UPDATE 2-Watsco Q4 earnings beat Street view

Wed Feb 17, 2010 10:50am EST

* Q4 adj EPS $0.25 vs est. $0.14

* Revenue rises 68 pct on JV contribution

* Says expects to come up with a more profitable Q1

* Shares rise 5 pct (Adds conference call and analyst comments, share movement)

BANGALORE, Feb 17 (Reuters) - Watsco Inc (WSO.N), a distributor of heating, air conditioning and refrigeration products, posted better-than-expected quarterly results, helped mainly by added revenue from a joint venture.

The company said it expects to come up with a more profitable first quarter in 2010 as it sees an improvement in revenue trends, and also helped by aggressive cost reduction.

"But we will wait to give detailed guidance when we have a better sense of the selling season," Chief Executive Albert Nahmad said on a conference call with analysts.

The quarter saw the trend of an increase in demand for higher-efficiency air conditioning systems, which experienced sales growth of 82 percent during the period, the CEO said.

"We expect this trend to continue, especially as a normal replacement cycle is restored to historical levels, and pent-up demand unfolds," Nahmad said.

"The fourth quarter marks the inflection in what we see as a dramatic compounding earnings growth story over the next three to give years, unique in an economy characterized by slower growth," J.P. Morgan Securities analyst Stephen Tusa wrote in a note.

For the latest fourth quarter, the company posted earnings of $6.2 million allocated to shareholders, or 21 cents a share, compared with $2.5 million, or 10 cents a share, in the year-ago period.

Revenue rose 68 percent to $563.6 million, which included $251 million of sales added by Carrier Enterprise, the joint venture Watsco formed with Carrier Corp, a unit of United Technologies Corp (UTX.N).

Watsco owns 60 percent stake in the joint venture that was formed in July 2009.

On an adjusted basis, the company earned 25 cents a share.

Analysts on average were expecting earnings 14 cents a share, before special items, on revenue of $547.0 million, according to Thomson Reuters I/B/E/S.

Watsco currently operates from 505 locations serving over 50,000 contractor customers.

Shares of the company were up 5 percent at $55.30 in morning trade on the New York Stock Exchange. They earlier touched a high of $56.98. (Reporting by Bijoy Koyitty in Bangalore; Editing by Gopakumar Warrier)