Watsco, Inc. (WSO) reported first‑quarter 2026 results that beat consensus estimates, with revenue of $1.533 billion, net income of $79.07 million, and diluted earnings per share of $1.87. The earnings beat was driven by disciplined cost management and a favorable product mix that offset the impact of lower unit volumes during the A2L refrigerant transition.
Revenue was flat year‑over‑year, but the company’s U.S. markets grew 2% while international markets declined 11%. E‑commerce sales rose 16%, representing 36% of trailing‑12‑month revenue, underscoring the company’s digital transformation strategy. Compared with Q1 2025, the company’s EPS fell from $1.93 to $1.87, and operating income slipped from $5.55 million to $5.45 million, reflecting the transition’s short‑term volume drag.
Gross profit margin contracted to 27.9% from 28.1% in the prior year, and operating margin fell to 7.2% from 7.3%. The slight compression is attributed to lower unit volumes, while higher average selling prices from the A2L transition helped preserve profitability. The company’s debt‑free balance sheet and substantial cash reserves enabled continued investment in technology platforms such as OnCallAir and mobile e‑commerce.
Management highlighted the completion of the Jackson Supply acquisition, which adds $230 million in annual sales and expands Watsco’s Sunbelt footprint. The company also increased its annual cash dividend by 10% to $13.20 per share, signaling confidence in its cash‑flow generation. The A2L transition, now largely complete, has stabilized volumes and positioned the company for higher‑margin growth in the coming quarters.
Despite the earnings beat, market participants remained cautious, focusing on broader economic conditions and the company’s forward guidance. Analysts noted that while the company’s financials are solid, the flat revenue and modest margin compression suggest that the transition’s headwinds are still present, and investors are awaiting clearer signals of sustained growth.
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