Head to Head Review: Willis Lease Finance (NASDAQ:WLFC) versus Watsco (NYSE:WSO)

Watsco (NYSE:WSO) and Willis Lease Finance (NASDAQ:WLFC) are both industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, dividends, valuation and institutional ownership.

Analyst Ratings

This is a summary of current recommendations for Watsco and Willis Lease Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Watsco	1	8	2	0	2.09
Willis Lease Finance	0	2	1	1	2.75

Watsco currently has a consensus target price of $395.50, suggesting a potential upside of 26.34%. Willis Lease Finance has a consensus target price of $75.50, suggesting a potential upside of 44.36%. Given Willis Lease Finance’s stronger consensus rating and higher possible upside, analysts plainly believe Willis Lease Finance is more favorable than Watsco.

Earnings and Valuation

This table compares Watsco and Willis Lease Finance”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Watsco	$7.24 billion	1.78	$496.99 million	$11.53	27.15
Willis Lease Finance	$730.24 million	1.51	$113.76 million	$3.99	13.11

Watsco has higher revenue and earnings than Willis Lease Finance. Willis Lease Finance is trading at a lower price-to-earnings ratio than Watsco, indicating that it is currently the more affordable of the two stocks.

Dividends

Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Willis Lease Finance pays an annual dividend of $0.53 per share and has a dividend yield of 1.0%. Watsco pays out 114.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Willis Lease Finance pays out 13.3% of its earnings in the form of a dividend. Watsco has raised its dividend for 13 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Watsco has a beta of 1.05, indicating that its stock price is 5% more volatile than the S&P 500. Comparatively, Willis Lease Finance has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Institutional and Insider Ownership

89.7% of Watsco shares are held by institutional investors. Comparatively, 93.7% of Willis Lease Finance shares are held by institutional investors. 12.9% of Watsco shares are held by insiders. Comparatively, 53.3% of Willis Lease Finance shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Watsco and Willis Lease Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Watsco	6.53%	14.40%	10.17%
Willis Lease Finance	11.80%	14.11%	2.64%

Summary

Watsco beats Willis Lease Finance on 11 of the 18 factors compared between the two stocks.

About Watsco

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.

About Willis Lease Finance

Willis Lease Finance Corporation operates as a lessor and servicer of commercial aircraft and aircraft engines worldwide. The company operates through two segments, Leasing and Related Operations, and Spare Parts Sales. The Leasing and Related Operations segment engages in acquiring and leasing commercial aircraft, aircraft engines, and other aircraft equipment, as well as the purchase and resale of commercial aircraft engines and other aircraft equipment, and other related businesses. The Spare Parts Sales segment purchases and resells after-market engine parts, whole engines, engine modules, and portable aircraft components. The company also focuses on engine management and consulting business. It serves commercial aircraft operators, as well as maintenance, repair, and overhaul organizations. As of December 31, 2023, it had a total lease portfolio of 337 engines, 12 aircraft, one marine vessel, and other leased parts and equipment, and with 74 lessees in 42 countries; and managed a total lease portfolio of 198 engines, aircraft, and related equipment for other parties. The company was founded in 1985 and is headquartered in Coconut Creek, Florida.