Watsco Inc reported second quarter 2026 results with revenue increasing 2% to $2.1 billion. The HVAC distributor posted earnings per share of $4, with operating income of $238 million representing an 11.3% margin. The company's residential HVAC equipment sales grew 5% during the quarter. E-commerce sales expanded 13%, now accounting for 37% of total sales over the past 12 months. Gross margin declined to 27.5% from 29.3% in the prior year, impacted by more moderate pricing actions from equipment manufacturers. Operating cash flow improved by $168 million for the six-month period. Watsco ended the quarter with $464 million in cash and no debt. The company raised its annual dividend 10% to $13.20 per share, marking 52 consecutive years of dividend payments. The firm acquired Jackson Supply, which generates $230 million in annual sales across 25 locations in Sunbelt markets.

Watsco (NYSE:WSO) falls 13% today after missing Q2 estimates. 29 July 2026 05:17 PM PDT Summarize with AI You are reading a free article with opinions that may differ from the recommendation given by Kalkine in its paid research reports. Become a Kalkine member today to get access to its research reports, in-depth technical and fundamental research. Learn more Key Highlights * WSO shares fell 12.92% Wednesday to $320.02, a 3-year low, down from a prior close of $367.51. * Second-quarter EPS of $4.00 missed a $4.47 to $4.51 consensus, with revenue of approximately $2.10 billion also falling short of a $2.14 billion to $2.15 billion estimate. * Gross margin compressed to 27.5% from 29.3% a year earlier as last year's tariff- and OEM-driven pricing gains normalized. * Commercial sales softened amid the industry-wide VRF-to-A2L refrigerant transition, even as residential HVAC equipment sales rose 5%. * The company completed its acquisition of Jackson Supply, adding 25 locations, and raised its annual dividend 10% to $13.20 per share, marking the 52nd consecutive year of dividends. Margin Compression Drives Sharp Decline Watsco (NYSE:WSO) shares plunged Wednesday after the HVAC distributor posted second-quarter results that missed Wall Street estimates on both lines, with EPS of $4.00 versus a $4.47 to $4.51 consensus and revenue of approximately $2.10 billion versus a $2.14 billion to $2.15 billion estimate. Watsco is the largest distributor of heating, ventilation, air conditioning and refrigeration equipment, parts and supplies in North America, operating a network of over 670 locations. Gross margin compressed to 27.5 percent from 29.3 percent a year earlier, as last year's tariff- and OEM-driven pricing gains normalized, while commercial sales softened amid the industry-wide transition from VRF to A2L refrigerants, overshadowing a 5 percent rise in residential HVAC equipment sales. The selloff mirrored broader weakness across HVAC and industrial peers reporting margin pressure this week, and came alongside a separate announcement that Watsco is expanding its footprint with the acquisition of Jackson Supply, adding 25 locations, though that news was not enough to offset investor concern over profitability trends. Technology Initiatives and Dividend Increase Provide Some Offset Watsco carries a market capitalization of approximately $13.18 billion and trades at a trailing price-to-earnings ratio of 26.56, with reported earnings per share of $12.05. Shares have traded in a 52-week range of $307.18 to $459.99, and the stock offers a dividend yield of 3.94 percent following a 10 percent increase in the annual dividend to $13.20 per share, marking the 52nd consecutive year of dividends. The company's technology initiatives continued to show traction, with e-commerce sales growing 13 percent and now representing 37 percent of total sales, 60 to 70 percent in some markets, while its new Supply.com platform, launched in the second quarter to serve institutional customers, generated $1.9 billion in gross merchandise value, up 15 percent. Management reiterated its long-term goal of a 30 percent gross margin and noted market stabilization with July organic growth of 4 to 5 percent. Conclusion Watsco's sharp decline reflects investor concern over margin compression and softening commercial demand amid the industry's refrigerant transition, even as the company's residential business, technology platforms and dividend growth remain intact. With management citing early signs of market stabilization heading into July, the durability of that recovery will be the key factor determining whether the stock can rebound from its 3-year low. This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research before making financial decisions. FAQs. Q: Why did Watsco stock fall to a 3-year low? A: Shares declined after the company missed second-quarter revenue and earnings estimates, with gross margin compressing as last year's tariff-related pricing gains normalized and commercial demand softened. Q: What is causing weakness in Watsco's commercial sales? A: Commercial sales softened amid the industry-wide transition from VRF to A2L refrigerants, even as residential HVAC equipment sales grew 5%. Q: did Watsco increase its dividend? A: Yes, the company raised its annual dividend 10% to $13.20 per share, marking the 52nd consecutive year of dividend payments. Download Free Report - Explore 3 Stock Ideas & Industry Insights Unlock 3 stock ideas and key industry insights in its free report. This information is general in nature and does not consider your personal objectives, financial situation, or needs. It is not financial advice. All investments involve risk - consider independent advice before making any investment decisions. Disclaimer: