Watsco Second Quarter Results Reflect Further Industry Stabilization, Strong E-Commerce Sales Growth and Continued Operating Efficiency
Rhea-AI Summary
Watsco (NYSE: WSO) reported second-quarter 2026 revenues up 2% to $2.1 billion (1% same-store), while operating income declined 12% to $238 million and diluted EPS fell 12% to $4.00, reflecting lower gross margins of 27.5% versus 29.3%.
The company acquired Jackson Supply Company, a Sunbelt HVAC distributor with approximately $230 million in annualized sales across 25 locations serving 5,000 customers, adding density in high-growth markets. Year-to-date, revenues rose 1% to $3.6 billion, operating income declined 9%, and EPS decreased 9% to $5.92.
According to Watsco, e-commerce sales grew 13% in the first half of 2026 and reached $2.7 billion, or 37% of sales, over the last 12 months. The company ended the period with $464 million in cash, no debt, operating cash use improved by $164 million year-over-year, and the annual dividend was raised 10% to $13.20 per share.
Positive
- Q2 2026 revenue up 2% to $2.10 billion
- Jackson Supply acquisition adds ~$230 million sales and 25 Sunbelt locations
- E-commerce sales up 13% in 1H 2026; $2.7 billion LTM (37% of sales)
- Operating cash use improved by $164 million year-to-year in first half
- Cash and investments of $464 million with no debt
- Dividend increased 10% to $13.20 per share annually
Negative
- Q2 gross margin down to 27.5% from 29.3% year-over-year
- Q2 operating income decreased 12% to $238 million
- Q2 diluted EPS decreased 12% to $4.00
- Year-to-date operating margin declined to 9.6% from 10.7%
- Year-to-date diluted EPS down 9% to $5.92
- SG&A expenses up 3% in Q2 versus 2% revenue growth
Key Figures
Historical Context
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Jul 16 | Earnings call scheduling | Neutral | -3.4% | Second-quarter earnings call scheduled for July 29 before market opening |
| Jul 01 | Dividend declaration | Positive | -2.2% | Quarterly dividend declared at $3.30 per share after 52 consecutive years |
| Jun 02 | Acquisition completion | Positive | +1.2% | Jackson Supply acquisition completed, adding 25 locations and approximately 5,000 customers |
| Apr 28 | Acquisition agreement | Positive | -4.0% | Agreement announced to acquire Jackson Supply for $198.0 million in stock |
| Apr 28 | First-quarter earnings | Negative | -4.0% | Revenue was $1.53 billion while diluted EPS declined 3% to $1.87 |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Watsco's recent news history showed two aligned reactions and three divergences, including negative reactions to a dividend announcement and prior quarterly results.
Key Terms
a2l refrigerants technical
same-store basis financial
gross merchandise value financial
non-gaap financial information financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
Jackson Supply Acquisition Adds Density to Key Sunbelt Markets;
Entrepreneurial Culture and Debt-Free Balance Sheet Positions Company for Growth
MIAMI, July 29, 2026 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) today announced its operating results for the quarter and six months ended June 30, 2026.
Watsco is the largest distributor in the highly fragmented North American HVAC market. Since entering distribution in 1989, Watsco has achieved an
During the second quarter, Watsco closed on the acquisition of Jackson Supply Company, a market-leading HVAC distributor with annualized sales of approximately
Watsco maintains a solid balance sheet with
Second Quarter Operating Performance
- Revenues increased
2% to$2.1 billion (1% on a same-store basis) - Gross profit decreased
4% to$579 million (gross profit margin of27.5% versus29.3% last year) - SG&A increased
3% to$349 million (16.6% as a percentage of sales versus16.4% last year) - Operating income decreased
12% to$238 million (operating margin of11.3% versus13.2% last year) - Earnings per share decreased
12% to$4.00
Second Quarter Sales Trends (excluding acquisitions)
3% increase in HVAC equipment sales (68% of sales)1% decrease in sales of other HVAC products (28% of sales)19% increase in commercial refrigeration products (4% of sales)
Second quarter sales reflect stabilizing end-market demand following last year’s transition to next generation HVAC systems containing A2L refrigerants, which affected virtually all domestic HVAC equipment products sold across 650 domestic locations and impacted our customers’ business as well. Domestic residential HVAC equipment sales increased
Second quarter gross margin was impacted by the timing and magnitude of pricing actions implemented by our primary OEMs in 2025 versus 2026. Pricing actions in 2025 captured substantial inflation and tariffs, resulting in outsized benefits to last year’s gross margin. In contrast, pricing actions for 2026 have normalized, returning to levels more in line with historical trends. The comparative benefit to 2025’s gross margin, along with other A2L transition-related impacts, was approximately 130 basis-points. The Company believes that gross margin thus far in 2026, which were largely consistent with gross margin achieved for the last 12 months ended June 30, 2026, are more representative of underlying market conditions.
