Watsco First Quarter Performance Reflects Stabilizing Markets, Improved Operating Efficiency and Expanded Technology Adoption
Rhea-AI Summary
Watsco (NYSE: WSO) reported first quarter 2026 results and agreed to acquire Jackson Supply Company, a Sunbelt HVAC distributor with annual sales of $230 million. Q1 revenue was $1.53 billion (flat), diluted EPS was $1.87 (down 3%), and the company held $593 million cash and short-term investments with no debt. E-commerce represented ~36% of trailing 12-month sales and OnCallAir® GMV rose 20%.
Positive
- Acquisition adds $230M annual sales
- Strong liquidity: $593M cash and short-term investments
- E-commerce ~36% of trailing 12-month sales
- Dividend increased 10% to $13.20 per share
Negative
- Revenue flat at $1.53B year-over-year
- Diluted EPS decreased 3% to $1.87
- Operating income declined 2%
- Inventories rose ~24% to $1.72B
News Market Reaction – WSO
On the day this news was published, WSO declined 4.03%, reflecting a moderate negative market reaction. Argus tracked a trough of -3.3% from its starting point during tracking. Our momentum scanner triggered 21 alerts that day, indicating elevated trading interest and price volatility. This price movement removed approximately $743M from the company's valuation, bringing the market cap to $17.69B at that time.
Data tracked by StockTitan Argus on the day of publication.
Key Figures
Market Reality Check
Peers on Argus
WSO gained 3.68% on high volume, while key peers were mixed: POOL -2.46%, QXO -3.71%, WCC -0.71%, AIT +1.35%, FERG +0.19%. The move appears company-specific rather than sector-driven.
Historical Context
| Date | Event | Sentiment | Move | Catalyst |
|---|---|---|---|---|
| Apr 10 | Conference call notice | Neutral | +1.3% | Announced timing of Q1 2026 earnings release and conference call. |
| Apr 01 | Dividend declaration | Positive | +3.3% | Declared $3.30 quarterly dividend, confirming 10% annual dividend increase. |
| Mar 16 | Conference participation | Neutral | +1.3% | Announced participation in J.P. Morgan Industrials Conference with management speakers. |
| Feb 17 | Dividend increase | Positive | +1.2% | Raised annual dividend 10% to $13.20 per share citing strong cash flow. |
| Feb 17 | Earnings results | Positive | +1.2% | Reported 2025 results with record gross margin, strong cash flow and higher dividend. |
Recent Watsco news events have generally seen modestly positive price reactions, especially around dividends, earnings updates and investor communications.
Over recent months, Watsco highlighted its dividend strength, conference participation and 2025 performance. On Feb 17, 2026, it reported 2025 revenues of $7.24 billion, record 28.0% gross margin and raised its annual dividend to $13.20 per share. Subsequent dividend-related releases in February and April also emphasized a 10% dividend increase and a 52-year payment history. Investor events in March and the April 10 call announcement preceded today’s Q1 2026 results and Jackson Supply acquisition update, continuing a steady communication pattern.
Market Pulse Summary
This announcement combines steady Q1 2026 performance with strategic expansion and continued digital scaling. Revenue held at $1.53 billion and diluted EPS was $1.87, while Watsco agreed to acquire Jackson Supply, a Sunbelt distributor with $230 million in annual sales. The company highlighted $593 million in cash and short-term investments with no debt, rising e-commerce revenue of $2.6 billion, and a higher $13.20 annual dividend. Investors may watch A2L transition progress, margins, cash generation and integration of new acquisitions.
Key Terms
a2l refrigerant technical
gross merchandise value financial
gmv financial
gaap financial
AI-generated analysis. Not financial advice.
Company to Acquire Jackson Supply Company, Leading Sunbelt Distributor with Annual Sales of
MIAMI, April 28, 2026 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) today announced its operating results for the first quarter ended March 31, 2026.
Watsco also announced that it has entered into an agreement to acquire Jackson Supply Company, one of the largest Sunbelt HVAC distributors, with annual sales of
Watsco is the largest distributor in the highly fragmented North American HVAC market. Since entering distribution in 1989, Watsco has achieved an
The Company maintains a solid financial position with
Business Trends
Market conditions gradually improved during the first quarter as the transition to A2L refrigerant products continued to mature. The A2L transition began during early 2025 and impacted approximately
First Quarter Performance
- Revenues were flat at
$1.53 billion - Gross profit was flat at
$428 million (gross profit margin of27.9% versus28.1% last year) - SG&A was also flat and consistent as a percentage of sales
- Operating income decreased
2% to$110 million (operating margin of7.2% versus7.3% last year) - Earnings per share decreased
3% to$1.87 - Cash used in operations was
$19 million versus$178 million last year, a$159 million improvement
Sales trends
2% increase in overall sales in U.S. markets versus11% sales decline internationally1% decrease in HVAC equipment (65% of sales)4% increase in sales of other HVAC products (30% of sales)11% increase in commercial refrigeration products (5% of sales)
First quarter 2026 results reflect a
Mr. Nahmad added: “Our markets are experiencing improved stability as we approach the Summer selling season for our products. Our teams are collaborating well with our contractor customers, who also have a more simplified, focused business environment in which to offer and sell their products and services. Our technology, our seasoned leadership team, our capital and our deep relationships in this wonderful industry serve us well and position us favorably to grow share.”
