- 3 Profitable Stocks with Open Questions
May 12, 2026
Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies to steer clear of and a few better alternatives.
Restaurant Brands (QSR)
Trailing 12-Month GAAP Operating Margin: 24.7%
Formed through a strategic merger, Restaurant Brands International (NYSE:QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Why Are We Hesitant About QSR?
Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its seven-year trend Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 1.6 percentage points Earnings growth over the last seven years fell short of the peer group average as its EPS only increased by 6% annually
Restaurant Brands is trading at $78.22 per share, or 18.6x forward P/E. Dive into our free research report to see why there are better opportunities than QSR.
Watsco (WSO)
Trailing 12-Month GAAP Operating Margin: 9.9%
Originally a manufacturing company, Watsco (NYSE:WSO) today only distributes air conditioning, heating, and refrigeration equipment, as well as related parts and supplies.
Why Are We Wary of WSO?
Sales were flat over the last two years, indicating it’s failed to expand this cycle Earnings per share fell by 3.7% annually over the last two years while its revenue was flat, partly because it diluted shareholders Waning returns on capital imply its previous profit engines are losing steam
At $429.10 per share, Watsco trades at 34x forward P/E. Check out our free in-depth research report to learn more about why WSO doesn’t pass our bar.
Illinois Tool Works (ITW)
Trailing 12-Month GAAP Operating Margin: 26.4%
Founded by Byron Smith, an investor who held over 100 patents, Illinois Tool Works (NYSE:ITW) manufactures engineered components and specialized equipment for numerous industries.
Why Do We Think Twice About ITW?
Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth Projected sales growth of 3.1% for the next 12 months suggests sluggish demand Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.1% annually
Illinois Tool Works’s stock price of $255.54 implies a valuation ratio of 22.9x forward P/E. To fully understand why you should be careful with ITW, check out our full research report (it’s free).
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- Watsco (WSO) Outperformed Despite a Challenging Environment
May 6, 2026
Conestoga Capital Advisors, an asset management company, released its first-quarter 2026 investor letter. A copy of the letter is available to download here. The first quarter of 2026 started with optimism about the domestic economy and attractive small-cap valuations, but it was affected by volatility due to geopolitical unrest in the Middle East and shifting expectations regarding interest rates. This unrest drove up energy prices and created a cautious global market. Energy, Basic Materials, and Industrials performed well, while software companies faced challenges due to AI disruption concerns. Market sensitivity to geopolitical events, energy prices, and inflation remains high. The Conestoga Smid Cap Composite fell 10.24% net-of-fees, underperforming the Russell 2500 Growth Index’s -3.52% return. The decline was driven by negative stock selection and sector/industry-specific headwinds, notably within Technology, Industrials, and Health Care sectors. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Conestoga Capital Advisors highlighted Watsco, Inc. (NYSE:WSO) as a leading contributor. Headquartered in Miami, Florida, Watsco, Inc. (NYSE:WSO) is a leading distributor of air conditioning, heating, and refrigeration equipment, and related parts and supplies. On May 5, 2026, Watsco, Inc. (NYSE:WSO) closed at $420.68 per share. One-month return of Watsco, Inc. (NYSE:WSO) was 10.35%, and its shares lost 8.17% over the past 52 weeks. Watsco, Inc. (NYSE:WSO) has a market capitalization of $17.10 billion.
Conestoga Capital Advisors stated the following regarding Watsco, Inc. (NYSE:WSO) in its Q1 2026 investor letter:
"Watsco, Inc. (NYSE:WSO) is a leading distributor of HVAC equipment and parts in North America. Shares outperformed despite a challenging demand environment, as investors focused on margin resilience, strong cash flow, and a more normal demand environment in 2026. The HVAC industry went through a significant refrigerant transition in 2025 which resulted in a destocking phenomenon in 2026. This was exacerbated by a consumer preference to repair instead of replace with the more expensive new equipment."William Blair Says Watsco (WSO) Sell-Off Overdone Despite New Competition
Watsco, Inc. (NYSE:WSO) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 38 hedge fund portfolios held Watsco, Inc. (NYSE:WSO) at the end of the fourth quarter, up from 34 in the previous quarter. While we acknowledge the potential of Watsco, Inc. (NYSE:WSO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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In another article, we covered Watsco, Inc. (NYSE:WSO) and shared the list of safest stocks with highest dividends. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.
Disclosure: None. This article is originally published at Insider Monkey.
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- 3 Dividend Stocks for May 2026
May 5, 2026 · youtube.com
This month's trio included a dividend aristocrat.
- 3 Dividend Stocks To Consider With At Least 3% Yield
Apr 30, 2026
Over the last 7 days, the United States market has remained flat, yet it has experienced a significant rise of 28% over the past year with earnings forecasted to grow by 16% annually. In this context, dividend stocks yielding at least 3% can offer investors a blend of income and potential growth, making them an attractive option for those seeking stability and returns in an evolving market landscape.