Albert H. Nahmad, Chairman and CEO said: “Our performance during the second quarter is indicative of improving end-market stability after a busy period of regulatory transitions. We are now operating in a more conventional environment in which Watsco’s scale, OEM relationships, and technology investments can add even more value.”
Mr. Nahmad added: “We are excited that Jackson Supply is now officially a member of the Watsco family. It is a legendary company that diversifies and expands our presence in key Sunbelt markets. We look forward to supporting their growth. I am also excited about the recent launch of SupplySync, which we introduced at our investor day last year, and continued progress on the other initiatives that are now active. We believe that Watsco is uniquely positioned for continued growth and success in our industry.”
Year to Date Operating Performance
- Revenues increased
1% to$3.6 billion - Gross profit decreased
3% to$1 billion (gross profit margin of27.7% versus28.7% last year) - SG&A increased
2% to$672 million (18.5% as a percentage of sales versus18.4% last year) - Operating income decreased
9% to$349 million (operating margin of9.6% versus 10.7 % last year) - Earnings per share decreased
9% to$5.92 - Cash used in operations of
$21 million versus$185 million last year, a$164 million improvement
Year to Date Sales Trends (excluding acquisitions)
1% increase in HVAC equipment sales (67% of sales)1% increase in sales of other HVAC products (29% of sales)16% increase in commercial refrigeration products (4% of sales)
Innovation and Strategic Technology Initiatives
The Company’s continued investment in technology reflects a long-term strategic commitment to building capabilities that strengthen customer relationships, improve operating efficiency and support sustainable growth. Watsco 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 advanced analytics, AI, technical knowledge and product recommendations. The result is a frictionless buying journey, increased convenience and higher customer satisfaction, which drives greater loyalty and repeat business with lower costs to serve.
Thus far in 2026:- E-commerce sales grew
13% during the first six months of 2026, far outpacing overall revenue growth, and reached$2.7 billion for the 12 months ended June 30, 2026 (37% of sales), with outperforming regions exceeding70% in e-commerce sales. - 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 such as bills of material, warranty information, regulatory match ups and more.
- 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® reached
$1 billion for the first six months of 2026, a14% increase over the same period last year. For the twelve months ended June 30, 2026, contractors presented quotes to approximately 342,000 households and generated$1.9 billion GMV, a15% increase versus the prior comparable twelve-month period.
A.J. Nahmad, Watsco’s President, added: “Our technology platforms have continued to scale and deepen their impact for our customers. We believe that the growth in e-commerce, OnCallAir® and overall digital engagement across our network reflects the value these tools deliver to our customers every day. We have also progressed nicely with the various initiatives introduced at our investor day, including the formal launch of SupplySync and the scaling of the other initiatives announced. Our focus remains advancing these unique capabilities – with AI enabling better and faster speed to market – in ways that help our customers grow.”
Buy & Build Acquisition Strategy
The Company acquired Jackson Supply in June 2026. Jackson Supply is among largest Sunbelt HVAC distributors, serving approximately 5,000 customers from 25 locations in several high-growth Sunbelt markets.
The Company continues to actively seek new businesses that will join the Watsco family. Watsco has acquired 13 companies in recent years that today represent approximately
Cash Flow, Dividends, Financial Strength and Liquidity
Operating cash flow was a cash-use of
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 growth investments. This strong financial position has been key to our 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.
Use of Non-GAAP Financial Information
In this release, the Company discloses non-GAAP measures on a “same-store basis”, which exclude the effects of locations closed, acquired, or locations opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations. The Company believes that this information provides greater comparability regarding its ongoing operating performance. These measures should not be considered an alternative to measurements presented in accordance with U.S. GAAP.
