WSO-B · Watsco, Inc.

Watsco's first quarter results reflect a stabilizing HVAC market as the A2L refrigerant transition matures. Revenue was flat at $1.53 billion, with a 2% increase in U.S. markets offset by an 11% decline internationally. HVAC equipment sales (65% of revenue) decreased 1%, while other HVAC products grew 4% and commercial refrigeration rose 11%. Average selling prices for HVAC equipment increased 9% due to a higher mix of A2L and higher-efficiency products, but unit volumes declined. Gross margin contracted 20 basis points to 27.9%, and operating margin slipped 10 bps to 7.2%, as SG&A remained flat. Earnings per share fell 3% to $1.87, in line with the seasonal pattern of lower first-quarter earnings. Cash flow from operations improved dramatically to a use of $19 million from $178 million a year ago, reflecting better working capital management. The company also announced the acquisition of Jackson Supply Company, a Sunbelt HVAC distributor with $230 million in annual sales, expected to close in Q2 2026. This marks the 73rd independent distributor to join Watsco and adds meaningful scale in core markets. Management noted improved market stability heading into the summer selling season and highlighted continued technology adoption, with e-commerce sales growing 16% to $2.6 billion annualized and OnCallAir GMV up 20%. The dividend was increased 10% to $13.20 per share, extending a 52-year streak. Overall, the quarter demonstrates resilience amid a transitional period, with the acquisition positioning Watsco for future growth.