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]

Core Insights - Watsco experienced a decline in unit volumes of approximately 17% in 2025, attributed to the refrigerant transition and a strong comparison to the previous year's growth of over 20% [1][5][13] - The company achieved double-digit pricing gains on new A2L products, increasing gross margin by 40 basis points to 27.1%, with a long-term goal of reaching 30% gross margin [1][6][15] - Watsco announced a 10% increase in its annual dividend to $13.20 per share, marking its 52nd consecutive year of dividend payments [2] Financial Performance - Watsco exited fiscal 2025 with improved profitability and a strengthened balance sheet, reporting record fourth-quarter cash flow of $400 million [4][8] - The company met a $500 million inventory reduction goal and is focused on improving inventory turns, with ending inventory around 18%-19% of prior 12-month sales [8][9] Market and Operational Insights - The transition to A2L refrigerants is shaping the industry, with Watsco completing 12 acquisitions representing over $1.6 billion in sales [3] - E-commerce accounted for 35% of sales, with OnCall Air achieving a $1.8 billion gross merchandise value run rate, indicating strong digital growth [5][10] Strategic Initiatives - Management is pursuing pricing optimization and technology initiatives to support margin expansion, with a focus on matching prices to product and market dynamics [19] - The company is also developing technology to enhance sales with institutional customers and applying artificial intelligence to improve operational efficiency [19] Industry Trends - The market is stabilizing as contractors are better trained on A2L products, and there is a single set of pricing and product lines, reducing confusion in the market [12] - Management noted that severe weather impacted early-year results, but typically, the business expands significantly during the summer season [14]

Financial Data and Key Metrics Changes - The company achieved double-digit pricing gains on new A2L products, raising growth margins by 40 basis points to 27.1% [4] - Unit volumes declined during the quarter, which was expected given the strong 20% growth rate in the previous year [4] - Operating efficiency improved as SG&A expenses dropped by 2% [4] - The company generated record fourth-quarter cash flow of $400 million and met its $500 million inventory reduction goal [5] Business Line Data and Key Metrics Changes - E-commerce sales accounted for 35% of total sales, exceeding 60% in certain U.S. markets [5] - The annual run rate of sales through OnCall Air, the digital selling platform, increased by 20% to reach $1.8 billion for the year [6] - The aftermarket add-on replacement market was down 6% in 2025, contributing to the overall 17% unit decline [12][14] Market Data and Key Metrics Changes - The company noted a more stable channel compared to previous years, with contractors better prepared to sell new technology [11] - The residential market faced challenges, with industry unit volumes expected to decline by 10%-15% according to OEMs [35] Company Strategy and Development Direction - The company plans to enhance growth margins with a long-term goal of achieving 30% [4] - Investments in innovation and technology are ongoing, including the development of new technology for institutional customers and the use of AI to improve customer experience [6][7] - The company aims to grow its non-equipment market, which currently represents about 30% of sales [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a more normalized operating environment in 2026, following significant regulatory changes and supply chain disruptions [2][20] - The company is focused on driving sales and customer relationships, emphasizing long-term growth over short-term gains [134] Other Important Information - The company announced a 10% increase in annual dividends to $13.20, marking its 52nd consecutive year of dividend payments [3] - The company remains debt-free and is looking for acquisition opportunities to further grow its business [33] 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, and contractors are better prepared to sell the new technology, leading to improved sales [11][12] Question: How does the company view the dividend increase in relation to earnings? - Management noted that cash flow is strong enough to support the dividend increase, and they are confident in future earnings growth [30][34] Question: What are the expectations for industry unit volumes in 2026? - Management acknowledged the difficulty in predicting unit volumes but expressed a belief that the market is returning to a more conventional starting point [123][126] Question: How is the company managing inventory levels? - The company reported that inventory is in good shape, with a goal to improve inventory turns to enhance cash flow [82][85] Question: What trends are observed in the commercial and international markets? - The commercial market showed a slight decline, while the international business faced geopolitical challenges but did not worsen [98]

