Core Viewpoint - Watsco, Inc. reported fourth-quarter results that fell short of analyst expectations, yet the stock saw an intra-day increase of over 4% despite the disappointing figures [1] Financial Performance - Earnings per share for the fourth quarter were $1.68, missing the consensus estimate of $1.88 by $0.20 [1] - Revenue for the quarter was $1.58 billion, below the expected $1.62 billion and down 10% year-over-year [1] - Operating income decreased by 25% to $102 million, with the operating margin contracting to 6.4% from 7.8% a year earlier [2] - HVAC equipment sales, which represent 67% of total revenue, fell by 13% during the quarter [2] - For the full year 2025, revenue decreased by 5% year-over-year to $7.24 billion, and earnings per share dropped from $13.30 in 2024 to $12.25 [2] Dividend and Cash Flow - Despite the weaker performance, the company announced a 10% increase in its annual dividend to $13.20 per share [2] - Watsco achieved record operating cash flow of $400 million in the fourth quarter, aided by a significant reduction in inventory from a peak of $2.1 billion during 2025 to $1.4 billion at year-end [3] Industry Context - Management attributed the downturn to industry volatility, particularly the transition to A2L refrigerant products, which impacted approximately 55% of products sold and necessitated the conversion of over $1 billion in inventory [3]

Management said unit volumes declined in the quarter, which Nahmad framed as expected given a strong comparison in the prior year’s fourth quarter, when unit growth exceeded 20%.In the fourth quarter, Nahmad said Watsco achieved “double-digit pricing gains” on new A2L products and increased gross margin by 40 basis points to 27.1%. He reiterated the company’s longer-term gross margin objective of reaching 30% and said Watsco has ongoing initiatives intended to support that trajectory.Watsco also announced a ...

Watsco (NYSE:WSO) Q4 2025 Earnings call February 17, 2026 10:00 AM ET Company ParticipantsA.J. Nahmad - PresidentAaron Nahmad - PresidentAlbert Nahmad - Chairman and CEOBarry Logan - EVPChris Snyder - Executive DirectorMike Francis - Equity Research AssociatePaul Johnston - COORick Gomez - CFOSteve Tusa - Managing DirectorConference Call ParticipantsDavid Manthey - Senior Research AnalystJeff Hammond - Managing Director and Equity Research AnalystPatrick Baumann - AnalystTommy Moll - Equity Research Analyst ...

Watsco (NYSE:WSO) Q4 2025 Earnings call February 17, 2026 10:00 AM ET Company ParticipantsA.J. Nahmad - PresidentAaron Nahmad - PresidentAlbert Nahmad - Chairman and CEOBarry Logan - EVPChris Snyder - Executive DirectorMike Francis - Equity Research AssociatePaul Johnston - COORick Gomez - CFOSteve Tusa - Managing DirectorConference Call ParticipantsDavid Manthey - Senior Research AnalystJeff Hammond - Managing Director and Equity Research AnalystPatrick Baumann - AnalystTommy Moll - Equity Research Analyst ...

Financial Data and Key Metrics Changes - Watsco achieved a 10% increase in annual dividends, raising it to $13.20, marking the 52nd consecutive year of dividend payments [3] - The company reported a 40 basis point increase in gross margins to 27.1% [4] - Unit volumes declined during the quarter, reflecting a 17% overall unit decline for 2025, following a strong 20% growth in the previous year [4][13] Business Line Data and Key Metrics Changes - The company added 12 business acquisitions, contributing over $1.6 billion in sales [3] - E-commerce sales accounted for 35% of total sales, exceeding 60% in certain U.S. markets [5] - The OnCall Air digital selling platform saw a 20% increase in gross merchandise value, reaching $1.8 billion for the year [6] Market Data and Key Metrics Changes - The aftermarket add-on replacement market was down 6% in 2025, influenced by a weaker consumer and contractor uncertainty [14][16] - The commercial segment experienced a decline in the high single digits, while international business showed mixed results, with Canada performing better than Latin America [95] Company Strategy and Development Direction - Watsco is focused on improving inventory turns and generating incremental cash flow, with a long-term goal of achieving 30% gross margins [5][6] - The company is investing in technology and innovation to enhance competitive positioning and drive sales growth [6][39] - A new initiative aims to grow sales in the fragmented non-equipment market, which currently represents about 30% of total sales [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a more stable operating environment in 2026, following significant regulatory changes and supply chain disruptions [2][19] - The company anticipates gradual margin improvement as the transition to A2L products matures throughout the year [5] - Management emphasized a long-term focus on growth and customer relationships, despite short-term market fluctuations [131] Other Important Information - Watsco achieved a record cash flow of $400 million in the fourth quarter and met its $500 million inventory reduction goal [5] - The company maintained a debt-free status throughout 2025, allowing for continued investment in growth opportunities [4][31] Q&A Session Summary Question: What is the outlook for pricing dynamics as the market normalizes? - Management indicated that the product line is now stable, with a single pricing structure for customers, and expressed confidence in contractors' ability to sell the new technology [12][18] Question: How does the dividend increase relate to future earnings? - Management acknowledged that the dividend exceeds the earnings rate for 2025 but emphasized strong cash flow and a commitment to maintaining the dividend track record [26][31] Question: What are the expectations for industry unit volumes in 2026? - Management noted that while industry forecasts suggest declines, Watsco's sales are directly tied to contractor installations, providing a more stable outlook [35][37] Question: How is the company addressing inventory management? - Management stated that inventory is in good shape, with ongoing efforts to improve quality and efficiency, aiming for a total of 5 inventory turns [79][81] Question: What trends are observed in the residential market? - Management reported that ductless and ducted products experienced similar declines, and there is no significant price sensitivity observed among contractors [101][108]

Watsco (WSO) came out with quarterly earnings of $1.68 per share, missing the Zacks Consensus Estimate of $1.94 per share. This compares to earnings of $2.37 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -13.33%. A quarter ago, it was expected that this heating and cooling company would post earnings of $4.21 per share when it actually produced earnings of $3.98, delivering a surprise of -5.46%.Over the last four quarters, t ...