Top 10 Dividend Stocks In The United States
Name Dividend Yield Dividend Rating Provident Financial Services (PFS) 4.28% ★★★★★★ OTC Markets Group (OTCM) 5.46% ★★★★★★ Host Hotels & Resorts (HST) 4.51% ★★★★★☆ First Interstate BancSystem (FIBK) 5.46% ★★★★★★ Ennis (EBF) 4.85% ★★★★★★ Donegal Group (DGIC.A) 4.37% ★★★★★★ Dillard's (DDS) 5.55% ★★★★★★ Columbia Banking System (COLB) 5.08% ★★★★★★ Banco Latinoamericano de Comercio Exterior S. A (BLX) 5.13% ★★★★★☆ Accenture (ACN) 3.62% ★★★★★☆
Click here to see the full list of 107 stocks from our Top US Dividend Stocks screener.
Let's uncover some gems from our specialized screener.
Hancock Whitney
Simply Wall St Dividend Rating: ★★★★★☆
Overview: Hancock Whitney Corporation is a financial holding company for Hancock Whitney Bank, offering traditional and online banking services to commercial, small business, and retail customers in the United States, with a market cap of approximately $5.47 billion.
Operations: Hancock Whitney Corporation generates revenue of approximately $1.39 billion from its banking operations, serving commercial, small business, and retail clients in the United States.
Dividend Yield: 3%
Hancock Whitney's dividend is well-covered by earnings, with a current payout ratio of 37.6% and forecasted to decrease to 28.9% in three years, indicating sustainability. The company has consistently paid and increased dividends over the past decade, although its yield of 3% is below the top tier in the US market. Recent earnings showed a decline in net income to US$47.42 million for Q1 2026, but share buybacks totaling US$94.57 million were completed successfully.
Unlock comprehensive insights into our analysis of Hancock Whitney stock in this dividend report. The valuation report we've compiled suggests that Hancock Whitney's current price could be quite moderate.HWC Dividend History as at Apr 2026
CompX International
Simply Wall St Dividend Rating: ★★★★★☆
Overview: CompX International Inc. manufactures and sells security products and recreational marine components primarily in North America, with a market cap of $285.89 million.
Operations: CompX International Inc.'s revenue is derived from two main segments: Security Products, contributing $120.70 million, and Marine Components, accounting for $37.58 million.
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Dividend Yield: 9.5%
CompX International offers a high dividend yield of 9.48%, placing it in the top 25% of US dividend payers, but its sustainability is questionable due to a cash payout ratio of 141.8%. Despite this, dividends have been stable and growing over the past decade. Recent earnings showed an increase in net income to US$19.48 million for 2025, with quarterly dividends maintained at $0.30 per share, reflecting consistency in shareholder returns despite coverage concerns.
Navigate through the intricacies of CompX International with our comprehensive dividend report here. Upon reviewing our latest valuation report, CompX International's share price might be too pessimistic.CIX Dividend History as at Apr 2026
Watsco
Simply Wall St Dividend Rating: ★★★★★☆
Overview: Watsco, Inc. operates as a distributor of air conditioning, heating, and refrigeration equipment and related parts across the United States, Canada, Latin America, and the Caribbean with a market cap of approximately $16.70 billion.
Operations: Watsco, Inc.'s revenue primarily stems from distributing HVAC and refrigeration equipment, along with related parts and supplies, across various regions including the United States, Canada, Latin America, and the Caribbean.
Dividend Yield: 3.1%
Watsco's dividend payments are robust, with a recent 10% increase to an annual rate of $13.20 per share, reflecting consistent growth over the past decade. The payout is well-covered by earnings and cash flows, with ratios of 73.6% and 72.1%, respectively. Despite a lower yield of 3.08% compared to top US dividend payers, Watsco maintains stability in its dividends and trades below estimated fair value, offering potential for value investors.
Take a closer look at Watsco's potential here in our dividend report. Our valuation report unveils the possibility Watsco's shares may be trading at a premium.WSO Dividend History as at Apr 2026
Turning Ideas Into Actions
Click this link to deep-dive into the 107 companies within our Top US Dividend Stocks screener. Already own these companies? Link your portfolio to Simply Wall St and get alerts on any new warning signs to your stocks. Simply Wall St is your key to unlocking global market trends, a free user-friendly app for forward-thinking investors.
Searching for a Fresh Perspective?
Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include HWC CIX and WSO.
