Watsco (NYSE:WSO) Releases Earnings Results, Misses Expectations By $0.41 EPS

Watsco (NYSE:WSO) posted its quarterly earnings data on Wednesday. The construction company reported $4.00 earnings per share (EPS) for the quarter, missing the consensus estimate of $4.41 by ($0.41), FiscalAI reports. The company had revenue of $2.10 billion for the quarter, compared to analyst estimates of $2.14 billion. Watsco had a net margin of 6.85% and a return on equity of 15.31%. The business’s revenue was up 2.1% compared to the same quarter last year. During the same quarter last year, the company 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 Stock Performance

NYSE WSO traded down $17.40 during trading hours on Thursday, reaching $302.62. The stock had a trading volume of 244,926 shares, compared to its average volume of 433,117. The stock has a fifty day moving average of $382.11 and a 200 day moving average of $393.38. The stock has a market cap of $12.30 billion, a P/E ratio of 25.16 and a beta of 1.02. Watsco has a 52-week low of $301.00 and a 52-week high of $459.00.

Watsco Announces Dividend

The company also recently announced a quarterly dividend, which will be paid on Friday, July 31st. Investors of record on Thursday, July 16th will be issued 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 dividend yield of 4.4%. Watsco’s payout ratio is 109.54%.

Key Stories Impacting Watsco

Here are the key news stories impacting Watsco this week:

• Positive Sentiment: Watsco reported modest revenue growth, with second-quarter sales rising 2.1% year over year to approximately $2.10 billion. Residential HVAC equipment sales increased 5%, while management described industry conditions as stabilizing. Watsco Second Quarter Results
• Positive Sentiment: Strong e-commerce sales, continued operating efficiency, a debt-free balance sheet and the Jackson Supply acquisition support Watsco’s longer-term growth strategy and financial flexibility. Why Watsco Stock Crashed Today
• Neutral Sentiment: Analyst price targets remain above the current share level, but recent coverage included a pessimistic forecast from Robert W. Baird, signaling that expectations may be resetting after the earnings report. Robert W. Baird Forecast for Watsco
• Negative Sentiment: Adjusted earnings of $4.00 per share missed the $4.38–$4.41 consensus range and declined from $4.52 a year earlier. Revenue also missed estimates of roughly $2.14 billion, increasing concern about slower earnings momentum. Watsco Q2 Earnings and Revenues Lag Estimates
• Negative Sentiment: Gross margin fell to 27.5% from 29.3% a year earlier as unusually strong prior-year OEM price increases and tariff-related pricing benefits faded. Weaker commercial sales and disruption related to the transition to A2L refrigerants added to concerns about near-term profitability. Why Watsco Stock Is Down Today

Hedge Funds Weigh In On Watsco

A number of institutional investors have recently bought and sold shares of the business. Invesco Ltd. boosted 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 valued at $26,395,000 after acquiring an additional 4,863 shares during the last quarter. Corient Private Wealth LLC lifted its position in Watsco by 202.6% during the fourth quarter. Corient Private Wealth LLC now owns 472,182 shares of the construction company’s stock valued at $159,102,000 after purchasing an additional 316,129 shares during the period. Delta Global Management LP lifted its position in Watsco by 12.0% during the fourth quarter. Delta Global Management LP now owns 7,177 shares of the construction company’s stock valued at $2,418,000 after purchasing an additional 769 shares during the period. Empowered Funds LLC lifted its position in 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 purchasing an additional 865 shares during the period. Finally, Voloridge Investment Management LLC boosted its holdings in Watsco by 89.5% in the fourth 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. 89.71% of the stock is owned by hedge funds and other institutional investors.

Analyst Ratings Changes

A number of research firms recently commented on WSO. Wall Street Zen upgraded shares of Watsco from a “sell” rating to a “hold” rating in a research note on Saturday, May 2nd. Morgan Stanley upped their price target on shares of Watsco from $370.00 to $405.00 and gave the company an “equal weight” rating in a research note on Friday, July 10th. Weiss Ratings reaffirmed a “hold (c)” rating on shares of Watsco in a report on Friday, June 26th. Stephens lifted their price objective on shares of Watsco from $475.00 to $485.00 and gave the stock an “overweight” rating in a research note on Wednesday, April 29th. Finally, DA Davidson assumed coverage on shares of Watsco in a report on Tuesday, June 16th. They set a “neutral” rating and a $385.00 price objective on the stock. Two equities research analysts have rated the stock with a Buy rating and nine have given a Hold rating to the stock. Based on data from MarketBeat, Watsco has an average rating of “Hold” and a consensus target price of $402.38.

Watsco Company Profile

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.