It is important to note that the first and fourth quarters of each calendar year are highly seasonal due to the timing of the replacement of HVAC systems and results are typically strongest in the second and third quarters. The Company’s first quarter financial results are disproportionately affected by seasonality.
Innovation and Strategic Technology Initiatives
Watsco pioneered the industry’s most comprehensive digital ecosystem. The Company has invested more than
- Watsco’s HVAC Pro+ Mobile Apps and E-Commerce platform have transformed the customer-experience by providing contractors with a seamless digital experience, including sourcing products, accessing technical help, real-time inventory, pricing, product information and more. These tools empower 24/7 self-service that benefit from intelligent search, dynamic reordering, technical knowledge and product recommendations. The result is a frictionless buying journey, increased convenience and higher customer satisfaction, which we believe drives greater loyalty and repeat business with lower costs to serve. First quarter highlights include:
- First quarter E-commerce sales grew
16% and were approximately$2.6 billion for the 12 months ended March 31, 2026 (36% of sales), with outperforming regions exceeding60% . Order trends and the rate of improvement in customer attrition remain consistent year-over-year. - Total authenticated users of our HVAC Pro+ Mobile Apps increased to approximately 74,000.
- The addition of more than 10,000 new SKUs related to the A2L product launch, including all relevant data concerning features, dimensions, capacities, consumer literature and technical information, including bills of material, warranty information, regulatory match-ups and more.
- First quarter E-commerce sales grew
- OnCallAir® is Watsco’s digital sales platform enabling contractors to engage, present and quote solutions to homeowners. The gross merchandise value (GMV) of products sold through OnCallAir® was approximately
$394 million (a20% increase) for the first quarter of 2026. For the twelve months ended March 31, 2026, contractors presented unique quotes to approximately 336,000 households and generated$1.9 billion GMV, a20% increase versus the comparative period ended March 31, 2025.
A.J. Nahmad, Watsco’s President, added: “Our core technology platforms have continued to scale among customers, and we continue to innovate new ways to delight our customers. Last year, we set in motion incremental investments in new platforms that we believe will enhance growth with existing customers, attract new customers and boost profitability in the years ahead. These initiatives should provide great potential and enhance Watsco’s already-sizeable competitive advantage in the fragmented HVAC/R industry.”
Cash Flow, Dividends, Financial Strength and Liquidity
Cash flow use was
In April 2026, the Company increased its annual cash dividend by
The Company’s objective is to maintain a healthy balance sheet that provides low-cost capital to fund strategic investments in growth. Watsco’s strong financial position has been key to its ability to deliver sustained long-term returns, enabling investments regardless of macroeconomic or industry conditions. The Company’s stated goal is to generate annual operating cash flow in excess of net income consistent with its long-term track record.
Buy & Build Acquisition Strategy
Once completed, Jackson Supply will mark the 73rd independent distributor that has elected to join the Watsco family and will contribute to Watsco’s scale and, more importantly, to its community of leaders. Since 2019, Watsco has acquired 12 companies that today represent approximately
First Quarter Earnings Conference Call Information
Date and time: April 28, 2026 at 10:00 a.m. (EDT)
Webcast: http://investors.watsco.com (a replay will be available on the Company’s website)
Dial-in number: United States (844) 883-3908 / International (412) 317-9254
About Watsco
Watsco is the largest distributor in the highly fragmented North American HVAC/R market. Watsco’s solid financial position and culture of innovation has enabled investments in long-term growth, including the Company’s industry-leading technology platforms. Today, approximately 74,000 contractors, installers and technicians engage digitally with the Company, resulting in improved growth and lower attrition. The Company is now advancing AI-driven initiatives to leverage its extensive data assets to enhance the customer experience and improve efficiencies. These investments position Watsco to capture market share as contractors increasingly adopt digital tools and incorporate data-driven solutions in their businesses.