This article was originally published by Simply Wall St.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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- Comerica Bank Has $15.42 Million Position in Watsco, Inc. $WSO
Apr 29, 2026 · defenseworld.net
Comerica Bank raised its stake in shares of Watsco, Inc. (NYSE: WSO) by 36.3% in the undefined quarter, according to its most recent 13F filing with the Securities and Exchange Commission. The firm owned 45,756 shares of the construction company's stock after buying an additional 12,190 shares during the quarter. Comerica Bank owned
- Watsco Inc (WSO) Q1 2026 Earnings Call Highlights: E-commerce Surge and Strategic Expansion ...
Apr 29, 2026
This article first appeared on GuruFocus.
Sales Increase: 2% increase in U.S. markets. E-commerce Sales Growth: Increased by 16% during the quarter. OnCall Air Sales Growth: Customer sales increased by 20%. Gross Merchandise Value for OnCall Air: Expected to exceed $2 billion this year. Gross Margins: Remained largely intact with a long-term goal of achieving 30%. SG&A Expenses: Remained flat due to improved operational efficiency. Debt Status: Company remains debt-free. Store Expansion: Acquisition of Jackson Supply to expand Sunbelt presence by 25 locations.
Warning! GuruFocus has detected 6 Warning Signs with WSO. Is WSO fairly valued? Test your thesis with our free DCF calculator.
Release Date: April 28, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Watsco Inc (NYSE:WSO) announced the acquisition of Jackson Supply, a market-leading Sunbelt distributor, which will expand their presence by 25 locations and diversify their product offerings. E-commerce sales increased by 16% during the quarter, outpacing overall growth rates, indicating strong adoption of their digital platforms. OnCall Air, Watsco's digital platform, saw a 20% increase in customer sales, with expectations for gross merchandise value to exceed $2 billion this year. The company remains debt-free, maintaining a strong balance sheet, which provides financial stability and flexibility for future investments. Watsco Inc (NYSE:WSO) continues to invest in technology and innovation, aiming to enhance their competitive position and achieve long-term growth and margin improvements.
Negative Points
Sales growth in the US markets was modest at 2%, with lower unit sales offsetting gains from high-efficiency systems. Unit volumes have not fully recovered, indicating that the market is not yet fully healed from previous disruptions. The company faces challenges from ongoing regulatory changes and tariffs, which could impact pricing and margins. There is uncertainty about the impact of upcoming OEM price increases and their effect on market dynamics. The company is cautious about the upcoming selling season, as it is still early to predict market conditions and consumer behavior.
Q & A Highlights
Q: Can you unpack your comments about improved stability as we head into the summer? Are you seeing April positive in terms of year-over-year growth? A: We saw the full maturity of the A2L product transition in Q1. Units are still weighing, but things improved as the quarter progressed. March ended with high single-digit growth, and April has sustained that momentum, showing more stability. However, we remain cautious as we are not yet in the peak selling season.
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Q: Can you provide more details on the Jackson Supply acquisition? What makes this an attractive acquisition for Watsco? A: Jackson Supply is a Goodman distributor and fits well within our existing footprint. We have a long-standing relationship with them and respect their leadership and strategy. We aim to support their expansion with capital, technology, and equity as needed. Texas, where they are primarily located, is a strong market.
Q: How do you view the potential impact of Home Depot's acquisition of Mingeldors on your acquisition opportunities? A: We have competed with the business they acquired for a long time and are not threatened by it. Our acquisition strategy focuses on mutual trust and respect with family-run businesses that want to join our family and leverage our tools and technology. We are confident in our continued opportunities.
Q: How do you expect inventory turns to evolve, and what impact will this have on cash flow? A: We expect to reduce our investment in inventory, improving inventory turns and contributing to cash flow. The supply chain is more stable, allowing us to carry less inventory while maintaining customer satisfaction. This is not a structural destocking but a return to more efficient inventory management.
Q: Can you discuss the impact of e-commerce growth on your gross margin target? A: E-commerce sales have higher gross margins and lower costs to serve compared to offline sales. We expect this trend to continue, benefiting both us and our customers. Our e-commerce platform also enhances customer retention and increases the number of line items sold per invoice.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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- Watsco, Inc. Q1 2026 Earnings Call Summary
Apr 28, 2026
Watsco, Inc. Q1 2026 Earnings Call Summary - Moby
Executive Narrative
Management observes improving market stability as the industry transitions from five years of volatility driven by COVID-19, supply chain constraints, and regulatory shifts. The A2L product transition has matured, leading to a more simplified operating environment and a richer sales mix of high-efficiency systems. First quarter sales growth of 2% in U.S. markets was driven by pricing and product mix, which helped offset lower unit volumes that began stabilizing late in the quarter. The acquisition of Jackson Supply adds $230 million in annual sales and 25 Sunbelt locations, specifically strengthening the company's presence in the fragmented parts and supplies segment. Technology adoption is accelerating, with e-commerce sales growing 16% and the OnCallAir platform seeing a 20% increase in customer sales, providing a lower cost-to-serve and higher gross margins. Gross margins remained stable due to disciplined pricing execution and the deployment of proprietary pricing optimization tools across the branch network. The company maintains a debt-free balance sheet, providing the financial flexibility to invest in inventory, technology, and M&A regardless of broader market conditions.
