Watsco to Report Q2 Earnings: What to Expect in This Season?

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]