Comparing Armstrong World Industries (AWI) and Watsco (NYSE:WSO.B)

Armstrong World Industries (NYSE: AWI) and Watsco (NYSE:WSO.B) are both mid-cap construction companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, dividends, institutional ownership, analyst recommendations, profitability and earnings.

Institutional & Insider Ownership

0.1% of Watsco shares are owned by institutional investors. 0.6% of Armstrong World Industries shares are owned by company insiders. Comparatively, 14.5% of Watsco shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Watsco pays an annual dividend of $5.80 per share and has a dividend yield of 3.1%. Armstrong World Industries does not pay a dividend.

Volatility & Risk

Armstrong World Industries has a beta of 1.68, indicating that its share price is 68% more volatile than the S&P 500. Comparatively, Watsco has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500.

Earnings & Valuation

This table compares Armstrong World Industries and Watsco’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Armstrong World Industries $893.60 million 3.31 $154.80 million $3.02 18.44
Watsco $4.34 billion 1.63 $208.22 million N/A N/A

Watsco has higher revenue and earnings than Armstrong World Industries.

Profitability

This table compares Armstrong World Industries and Watsco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Armstrong World Industries 12.77% 41.95% 7.84%
Watsco 4.80% 14.66% 9.51%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Armstrong World Industries and Watsco, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Armstrong World Industries 1 6 3 0 2.20
Watsco 0 0 0 0 N/A

Armstrong World Industries currently has a consensus price target of $61.57, suggesting a potential upside of 10.54%. Given Armstrong World Industries’ higher probable upside, research analysts plainly believe Armstrong World Industries is more favorable than Watsco.

Summary

Watsco beats Armstrong World Industries on 7 of the 13 factors compared between the two stocks.

About Armstrong World Industries

Armstrong World Industries, Inc. designs, manufactures, and sells ceiling systems primarily for use in the construction and renovation of residential and commercial buildings worldwide. It principally offers mineral fiber, fiberglass wool, and metal ceiling systems. The company produces suspended mineral fiber and soft fiber ceiling systems; suspension system (grid) and ceiling component products; and acoustical ceiling, wall, and structural solutions. It sells its commercial ceiling materials and accessories to resale distributors and ceiling system contractors; residential ceiling products to wholesalers and retailers, such as large home centers; and architectural specialties products to resale distributors and ceiling systems contractors. The company was incorporated in 1891 and is headquartered in Lancaster, Pennsylvania.

About Watsco

Watsco, Inc. is a distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies (HVAC/R) in the HVAC/R distribution industry in North America. As of December 31, 2016, the Company sold a range of non-equipment products, representing more than 300,000 stock keeping units, including parts, ductwork, air movement products, insulation, tools, installation supplies, thermostats and air quality products. It distributes products consisting of equipment, including residential ducted and ductless air conditioners ranging from 1 to 5 tons, gas, electric and oil furnaces ranging from 50,000 to 150,000 British Thermal Units, commercial air conditioning and heating equipment and systems ranging from 1.5 to 25 tons and other specialized equipment; parts, including replacement compressors and motors, and supplies, including ductwork, grills, registers, sheet metal, adhesives and other ancillary supplies. It also sells products to the refrigeration market.

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