Recent Industry Dynamics Exhibit 99.1 Watsco Reports Record Full-Year Gross Margin, Meets Inventory Reduction Target and Generates Record 4th Quarter Cash Flow in Challenging Market Conditions ______________________ Boosts Annual Dividend 10% to $13.20 Per Share Entrepreneurial Culture, Transformational Technologies and Debt-Free Balance Sheet Positions Company for Growth MIAMI, FLORIDA – (GLOBENEWSWIRE), February 17, 2026 – Watsco, Inc. (NYSE: WSO) announced its operating results for the full-year and four ...

MIAMI, Feb. 17, 2026 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE:WSO) announced that its Board of Directors approved a 10% increase in its annual dividend to $13.20 per share on each outstanding share of its Common and Class B common stock. The increase will be reflected in the Company’s next quarterly dividend payment in April 2026. Albert H. Nahmad, Watsco’s Chairman & CEO stated: “We are pleased to increase dividends to shareholders, which reflects our confidence in the prospects of our business and is suppor ...

Core Insights - Watsco, Inc. announced a 10% increase in its annual dividend to $13.20 per share, marking the 52nd consecutive year of dividend payments [3] - The company reported strong financial results for 2025, with revenues reaching $7.2 billion, a 52% increase from 2019, and operating income nearly doubling to $720 million [7][12] - Watsco maintains a debt-free balance sheet with $780 million in cash and investments, positioning itself for sustained growth and innovation [4][16] Financial Performance - Revenues increased from $4.8 billion in 2019 to $7.2 billion in 2025, reflecting a compounded annual growth rate (CAGR) of 7% [7] - Operating income rose from $367 million in 2019 to $720 million in 2025, achieving a CAGR of 12% [7] - Gross margin improved from 24.3% in 2019 to 28.0% in 2025, with earnings per share increasing from $6.50 to $12.25 during the same period [7] Industry Dynamics - The HVAC/R industry has faced volatility since 2019 due to macroeconomic factors, including the COVID-19 pandemic and supply chain disruptions [5] - The transition to A2L refrigerant products in 2025 impacted 55% of products sold, leading to over $1 billion in inventory conversion [6] - Despite these challenges, Watsco's performance indicates resilience and effective execution of its business model [7] Innovation and Technology - Watsco has invested over $250 million in technology over the past five years, enhancing its digital ecosystem and customer engagement [14] - The HVAC Pro+ Mobile Apps and e-commerce platform have transformed customer experiences, with e-commerce sales reaching approximately $2.5 billion in 2025, accounting for 35% of overall sales [18] - The company is advancing AI-driven initiatives to leverage data assets for improved customer experience and operational efficiency [20] Cash Flow and Financial Strength - Operating cash flow for 2025 was $570 million, with a record $400 million in the fourth quarter, reflecting a reduction in inventory [15] - The company aims to maintain a healthy balance sheet to access low-cost capital for strategic growth investments [16] - Watsco's strong financial position has enabled sustained long-term returns, allowing for investments regardless of market conditions [16] Acquisition Strategy - Watsco has acquired three distributors in key markets during 2025, contributing to a total of 12 acquisitions since 2019, representing approximately $1.6 billion in annualized sales [17] - The "buy and build" strategy focuses on enhancing the legacy of acquired companies through investments in new locations and products [17]

Core Viewpoint - Watsco Inc. is facing a challenging market environment, with expected declines in earnings and revenue for the upcoming quarterly earnings report [2][6]. Financial Performance Expectations - Watsco's earnings per share (EPS) is estimated at $1.94, reflecting an 18.1% decline compared to the same period last year [2][6]. - Revenue is projected to decrease by 8.3% year-over-year to $1.62 billion [2][6]. - The consensus EPS estimate has been revised downwards by 8.6% over the past 30 days, indicating a reevaluation by analysts [2][6]. Market Impact - The upcoming earnings report could significantly impact Watsco's stock price, with potential upward movement if results exceed expectations, or a decline if estimates are missed [3]. Financial Metrics - Watsco has a price-to-earnings (P/E) ratio of approximately 28.63 and a price-to-sales ratio of about 2.28, reflecting the market's valuation of its earnings and revenue [4][6]. - The enterprise value to sales ratio is around 2.29, and the enterprise value to operating cash flow ratio is approximately 31.01 [4]. - The company maintains a strong liquidity position with a current ratio of approximately 3.84, indicating its ability to cover short-term liabilities [5]. - Watsco's debt-to-equity ratio is relatively low at 0.16, suggesting a conservative use of debt in its capital structure [5].