Watsco (NYSE:WSO) Posts Quarterly Earnings Results, Misses Estimates By $0.41 EPS

Watsco (NYSE:WSO) released its earnings results on Wednesday. The construction company reported $4.00 EPS for the quarter, missing analysts’ consensus estimates of $4.41 by ($0.41), FiscalAI reports. The firm had revenue of $2.10 billion during the quarter, compared to analysts’ expectations of $2.14 billion. Watsco had a net margin of 6.85% and a return on equity of 15.31%. The company’s revenue for the quarter was up 2.1% compared to the same quarter last year. During the same quarter in the previous year, the business earned $4.52 EPS.

Here are the key takeaways from Watsco’s conference call:

• Revenue grew 2% to $2.1 billion, with residential HVAC equipment sales up 5% on gains in both unit volume and pricing. Management characterized the market as stabilizing and expects roughly 4%–5% growth through July.
• Gross margin declined to 27.5% from 29.3% a year ago, primarily because 2025 included unusually aggressive OEM pricing and tariff-related benefits. Management views 27%–plus as the current baseline but reiterated a long-term goal of reaching 30% gross margin.
• Demand trends remain uneven: new construction is slowing in Florida and Texas, while Northern states are performing strongly; commercial sales fell about 8%, largely due to the VRF product transition to A2L refrigerants.
• Watsco completed its acquisition of Jackson Supply on June 1, adding approximately $20 million of June revenue and 25 Sunbelt locations. Management said Jackson’s leadership has an ambitious growth plan and that profitability is consistent with Watsco’s overall profile.
• Technology initiatives continued to gain traction, with e-commerce sales up 13% and reaching 37% of sales over the last 12 months, while OnCall Air proposals generated $1.9 billion in gross merchandise value. The company ended the quarter with $464 million in cash, no debt, and raised its annual dividend 10% to $13.20 per share.

Watsco Price Performance

Shares of NYSE WSO traded down $59.33 during mid-day trading on Wednesday, hitting $308.18. 1,039,159 shares of the company’s stock traded hands, compared to its average volume of 427,733. The company has a market capitalization of $12.53 billion, a P/E ratio of 25.59 and a beta of 1.02. The company’s 50-day moving average is $383.45 and its two-hundred day moving average is $393.67. Watsco has a 1 year low of $307.18 and a 1 year high of $459.99.

Watsco Announces Dividend

The firm also recently declared a quarterly dividend, which will be paid on Friday, July 31st. Investors of record on Thursday, July 16th will be paid a dividend of $3.30 per share. The ex-dividend date of this dividend is Thursday, July 16th. This represents a $13.20 dividend on an annualized basis and a yield of 4.3%. Watsco’s dividend payout ratio is presently 109.54%.

Watsco News Summary

Here are the key news stories impacting Watsco this week:

• Positive Sentiment: Watsco reported revenue of approximately $2.10 billion, up 2.1% year over year. Residential HVAC equipment sales increased 5%, while e-commerce sales remained strong, suggesting improving underlying demand as the industry stabilizes. Watsco Second Quarter Results
• Positive Sentiment: The Jackson Supply acquisition adds distribution density in important Sunbelt markets. Watsco also highlighted continued operating efficiency, substantial cash generation, and a debt-free balance sheet that could support additional expansion. Why Watsco Stock Crashed Today
• Neutral Sentiment: Analyst price targets remain above the recent trading level, with recent targets ranging from $385 to $485 and a reported median of $400. However, institutional positioning was mixed, with some large investors adding shares while others reduced holdings.
• Negative Sentiment: Second-quarter EPS was $4.00, below consensus estimates of roughly $4.38-$4.41 and down from $4.52 a year earlier. Revenue also missed expectations of about $2.14 billion, reinforcing concerns about slower near-term earnings growth. Watsco Q2 Earnings and Revenues Lag Estimates
• Negative Sentiment: Gross margin fell to 27.5% from 29.3% a year earlier as unusually favorable OEM price increases and tariff-related pricing benefits faded. Commercial sales were also weaker, partly because customers are transitioning to A2L refrigerants, creating additional uncertainty around product mix and profitability. Watsco Reports Mixed Q2 Results

Wall Street Analyst Weigh In

Several research firms have recently issued reports on WSO. Morgan Stanley lifted their target price on shares of Watsco from $370.00 to $405.00 and gave the company an “equal weight” rating in a report on Friday, July 10th. Weiss Ratings restated a “hold (c)” rating on shares of Watsco in a research report on Friday, June 26th. Wall Street Zen raised shares of Watsco from a “sell” rating to a “hold” rating in a research report on Saturday, May 2nd. Robert W. Baird lowered their price target on Watsco from $460.00 to $420.00 and set an “outperform” rating on the stock in a report on Tuesday. Finally, DA Davidson assumed coverage on Watsco in a research note on Tuesday, June 16th. They set a “neutral” rating and a $385.00 price target for the company. Two investment analysts have rated the stock with a Buy rating and nine have assigned a Hold rating to the company’s stock. According to data from MarketBeat.com, the company has a consensus rating of “Hold” and a consensus price target of $404.88.

Hedge Funds Weigh In On Watsco

A number of large investors have recently bought and sold shares of the business. Invesco Ltd. lifted its holdings in shares of Watsco by 6.6% in the 4th quarter. Invesco Ltd. now owns 78,336 shares of the construction company’s stock worth $26,395,000 after buying an additional 4,863 shares during the period. Corient Private Wealth LLC boosted its stake in Watsco by 202.6% in the fourth quarter. Corient Private Wealth LLC now owns 472,182 shares of the construction company’s stock valued at $159,102,000 after acquiring an additional 316,129 shares in the last quarter. Delta Global Management LP grew its stake in Watsco by 12.0% during the 4th quarter. Delta Global Management LP now owns 7,177 shares of the construction company’s stock worth $2,418,000 after buying an additional 769 shares during the last quarter. Empowered Funds LLC increased its holdings in shares of Watsco by 86.3% during the fourth quarter. Empowered Funds LLC now owns 1,867 shares of the construction company’s stock valued at $629,000 after acquiring an additional 865 shares in the last quarter. Finally, Voloridge Investment Management LLC raised its position in shares of Watsco by 89.5% in the 4th quarter. Voloridge Investment Management LLC now owns 120,497 shares of the construction company’s stock valued at $40,601,000 after purchasing an additional 56,898 shares during the last quarter. Hedge funds and other institutional investors own 89.71% of the company’s stock.

About Watsco

Watsco, Inc is the largest distributor of heating, ventilation, air conditioning and refrigeration (HVAC/R) equipment, parts and supplies in the United States. Headquartered in Miami, Florida, the company operates a network of more than 600 branches across the continental U.S., Canada and Puerto Rico. Watsco serves residential and commercial contractors by providing essential components for climate control systems, including air conditioners, furnaces, heat pumps, coils, refrigerants, controls and electrical and piping supplies.

Founded in 1947, Watsco has grown from a single regional distributor into an industry leader through a combination of organic expansion, acquisitions and strategic partnerships with original equipment manufacturers such as Carrier, Trane, Goodman and Lennox.