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

Watsco (NYSE:WSO) posted its quarterly earnings results on Tuesday. The construction company reported $1.68 earnings per share for the quarter, missing the consensus estimate of $1.94 by ($0.26), FiscalAI reports. The company had revenue of $1.58 billion during the quarter, compared to analysts’ expectations of $1.62 billion. Watsco had a return on equity of 16.48% and a net margin of 7.04%.The business’s quarterly revenue was down 9.9% on a year-over-year basis. During the same quarter in the previous year, the company earned $2.37 EPS.

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 Stock Up 1.3%

NYSE WSO opened at $423.17 on Wednesday. The company has a 50-day moving average price of $374.66 and a 200-day moving average price of $378.42. Watsco has a 52 week low of $323.05 and a 52 week high of $535.40. The firm has a market capitalization of $17.16 billion, a P/E ratio of 33.06 and a beta of 1.04.

Watsco Announces Dividend

The company also recently declared a quarterly dividend, which was paid on Friday, January 30th. Shareholders of record on Friday, January 16th were paid a dividend of $3.00 per share. This represents a $12.00 dividend on an annualized basis and a dividend yield of 2.8%. The ex-dividend date was Friday, January 16th. Watsco’s payout ratio is currently 93.75%.

Institutional Inflows and Outflows

Institutional investors have recently added to or reduced their stakes in the business. Brooklyn Investment Group purchased a new position in Watsco during the fourth quarter valued at $419,000. Boothbay Fund Management LLC raised its stake in shares of Watsco by 85.9% in the fourth quarter. Boothbay Fund Management LLC now owns 1,426 shares of the construction company’s stock worth $480,000 after buying an additional 659 shares during the period. CIBC Bancorp USA Inc. purchased a new position in shares of Watsco during the 3rd quarter valued at about $506,000. Quantitative Investment Management LLC bought a new position in shares of Watsco during the 4th quarter valued at approximately $519,000. Finally, Alamea Verwaltungs GmbH grew its stake in shares of Watsco by 21.5% during the 2nd quarter. Alamea Verwaltungs GmbH now owns 1,270 shares of the construction company’s stock valued at $561,000 after acquiring an additional 225 shares during the period. 89.71% of the stock is currently owned by institutional investors.

Analysts Set New Price Targets

Several research firms have recently issued reports on WSO. 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 research note on Friday, December 12th. Morgan Stanley reduced their price target on shares of Watsco from $460.00 to $370.00 and set an “equal weight” rating for the company in a research report on Wednesday, January 14th. UBS Group started coverage on shares of Watsco in a report on Monday, January 5th. They issued a “neutral” rating and a $370.00 price objective for the company. Finally, Zacks Research downgraded Watsco from a “hold” rating to a “strong sell” rating in a research note on Tuesday, January 13th. One equities research analyst has rated the stock with a Buy rating, eight have issued a Hold rating and one has given a Sell rating to the stock. According to MarketBeat, the company presently has a consensus rating of “Hold” and a consensus price target of $404.14.

More Watsco News

Here are the key news stories impacting Watsco this week:

• Positive Sentiment: Board approved a 10% increase in the annual dividend to $13.20/share, reinforcing cash-flow strength and shareholder returns; the raise will show up in the April 2026 payment. Article Title
• Positive Sentiment: Company reported record full-year gross margin, met inventory-reduction targets and generated record Q4 cash flow — highlights management’s ability to protect margins and liquidity despite a soft demand backdrop. Article Title
• Positive Sentiment: Management is pushing a technology-driven margin expansion plan and is targeting a ~30% gross margin as the A2L refrigerant transition stabilizes — this is presented as a multi-year earnings lever tied to digital/AI investments and contractor engagement. Article Title
• Neutral Sentiment: Earnings call transcripts and deep-dive coverage outline the A2L transition, margin initiatives and inventory actions; useful detail for modelling but no radical guidance shift was disclosed. Article Title
• Neutral Sentiment: Analysts maintain a consensus “Hold” with recent median targets below current levels, reflecting caution while the company executes its margin and technology plans. Article Title
• Negative Sentiment: Q4 EPS of $1.68 missed consensus ($1.94) and fell from $2.37 a year ago; revenue was $1.58B versus $1.62B expected and declined ~9.9% YoY — the misses are the primary near-term catalyst for the share weakness. Article Title
• Negative Sentiment: Media recaps highlight missed sales expectations and the year-over-year EPS drop, which raises near-term growth concerns despite margin actions and tech investment plans. Article Title

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.