Watsco (NYSE:WSO) Issues Quarterly Earnings Results, Misses Expectations By $0.26 EPS

Watsco (NYSE:WSO) announced its earnings results on Tuesday. The construction company reported $1.68 earnings per share for the quarter, missing analysts’ consensus estimates of $1.94 by ($0.26), FiscalAI reports. Watsco had a return on equity of 15.49% and a net margin of 6.87%.The company had revenue of $1.58 billion during the quarter, compared to analyst estimates of $1.62 billion. During the same period in the previous year, the company posted $2.37 earnings per share. Watsco’s revenue for the quarter was down 9.9% on a year-over-year basis.

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

• Watsco raised its annual dividend by 10% to $13.20, its 52nd consecutive year of payouts, and the board cited strong cash flow (management estimates roughly $16–$18 per share) as support for the increase.
• Management says the A2L product transition is largely behind them, noting double‑digit pricing gains and a Q4 gross margin uptick to 27.1%, with a strategic push (pricing optimization + VCR purchasing initiative) to exceed a 30% gross margin target over time.
• Unit volumes declined about 17% in 2025 (aftermarket roughly down 6%), and early 2026 sales are soft (mid‑single digit decline in Jan–Feb), reflecting lingering demand weakness and some international softness.
• The company finished 2025 debt‑free, met a $500 million inventory reduction goal, generated a record Q4 cash flow of $400 million, and is focused on improving inventory turns (long‑term goal: 5 turns) to free additional cash.
• Digital and technology initiatives are accelerating adoption—e‑commerce now about 35% of sales, mobile app users rose 15% to 73,000, and OnCall Air annual GMV grew 20% to $1.8 billion—management expects AI and pricing tools to further drive growth and margins.

Watsco Trading Down 0.7%

NYSE:WSO opened at $420.00 on Thursday. Watsco has a 1-year low of $323.05 and a 1-year high of $533.07. The firm has a fifty day simple moving average of $375.97 and a 200 day simple moving average of $378.71. The stock has a market capitalization of $17.04 billion, a PE ratio of 34.68 and a beta of 1.04.

Watsco Announces Dividend

The business also recently disclosed a quarterly dividend, which was paid on Friday, January 30th. Stockholders of record on Friday, January 16th were issued a $3.00 dividend. This represents a $12.00 annualized dividend and a dividend yield of 2.9%. The ex-dividend date of this dividend was Friday, January 16th. Watsco’s dividend payout ratio is presently 93.75%.

Analyst Ratings Changes

Several research analysts have recently weighed in on the company. Zacks Research cut Watsco from a “hold” rating to a “strong sell” rating in a research report on Tuesday, January 13th. Morgan Stanley cut their target price on Watsco from $460.00 to $370.00 and set an “equal weight” rating on the stock in a research note on Wednesday, January 14th. Weiss Ratings reaffirmed a “hold (c)” rating on shares of Watsco in a research report on Thursday, October 30th. KeyCorp reiterated a “sector weight” rating on shares of Watsco in a report on Friday, December 12th. Finally, UBS Group assumed coverage on shares of Watsco in a research report on Monday, January 5th. They issued a “neutral” rating and a $370.00 price objective on the stock. One analyst has rated the stock with a Buy rating, eight have issued a Hold rating and one has assigned a Sell rating to the stock. According to MarketBeat.com, the company currently has an average rating of “Hold” and a consensus target price of $412.00.

Institutional Inflows and Outflows

Several institutional investors have recently modified their holdings of the company. Bamco Inc. NY bought a new stake in shares of Watsco in the 4th quarter valued at about $35,000. Quarry LP bought a new stake in Watsco in the fourth quarter valued at approximately $37,000. Resources Management Corp CT ADV lifted its position in shares of Watsco by 150.0% in the fourth quarter. Resources Management Corp CT ADV now owns 125 shares of the construction company’s stock valued at $42,000 after buying an additional 75 shares during the last quarter. Los Angeles Capital Management LLC bought a new position in shares of Watsco during the 4th quarter worth approximately $59,000. Finally, Headlands Technologies LLC bought a new position in shares of Watsco during the 2nd quarter worth approximately $121,000. 89.71% of the stock is currently owned by institutional investors and hedge funds.

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.