Core Insights - Watsco, Inc. reported strong operating results for Q2 2025, with record gross profit margins and expanded operating margins amid the transition to A2L products [1][4][7] - The company maintains a robust financial position, with significant cash reserves and no debt, allowing for continued investments in growth and technology [3][14] - The ongoing regulatory transition to next-generation HVAC equipment incorporating A2L refrigerants is expected to impact sales and inventory management [4][6] Financial Performance - Q2 revenues decreased by 4% to $2.06 billion, while gross profit increased by 4% to a record $603 million, resulting in a gross profit margin of 29.3%, up 220 basis points [8][23] - Operating income rose by 1% to $272 million, with an operating margin of 13.2%, reflecting a 60 basis point increase [8][23] - For the first half of 2025, revenues decreased by 3% to $3.59 billion, with gross profit increasing by 2% to $1.03 billion and a gross profit margin of 28.7%, up 140 basis points [11][23] Market Trends and Innovations - The transition to A2L refrigerants is driving double-digit pricing realization, although unit volumes have been affected by weather conditions and lower homebuilding activity [6][9] - Watsco has invested over $250 million in technology over the past five years, enhancing its digital ecosystem and customer experience [11][12] - The company's HVAC Pro+ Mobile Apps and e-commerce platform have significantly improved customer engagement, with e-commerce sales reaching approximately $2.5 billion, accounting for 34% of total sales [11][12] Strategic Initiatives - Watsco's "buy and build" acquisition strategy has led to the acquisition of 12 companies since 2019, contributing approximately $1.6 billion in annualized sales [13] - The company is leveraging AI-driven initiatives to enhance customer experience and operational efficiencies, with tools like "Ask.Watsco" and "AL.watsco" [15][12] - Watsco plans to target institutional customers through Project "WatscoOne," aiming to provide comprehensive solutions across multiple markets and product categories [15]

Core Insights - Watsco, Inc. (WSO) is expected to report second-quarter 2025 results on July 30, with earnings projected at $4.84 per share and revenues at $2.21 billion, indicating year-over-year growth of 7.8% and 3.5% respectively [1][2][7] Earnings Performance - In the last reported quarter, Watsco's earnings missed the Zacks Consensus Estimate by 15.7% and decreased 11.1% year over year, while sales missed by 7.6% and decreased 2.2% year over year [1] - Watsco has topped the consensus mark in one of the last four quarters, with an average negative surprise of 5.7% [1] Estimate Revisions - The Zacks Consensus Estimate for the upcoming quarter's earnings has decreased from $4.91 to $4.84 over the past 30 days [2] Revenue Drivers - Strong HVAC demand and the rollout of A2L-compliant systems are expected to boost Watsco's revenues in the second quarter [3] - The company anticipates a smoother sales cadence and a higher-value product mix, with over 60% of recent equipment sales consisting of 454B-based systems [3] Market Conditions - The core residential replacement market is expected to remain strong due to improved weather trends and high-efficiency product demand [4] - Commercial product sales are projected to stabilize as A2L adoption broadens, while international markets may underperform due to macro uncertainties [4] Sales Projections - HVAC Equipment sales are expected to grow 5% year over year to $1.6 billion, while HVAC Products are projected to grow 1% to $540.3 million [5] - Commercial Refrigeration Products sales are expected to grow 2% to $87.3 million [5] Margin Expectations - Gross margins are expected to improve by 100 basis points to 28.1%, driven by favorable pricing and an improved product mix [6][7] - Management aims for a long-term gross margin goal of 30% [6] Cost Pressures - Some cost pressures related to refrigerant container shortages are noted, but management does not expect a material impact on margins [8] Earnings Prediction Model - The current model does not predict an earnings beat for Watsco, as it lacks a positive Earnings ESP and a favorable Zacks Rank [9] - Watsco currently holds a Zacks Rank of 3 [10]

