Contrasting Willis Lease Finance (NASDAQ:WLFC) and Watsco (NYSE:WSO)

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

Analyst Ratings

This is a breakdown of recent ratings for Watsco and Willis Lease Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Watsco	0	9	2	0	2.18
Willis Lease Finance	0	1	1	1	3.00

Watsco presently has a consensus price target of $395.50, suggesting a potential upside of 27.62%. Willis Lease Finance has a consensus price target of $75.50, suggesting a potential upside of 32.99%. Given Willis Lease Finance’s stronger consensus rating and higher probable upside, analysts plainly believe Willis Lease Finance is more favorable than Watsco.

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%

Dividends

Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.3%. Willis Lease Finance pays an annual dividend of $0.53 per share and has a dividend yield of 0.9%. 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 & Volatility

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

Insider and Institutional 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 company insiders. Comparatively, 53.3% of Willis Lease Finance shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Watsco	$7.24 billion	1.77	$496.99 million	$11.53	26.88
Willis Lease Finance	$765.37 million	1.57	$113.76 million	$3.99	14.23

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.

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.