Forward-Looking Commentary
Management noted that the operating environment has largely normalized as of the start of 2026, allowing for improved operating efficiency and a focus on technology investments. Gross merchandise value for the OnCallAir digital platform is projected to exceed $2 billion this year as contractor adoption gains momentum. Inventory turns are expected to improve and contribute to cash flow for the remainder of the year as the supply chain stabilizes and manufacturers maintain consistent production lines. The company anticipates potential price increases across the board in the second quarter, driven by manufacturer pressure from Section 232 duties. Strategic initiatives including the Hydros system and new innovations for institutional customers are set to launch in the second quarter to drive market share and margin expansion.
Notable Items & Risk Factors
The Jackson Supply acquisition is expected to close in the second quarter, with the existing leadership team remaining in place to maintain its entrepreneurial culture. Section 232 tariffs are creating upward pricing pressure for OEMs, which management expects will be passed through to the distribution level. Unit volumes remained a headwind in the first quarter, indicating the market has not yet fully 'healed' despite incremental improvements in March and April. Inventory levels were elevated by approximately 25% quarter-over-quarter, reflecting the higher cost of A2L equipment and the need to stock indoor units compatible with new refrigerants.
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Q&A Highlights
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Market stability and growth momentum heading into the summer season
Management noted that March exited the quarter with high single-digit growth on a same-day basis, and this momentum has sustained through the first three weeks of April. While cautious because the peak selling season has not yet arrived, leadership described the current environment as 'incrementally more stable' and 'less complex' than previous years.
Impact of Section 232 tariffs on industry pricing dynamics
Management expects across-the-board price increases from manufacturers due to the duties being paid, with more clarity expected during the second quarter. The company is utilizing proprietary software to quickly implement these price adjustments across thousands of SKUs, reducing the risk of margin lag.
Inventory strategy and the transition to A2L products
The increase in inventory value is attributed to the higher price point of A2L equipment rather than an increase in unit counts; unit holdings are actually lower than the prior year. Management clarified that they did not 'buy ahead' of tariffs, but are carrying necessary stock to support the transition where indoor and outdoor units must now be matched for the new refrigerant.
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- Watsco, Inc. (WSO) Q1 2026 Earnings Call Transcript
Apr 28, 2026 · seekingalpha.com
Watsco, Inc. (WSO) Q1 2026 Earnings Call Transcript
- Watsco (WSO) Q1 Earnings and Revenues Surpass Estimates
Apr 28, 2026
Watsco (WSO) came out with quarterly earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.73 per share. This compares to earnings of $1.93 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of +7.97%. A quarter ago, it was expected that this heating and cooling company would post earnings of $1.94 per share when it actually produced earnings of $1.68, delivering a surprise of -13.4%.
Over the last four quarters, the company has surpassed consensus EPS estimates just once.
Watsco, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $1.53 billion for the quarter ended March 2026, surpassing the Zacks Consensus Estimate by 2.01%. This compares to year-ago revenues of $1.53 billion. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Watsco shares have added about 35.6% since the beginning of the year versus the S&P 500's gain of 4.8%.
What's Next for Watsco?
While Watsco has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Watsco was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $4.22 on $2.08 billion in revenues for the coming quarter and $12.53 on $7.38 billion in revenues for the current fiscal year.
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Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the bottom 40% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
DNOW (DNOW), another stock in the same industry, has yet to report results for the quarter ended March 2026.
This energy and industrial distribution company is expected to post quarterly earnings of $0.05 per share in its upcoming report, which represents a year-over-year change of -77.3%. The consensus EPS estimate for the quarter has been revised 5.3% lower over the last 30 days to the current level.
DNOW's revenues are expected to be $1.13 billion, up 88.7% from the year-ago quarter.
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Watsco, Inc. (WSO) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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- Watsco, Inc. Reveals Fall In Q1 Profit
Apr 28, 2026
(RTTNews) - Watsco, Inc. (WSO) reported a profit for first quarter that Dropped, from last year
The company's earnings came in at $71.04 million, or $1.87 per share. This compares with $72.88 million, or $1.93 per share, last year.
The company's revenue for the period rose 0.1% to $1.533 billion from $1.531 billion last year.
Watsco, Inc. earnings at a glance (GAAP) :
-Earnings: $71.04 Mln. vs. $72.88 Mln. last year. -EPS: $1.87 vs. $1.93 last year. -Revenue: $1.533 Bln vs. $1.531 Bln last year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
