Watsco | 8-K: FY2026 Q2 Revenue Misses Estimate at USD 2.105 B

Revenue: As of FY2026 Q2, the actual value is USD 2.105 B, missing the estimate of USD 2.145 B.

EPS: As of FY2026 Q2, the actual value is USD 4, missing the estimate of USD 4.3927.

EBIT: As of FY2026 Q2, the actual value is USD 234.88 M.

Second Quarter Operating Performance (Three Months Ended June 30, 2026 vs. 2025)

Revenue

Revenues for Watsco, Inc. increased 2% to $2.1 billion for the second quarter of 2026, compared to $2.062 billion in the same period of 2025. On a same-store basis, revenues increased 1%.

Operational Metrics

Gross profit decreased 4% to $579 million in the second quarter of 2026, down from $603 million in the prior year period, with the gross profit margin at 27.5%, a decrease from 29.3%. Selling, general and administrative (SG&A) expenses increased 3% to $349 million, up from $339 million, and as a percentage of sales, SG&A was 16.6%, an increase from 16.4%. Operating income decreased 12% to $238 million, compared to $272 million, resulting in an operating margin of 11.3%, down from 13.2%. Net income was $191,302 thousand, compared to $216,768 thousand, with net income attributable to Watsco, Inc. at $163,336 thousand, down from $183,613 thousand. Other income increased to $8,429 thousand from $7,382 thousand, and net interest income rose to $3,497 thousand from $2,329 thousand. Income before income taxes was $241,869 thousand, a decrease from $274,198 thousand, and income taxes were $50,567 thousand, down from $57,430 thousand. Net income attributable to non-controlling interest was $27,966 thousand, compared to $33,155 thousand.

Sales Trends (excluding acquisitions)

HVAC equipment sales increased 3% and represented 68% of sales. Sales of other HVAC products decreased 1%, accounting for 28% of sales. Commercial refrigeration products sales increased 19% and represented 4% of sales. Domestic residential HVAC equipment sales grew 5%, driven by 2% growth in unit volume and a 2% increase in average selling prices.

Year-to-Date Operating Performance (Six Months Ended June 30, 2026 vs. 2025)

Revenue

Revenues for Watsco, Inc. increased 1% to $3.6 billion for the six months ended June 30, 2026, compared to $3.593 billion in the same period of 2025.

Operational Metrics

Gross profit decreased 3% to $1 billion for the six months ended June 30, 2026, down from $1.033 billion in the prior year period, with the gross profit margin at 27.7%, a decrease from 28.7%. SG&A expenses increased 2% to $672 million, up from $662 million, and as a percentage of sales, SG&A was 18.5%, an increase from 18.4%. Operating income decreased 9% to $349 million, compared to $384 million, resulting in an operating margin of 9.6%, down from 10.7%. Net income was $284,243 thousand, compared to $311,308 thousand, with net income attributable to Watsco, Inc. at $242,410 thousand, down from $263,674 thousand. Other income increased to $13,909 thousand from $12,528 thousand, and net interest income rose to $9,956 thousand from $7,746 thousand. Income before income taxes was $358,512 thousand, a decrease from $391,803 thousand, and income taxes were $74,269 thousand, down from $80,495 thousand. Net income attributable to non-controlling interest was $41,833 thousand, compared to $47,634 thousand.

Sales Trends (excluding acquisitions)

HVAC equipment sales increased 1% and represented 67% of sales. Sales of other HVAC products increased 1%, accounting for 29% of sales. Commercial refrigeration products sales increased 16% and represented 4% of sales.

Cash Flow, Financial Strength, and Liquidity

Net cash used in operating activities was - $21,440 thousand for the six months ended June 30, 2026, an improvement of $164 million compared to - $185,090 thousand for the same period in 2025. Net cash provided by investing activities was $191,765 thousand, compared to $222,252 thousand in the prior year period. Net cash used in financing activities was - $237,360 thousand, compared to - $274,233 thousand in the prior year period. Watsco, Inc. maintains a solid balance sheet with $464 million in cash and cash investments and no debt. Cash and cash equivalents at the end of the period were $364,189 thousand as of June 30, 2026, compared to $292,978 thousand as of June 30, 2025. Watsco, Inc. increased its annual cash dividend by 10% to $13.20 per share in April 2026.

Unique Metrics and Operational Highlights

Watsco, Inc. closed on the acquisition of Jackson Supply Company, an HVAC distributor with annualized sales of approximately $230 million across 25 Sunbelt locations. E-commerce sales grew 13% during the first six months of 2026, reaching $2.7 billion for the 12 months ended June 30, 2026, and representing 37% of total sales. The gross merchandise value (GMV) of products sold through OnCallAir® reached $1 billion for the first six months of 2026, a 14% increase over the same period last year. For the twelve months ended June 30, 2026, OnCallAir® generated $1.9 billion GMV, a 15% increase versus the prior comparable twelve-month period. Watsco, Inc. has invested over $250 million in its digital platforms over the last five years, with a current annual run rate of approximately $68 million.

Outlook / Guidance

Watsco, Inc. anticipates more conventional supply-chain trends for the remainder of 2026, which are expected to lead to improved inventory turns and enhanced returns on invested capital. The company aims to generate annual operating cash flow that exceeds its net income.