Company Overview - Watsco, Inc. is the largest distributor of heating, air conditioning, and refrigeration (HVAC/R) products with operations in the United States, Canada, Mexico, Puerto Rico, and exports to Latin America and the Caribbean [4] Market Focus - The company focuses on the replacement market, which has grown due to the aging of installed systems, the introduction of higher energy-efficient models, and the necessity of HVAC products in homes and businesses [5] - Approximately 102 million HVAC systems in the U.S. have been in service for over 10 years, many operating below current minimum efficiency standards [5] Environmental Impact - Watsco plays a significant role in addressing climate change by lowering CO2e emissions through the sale of higher-efficiency HVAC systems [6] - HVAC systems account for roughly half of U.S. household energy consumption, making the replacement of older systems critical for reducing electricity consumption and carbon footprints [6] Emission Reduction Achievements - From January 1, 2020, to June 30, 2025, Watsco is estimated to have averted 24.5 million metric tons of CO2e emissions, equivalent to removing 5.7 million gas-powered vehicles from the road annually [7]

Group 1 - Watsco is the largest HVAC maintenance and repair service provider and distributor in the US, with over 375,000 contractors and technicians [1] - The company is benefiting from the industry transition to A2L refrigerants, which is identified as a key catalyst for growth [1]

Core Points - Watsco, Inc. has declared a quarterly cash dividend of $3.00 per share, marking the 200th consecutive quarter of dividend payments [1][2] - The company has a history of paying dividends for 51 consecutive years, reflecting its commitment to sharing cash flow while maintaining a conservative balance sheet [2] - Watsco focuses on the replacement market for HVAC/R products, which is growing due to aging systems and the need for energy-efficient models [4] Company Overview - Watsco is the largest distributor of heating, air conditioning, and refrigeration products in the U.S., Canada, Mexico, and Puerto Rico, with exports to Latin America and the Caribbean [3] - The company plays a significant role in addressing climate change by promoting the replacement of older HVAC systems with higher efficiency models [5] Market Opportunity - There are approximately 102 million HVAC systems in the U.S. that are over 10 years old, many of which operate below current efficiency standards, presenting a substantial market opportunity for Watsco [4] - From January 1, 2020, to March 31, 2025, Watsco is estimated to have averted 23.7 million metric tons of CO2e emissions through the sale of higher-efficiency HVAC systems, equivalent to removing 5.5 million gas-powered vehicles from the road annually [6]

Business Overview - Watsco operates in a highly fragmented market and is a market leader in the HVAC/R distribution industry[4, 13] - The company has a wide geographic presence with 690 locations across the United States, Canada, and Latin America & Caribbean[12] - Watsco's business model involves supplying equipment, parts, and supplies to contractors for the repair or replacement of HVAC systems[10] - The company's revenues are primarily generated in the United States (90%), with the majority coming from residential HVAC equipment (54%)[19] Technology and Digital Transformation - Watsco is focused on transforming the customer experience through enhanced technology, including a robust e-commerce platform and mobile apps[4, 23] - The company's annualized e-commerce revenue in 2023 was $24 billion, a 5% increase[32] - Watsco has digitized over 15 million product SKUs and made them accessible in its mobile app[29, 33] - E-commerce users experience approximately 50% less attrition compared to traditional customers[32] Financial Performance and Shareholder Value - From 1989 to 12/31/23, Watsco's revenues grew from $64 million to $73 billion, representing a 15% compound annual growth rate (CAGR)[41] - The company's market capitalization increased from $22 million to $169 billion during the same period, a 22% CAGR[41] - Watsco raised its annual dividend rate to $1080 per share, effective in April 2024[45]

Business Overview - Watsco operates in a highly fragmented market and is a market leader in the HVAC/R distribution industry[4, 13] - The company has a broad geographic presence with 691 locations, including 630 in the United States, 36 in Canada, and 25 in Latin America & Caribbean[12] - Watsco's revenue is primarily generated in the United States (90%), with Canada and Latin America contributing 5% each[19] - Residential HVAC equipment accounts for 54% of revenues, followed by other HVAC products (27%), commercial HVAC equipment (15%), and refrigeration (4%)[19] Technology and Digital Transformation - Watsco is focused on transforming the customer experience through technology, with annualized e-commerce revenue reaching $2.4 billion in 2023, a 5% increase[4, 32] - The company has over 1.5 million product SKUs digitized and accessible in its mobile app[29, 33] - E-commerce users experience approximately 50% less attrition compared to traditional customers, and e-commerce orders have 15% higher line items per order[32] Financial Performance and Shareholder Value - Watsco's revenues have grown from $64 million in 1989 to $7.3 billion in the trailing twelve months (TTM) ending March 31, 2024, representing a 14% compound annual growth rate (CAGR)[41] - The company's Earnings Before Interest and Taxes (EBIT) has increased from $2 million in 1989 to $757 million in the TTM ending March 31, 2024, an 18% CAGR[41] - Watsco's market capitalization has grown from $22 million in 1989 to $17.3 billion in the TTM ending March 31, 2024, a 21% CAGR[41] - The company has a solid cash flow performance, with cumulative net income of $4.7 billion, operating cash flow of $4.5 billion, and dividends of $2.8 billion over the past 20 years[43]