This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, our expected financial and operational results and the related assumptions underlying our expected results. These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” or “intend,” the negative of these terms, and similar references to future periods. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry, the seasonal nature of sales of Watsco’s products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments. Detailed information about these factors and additional important factors can be found in the documents that Watsco files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as required by applicable law.
| WATSCO, INC. Condensed Consolidated Results of Operations (In thousands, except share and per share data) (Unaudited) | ||||||||
| Quarters Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | 1,533,010 | $ | 1,531,086 | ||||
| Cost of sales | 1,105,455 | 1,101,463 | ||||||
| Gross profit | 427,555 | 429,623 | ||||||
| Gross profit margin | 27.9 | % | 28.1 | % | ||||
| Selling, general and administrative expenses | 322,851 | 322,581 | ||||||
| Other income | 5,480 | 5,146 | ||||||
| Operating income | 110,184 | 112,188 | ||||||
| Operating margin | 7.2 | % | 7.3 | % | ||||
| Interest income, net | 6,459 | 5,417 | ||||||
| Income before income taxes | 116,643 | 117,605 | ||||||
| Income taxes | 23,702 | 23,065 | ||||||
| Net income | 92,941 | 94,540 | ||||||
| Less: net income attributable to non-controlling interest | 13,867 | 14,479 | ||||||
| Net income attributable to Watsco, Inc. | $ | 79,074 | $ | 80,061 | ||||
| Diluted earnings per share: | ||||||||
| Net income attributable to Watsco, Inc. shareholders | $ | 79,074 | $ | 80,061 | ||||
| Less: distributed and undistributed earnings allocated to restricted common stock (1) | 8,034 | 7,172 | ||||||
| Earnings allocated to Watsco, Inc. shareholders | $ | 71,040 | $ | 72,889 | ||||
| Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 37,964,580 | 37,853,255 | ||||||
| Diluted earnings per share for Common and Class B common stock (1) | $ | 1.87 | $ | 1.93 | ||||
| (1 | ) | The quarterly EPS results reflect dilution of 7 cents per share in 2026 ( |
| WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) | ||||||
| March 31, 2026 | December 31, 2025 | |||||
| Cash and cash equivalents | $ | 392,679 | $ | 433,283 | ||
| Short-term cash investments | 200,000 | 300,000 | ||||
| Accounts receivable, net | 839,237 | 796,181 | ||||
| Inventories, net | 1,715,195 | 1,386,317 | ||||
| Other current assets | 34,067 | 38,725 | ||||
| Total current assets | 3,181,178 | 2,954,506 | ||||
| Property and equipment, net | 133,299 | 136,012 | ||||
| Operating lease right-of-use assets | 460,731 | 452,547 | ||||
| Goodwill, intangibles, net and other | 874,289 | 871,740 | ||||
| Total assets | $ | 4,649,497 | $ | 4,414,805 | ||
| Accounts payable and accrued expenses | $ | 834,157 | $ | 600,589 | ||
| Current portion of lease liabilities | 117,714 | 117,153 | ||||
| Total current liabilities | 951,871 | 717,742 | ||||
| Operating lease liabilities, net of current portion | 358,490 | 350,616 | ||||
| Deferred income taxes and other liabilities | 124,216 | 124,386 | ||||
| Total liabilities | 1,434,577 | 1,192,744 | ||||
| Watsco, Inc. shareholders' equity | 2,762,105 | 2,781,376 | ||||
| Non-controlling interest | 452,815 | 440,685 | ||||
| Total shareholders' equity | 3,214,920 | 3,222,061 | ||||
| Total liabilities and shareholders' equity | $ | 4,649,497 | $ | 4,414,805 | ||
| WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | ||||||||
| Quarters Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 92,941 | $ | 94,540 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 11,019 | 10,777 | ||||||
| Non-cash contribution to 401(k) plan | 9,267 | 8,743 | ||||||
| Share-based compensation | 8,077 | 8,800 | ||||||
| Provision for doubtful accounts | 1,796 | 840 | ||||||
| Other income from investment in unconsolidated entity | (5,480 | ) | (5,146 | ) | ||||
| Other, net | 968 | 811 | ||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
| Accounts receivable, net | (45,516 | ) | 83,864 | |||||
| Inventories, net | (330,428 | ) | (389,990 | ) | ||||
| Accounts payable and other liabilities | 234,710 | 8,887 | ||||||
| Other, net | 3,741 | 230 | ||||||
| Net cash used in operating activities | (18,905 | ) | (177,644 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net proceeds from short-term investments | 100,000 | 255,669 | ||||||
| Capital expenditures, net | (6,862 | ) | (7,443 | ) | ||||
| Business acquisitions, net of cash acquired | - | (3,670 | ) | |||||
| Net cash provided by investing activities | 93,138 | 244,556 | ||||||
| Cash flows from financing activities: | ||||||||
| Dividends on common stock | (121,775 | ) | (109,037 | ) | ||||
| Distributions to non-controlling interest | - | (69,829 | ) | |||||
| Proceeds from dividend reinvestment plan | 3,851 | 6,708 | ||||||
| Other, net | 3,954 | 10,479 | ||||||
| Net cash used in financing activities | (113,970 | ) | (161,679 | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (867 | ) | 319 | |||||
| Net decrease in cash and cash equivalents | (40,604 | ) | (94,448 | ) | ||||
| Cash and cash equivalents at beginning of period | 433,283 | 526,271 | ||||||
| Cash and cash equivalents at end of period | $ | 392,679 | $ | 431,823 | ||||
Contact
Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail: blogan@watsco.com
