in 2020.

With respect to this, chairman and CEO of Watsco, Albert H. Nahmad, said, “We welcome Acme Refrigeration, its leaders and employees to the Watsco family of companies. Acme has long been an admired company within its markets with a loyal customer following.”

Acquisition-Driving Performance

Acquisitions have been Watsco’s preferred mode of solidifying its product portfolio and leveraging new business opportunities in a bid to expand the customer base and profitability. The company has acquired more than 60 businesses since 1989, most of which were successful, multi-generation, family-owned businesses. Acme is the second acquisition of Watsco so far this year after the purchase of Temperature Equipment Corporation in April 2021.

The company focuses on partnering with great businesses focused on the HVAC/R industry. Watsco’s revenues in HVAC/R distribution grew to $5.1 billion in 2020 from $64.1 million in 1989, mainly buoyed by acquisitions of companies with established market positions. It has been actively seeking more opportunities to invest and grow through acquisitions, given a relatively low market share of the estimated $40-billion North American distribution marketplace for HVAC/R products.

Shares of the company have gained 31.7% so far this year compared with the industry’s 28.3% growth. Also, earnings estimates for 2021 have moved up over the past 30 days. The trend is likely to continue, given strength in the e-commerce business. Watsco’s investment in industry-leading technologies helps it to improve order fill rates with speed and accuracy.

Zacks Rank

Watsco — which shares space with Comfort Systems USA, Inc. FIX, The AZEK Company Inc. AZEK and AAON, Inc. AAON in the Zacks Building Products - Air Conditioner and Heating industry — currently sports a Zacks Rank #2 (Buy). You can see. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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