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]

Core Viewpoint - Watsco reported quarterly earnings of $1.68 per share, missing the Zacks Consensus Estimate of $1.94 per share, and showing a decline from $2.37 per share a year ago, indicating a negative earnings surprise of -13.33% [1] Financial Performance - The company posted revenues of $1.58 billion for the quarter ended December 2025, which was 1.88% below the Zacks Consensus Estimate and a decrease from $1.75 billion in the same quarter last year [2] - Watsco has not surpassed consensus EPS estimates over the last four quarters, indicating a consistent trend of underperformance [2] Stock Performance and Outlook - Watsco shares have increased by approximately 24% since the beginning of the year, contrasting with a slight decline of 0.1% in the S&P 500 [3] - The future performance of Watsco's stock will largely depend on management's commentary during the earnings call and the subsequent revisions of earnings estimates [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.91 on revenues of $1.54 billion, while for the current fiscal year, the estimate is $12.91 on revenues of $7.52 billion [7] - The trend of estimate revisions for Watsco has been unfavorable, resulting in a Zacks Rank of 4 (Sell), suggesting expected underperformance in the near future [6] Industry Context - The Manufacturing - General Industrial industry, to which Watsco belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a relatively strong position within the market [8] - The performance of Watsco's stock may also be influenced by the overall outlook for the industry, as higher-ranked industries tend to outperform lower-ranked ones significantly [8]

Financial Performance - Watsco reported full-year revenues of $7.2 billion for 2025, a 52% increase from $4.8 billion in 2019, with a compound annual growth rate (CAGR) of 7%[9] - The company's operating income for 2025 was $720 million, up 96% from $367 million in 2019, reflecting a CAGR of 12%[9] - Watsco's earnings per share (EPS) for 2025 were $12.25, compared to $6.50 in 2019, marking an 88% increase[9] - Revenues for Q4 2025 were $1,578,757, a decrease of 9.9% from $1,753,962 in Q4 2024[25] - Net income attributable to Watsco, Inc. was $71,745 in Q4 2025, down from $96,841 in Q4 2024, representing a decline of 26.0%[25] - The diluted earnings per share for 2025 was $12.25, down from $13.30 in 2024, a decrease of 7.9%[25] Profitability and Margins - Gross margin improved to a record 28.0%, an increase of 370 basis points from 24.3%[9] - Gross profit margin improved to 27.1% in Q4 2025 from 26.7% in Q4 2024[25] Cash Flow and Assets - Operating cash flow for 2025 was $570 million, with a record $400 million in the fourth quarter, reflecting a sharp reduction in inventory[17] - Net cash provided by operating activities was $569,613 in 2025, down from $773,102 in 2024, a decrease of 26.4%[29] - Cash and cash equivalents at the end of 2025 were $433,283, down from $526,271 at the end of 2024, a decrease of 17.7%[29] - Total current assets decreased to $2,954,506 in 2025 from $3,079,981 in 2024, a reduction of 4.1%[28] - Total liabilities decreased to $1,192,744 in 2025 from $1,415,285 in 2024, a decline of 16.0%[28] Investments and Acquisitions - The company maintained a debt-free balance sheet with $780 million in cash and investments, allowing for sustained growth investments[6] - Watsco 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[19] - Business acquisitions net of cash acquired amounted to $19,198 in 2025, compared to $5,173 in 2024, indicating increased investment in growth[29] E-commerce and User Engagement - Watsco's e-commerce sales reached approximately $2.5 billion in 2025, accounting for 35% of overall sales, with some regions exceeding 60% e-commerce penetration[20] - The authenticated user community of Watsco's HVAC Pro+ Mobile Apps increased by 15% to approximately 73,000 users[20] Future Outlook - Watsco plans to continue optimizing inventory and improving operating efficiency as it anticipates a more conventional industry environment in 2026[10] Dividends - Dividends on common stock increased to $473,765 in 2025 from $423,521 in 2024, an increase of 11.9%[29]

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].