Second Quarter Earnings Conference Call Information
Date and time: July 29, 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, more than 70,000 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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | 2,104,859 | $ | 2,062,442 | $ | 3,637,869 | $ | 3,593,528 | ||||||||
| Cost of sales | 1,525,930 | 1,458,954 | 2,631,385 | 2,560,417 | ||||||||||||
| Gross profit | 578,929 | 603,488 | 1,006,484 | 1,033,111 | ||||||||||||
| Gross profit margin | 27.5 | % | 29.3 | % | 27.7 | % | 28.7 | % | ||||||||
| Selling, general and administrative expenses | 348,986 | 339,001 | 671,837 | 661,582 | ||||||||||||
| Other income | 8,429 | 7,382 | 13,909 | 12,528 | ||||||||||||
| Operating income | 238,372 | 271,869 | 348,556 | 384,057 | ||||||||||||
| Operating margin | 11.3 | % | 13.2 | % | 9.6 | % | 10.7 | % | ||||||||
| Interest income, net | 3,497 | 2,329 | 9,956 | 7,746 | ||||||||||||
| Income before income taxes | 241,869 | 274,198 | 358,512 | 391,803 | ||||||||||||
| Income taxes | 50,567 | 57,430 | 74,269 | 80,495 | ||||||||||||
| Net income | 191,302 | 216,768 | 284,243 | 311,308 | ||||||||||||
| Less: net income attributable to non-controlling interest | 27,966 | 33,155 | 41,833 | 47,634 | ||||||||||||
| Net income attributable to Watsco, Inc. | $ | 163,336 | $ | 183,613 | $ | 242,410 | $ | 263,674 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Net income attributable to Watsco, Inc. shareholders | $ | 163,336 | $ | 183,613 | $ | 242,410 | $ | 263,674 | ||||||||
| Less: distributed and undistributed earnings allocated to restricted common stock | 10,733 | 12,159 | 16,855 | 17,409 | ||||||||||||
| Earnings allocated to Watsco, Inc. shareholders | $ | 152,603 | $ | 171,454 | $ | 225,555 | $ | 246,265 | ||||||||
| Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 38,192,692 | 37,899,430 | 38,079,266 | 37,876,470 | ||||||||||||
| Diluted earnings per share for Common and Class B common stock | $ | 4.00 | $ | 4.52 | $ | 5.92 | $ | 6.50 | ||||||||
| WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) | ||||||||
| June 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | 364,189 | $ | 433,283 | ||||
| Short-term cash investments | 100,000 | 300,000 | ||||||
| Accounts receivable, net | 1,060,767 | 796,181 | ||||||
| Inventories, net | 1,890,473 | 1,386,317 | ||||||
| Other current assets | 38,668 | 38,725 | ||||||
| Total current assets | 3,454,097 | 2,954,506 | ||||||
| Property and equipment, net | 146,892 | 136,012 | ||||||
| Operating lease right-of-use assets | 509,300 | 452,547 | ||||||
| Goodwill, intangibles, net and other | 974,428 | 871,740 | ||||||
| Total assets | $ | 5,084,717 | $ | 4,414,805 | ||||
| Accounts payable and accrued expenses | $ | 960,051 | $ | 600,589 | ||||
| Current portion of lease liabilities | 119,723 | 117,153 | ||||||
| Total current liabilities | 1,079,774 | 717,742 | ||||||
| Operating lease liabilities, net of current portion | 406,478 | 350,616 | ||||||
| Deferred income taxes and other liabilities | 125,255 | 124,386 | ||||||
| Total liabilities | 1,611,507 | 1,192,744 | ||||||
| Watsco, Inc. shareholders' equity | 2,994,413 | 2,781,376 | ||||||
| Non-controlling interest | 478,797 | 440,685 | ||||||
| Total shareholders' equity | 3,473,210 | 3,222,061 | ||||||
| Total liabilities and shareholders' equity | $ | 5,084,717 | $ | 4,414,805 | ||||
| WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 284,243 | $ | 311,308 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 21,943 | 21,687 | ||||||
| Non-cash contribution to 401(k) plan | 9,267 | 8,743 | ||||||
| Share-based compensation | 16,711 | 17,612 | ||||||
| Provision for doubtful accounts | 2,442 | 704 | ||||||
| Other income from investment in unconsolidated entity | (13,909 | ) | (12,528 | ) | ||||
| Other, net | 2,861 | 3,297 | ||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
| Accounts receivable, net | (244,560 | ) | (131,119 | ) | ||||
| Inventories, net | (443,966 | ) | (552,956 | ) | ||||
| Accounts payable and other liabilities | 339,169 | 149,774 | ||||||
| Other, net | 4,359 | (1,612 | ) | |||||
| Net cash used in operating activities | (21,440 | ) | (185,090 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net proceeds from short-term investments | 200,000 | 255,669 | ||||||
| Business acquisitions, net of cash acquired | 7,663 | (19,383 | ) | |||||
| Capital expenditures, net | (15,898 | ) | (14,034 | ) | ||||
| Net cash provided by investing activities | 191,765 | 222,252 | ||||||
| Cash flows from financing activities: | ||||||||
| Dividends on common stock | (255,920 | ) | (230,497 | ) | ||||
| Distributions to non-controlling interest | - | (69,829 | ) | |||||
| Proceeds from dividend reinvestment plan | 8,107 | 14,111 | ||||||
| Other, net | 10,453 | 11,982 | ||||||
| Net cash used in financing activities | (237,360 | ) | (274,233 | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (2,059 | ) | 3,778 | |||||
| Net decrease in cash and cash equivalents | (69,094 | ) | (233,293 | ) | ||||
| Cash and cash equivalents at beginning of period | 433,283 | 526,271 | ||||||
| Cash and cash equivalents at end of period | $ | 364,189 | $ | 292,978 | ||||
Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail: blogan@watsco.com