Watsco, Inc. 3Q24 Investor Presentation Safe Harbor Statement This Presentation contains or incorporates by reference statements that are not historical in nature and that are intended to be, and are hereby identified as, "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Statements which are not historical in nature, including the words "anticipate," "estimate," "could," "should," "may," "plan," "seek," "expect," "believe," "intend," "target," "will," "project, ...

Business Overview - Watsco is a market leader in a highly fragmented HVAC/R industry[4, 13] - The company operates 690 strategic locations across the United States, Canada, Latin America, and the Caribbean[12] - The company's business model involves contractors purchasing equipment, parts, and supplies from Watsco to repair or replace homeowner's systems[10] Market and Products - The United States accounts for 90% of Watsco's revenues, with Canada and Latin America contributing 5% each[19] - Residential HVAC equipment makes up 55% of revenues, commercial HVAC equipment 15%, other HVAC products 26%, and refrigeration 4%[19] - The installed base of HVAC units in the U S has been increasing, with over 120 million units installed[24] Technology and Digital Transformation - Watsco is focused on transforming the customer experience through enhanced technology, including a robust e-commerce platform[4, 31] - Annualized e-commerce revenue in 2024 reached $2.6 billion, an 8% increase[35] - E-commerce users experience approximately 60% less attrition compared to traditional customers[35] Financial Performance and Shareholder Value - From 1989 to 2024, Watsco's revenues grew from $64 million to $7.6 billion, representing a 14% compound annual growth rate (CAGR)[46] - Over the same period, EBIT increased from $2 million to $782 million, an 18% CAGR, and the share price rose from $2.70 to $473.89, a 16% CAGR[46] - The company's market capitalization grew from $22 million to $19.2 billion over the same period, a 21% CAGR[46] - In 2024, Watsco's dividend payments totaled $423 million[46] - As of December 31, 2024, Watsco had $782 million in cash and investments and no total borrowings[50]

Business Overview - Watsco is a market leader in a highly fragmented industry, focusing on transforming customer experience with technology and value creation[4] - The company operates 693 strategic locations across the United States, Canada, and Latin America & Caribbean[12] - Watsco's business model involves contractors purchasing equipment, parts, and supplies to repair or replace homeowner's systems[10] Market and Products - The company estimates its market share to be 18-20%[46] - Watsco's revenue is primarily generated in the United States (90%), with Canada and Latin America contributing 5% each[19] - Residential HVAC equipment accounts for 55% of revenue, followed by other HVAC products (26%), commercial HVAC equipment (15%), and refrigeration (4%)[19] - The installed base of HVAC units in the U S continues to grow, with approximately 96 million units shipped in 2024, and only ~12% of industry shipments tied to Residential New Construction[24] Technology and ESG - Watsco is focused on using technology to transform the HVAC industry, with $2.6B in annualized e-commerce revenue in 2024, an 8% increase[25, 35] - The company has over 930k product SKUs digitized and accessible in its mobile app[32, 36] - Watsco's ESG efforts have resulted in averting 23.7 million metric tons of CO2e from the sale of high-efficiency equipment from January 2020 – March 2025[38] Financial Performance - From 1989 to LTM 3/31/25, Watsco's revenues grew from $64 million to $7.6 billion, representing a 14% CAGR[46] - EBIT increased from $2 million to $767 million during the same period, a 17% CAGR[46] - The company's market capitalization has grown from $22 million to $20 billion, a 21% CAGR[46]