Watsco, Inc. (WSO)

Watsco reported third-quarter 2026 revenue up 7 percent to a record $2.22 billion on 27 October 2026 1. Operating income fell 4 percent to $225 million, and earnings per share were $3.77 1.

Gross margin, the share of sales left after the cost of the goods, was 26.4 percent against 27.5 percent a year earlier 1. The company tied that to its mix of customers and markets and to smaller manufacturer price increases in 2026 than in 2025 1.

Jackson Supply was acquired in June 2026 and The Granite Group in October 2026, and the company says they added 107 locations and $730 million in annualized revenue 1. Jackson contributed $78 million of third-quarter sales 1.

On 21 October 2026 Watsco also signed a five-year, $750 million unsecured credit facility that replaces a $600 million one 2. Demand for heating equipment is usually highest in the first and fourth quarters, and the new network will be tested through that season 3.

Watsco was incorporated in Florida in 1956 and entered distribution of heating, air conditioning and refrigeration (HVAC/R) products in 1989 3. Its revenue in that business has grown from $64.1 million in 1989 to $7.2 billion in 2025 3.

The growth came from acquiring established distributors and then building on them with more products and locations 3. Since 1989 the company has acquired 72 distribution businesses, and it usually keeps each one's trade names and managers 3.

Its largest partnership began in 2009, when it formed a joint venture with Carrier, the equipment maker, which contributed its own locations in Sun Belt states 3. More ventures followed in 2011, 2012 and 2021, and the Carrier ventures made up 53 percent of 2025 revenue 3.

The company's own comparison of 2019 and 2025 shows revenue up from $4.8 billion to $7.2 billion and gross margin up from 24.3 percent to 28.0 percent 8.

Revenue was $7.28 billion in 2023, $7.62 billion in 2024 and $7.24 billion in 2025 4.

In 2025 the company acquired three distributors: W.L. Lashley in January, Hawkins HVAC in April and Southern Ice Equipment in May 4.

Revenue fell 5 percent in 2025 to $7.24 billion 8. Ducted residential systems, the biggest part of residential sales, fell 10 percent, with unit volume down 18 percent and average selling price up 8 percent 4.

The company blamed a regulatory switch to new A2L refrigerant equipment, a mild summer, less home building and weaker consumer spending 4. The switch touched about 55 percent of products sold across 650 locations and meant converting over $1 billion of inventory 8.

Gross margin still reached a record 28.0 percent in 2025, which the company credited to its pricing software and manufacturer price actions 8.

What it sells and to whom

Watsco sells to licensed heating and air conditioning contractors, who install the products in homes and businesses 3. It serves more than 130,000 active contractors, and no single customer was above 2 percent of revenue in 2025 3.

HVAC equipment was 67 percent of 2025 revenue, from about 20 vendors 3. Other HVAC products such as parts, ductwork, thermostats and insulation were 29 percent, from more than 1,300 vendors 3. Commercial refrigeration was 4 percent 3.

In the third quarter of 2026, excluding acquisitions, residential equipment sales rose 7 percent, with 5 percent more units and a 2 percent higher average selling price 1. Commercial equipment sales fell 5 percent 1.

Locations and the supplier link

At the end of 2025 Watsco ran 695 locations, 637 of them in the United States, 34 in Canada and 24 in Latin America and the Caribbean 3. Florida had 102 and Texas 89 3.

Its top ten suppliers supplied 85 percent of purchases, including 62 percent from Carrier and 8 percent from Rheem 3. The company says manufacturers including Carrier and Rheem face tariff pressure from parts made in China and Mexico 3.

Technology

E-commerce reached $2.75 billion for the 12 months to 30 September 2026, 37 percent of revenue 1. Contractors presented about 351,000 quotes through OnCallAir, the company's digital sales platform 1.

People and rivals

Albert H Nahmad, 85, is Chairman and Chief Executive Officer, and his son Aaron J Nahmad, 44, is President 93. Ana M Menendez has been Chief Financial Officer since 2003 9. The company employed about 7,050 people at the end of 2025 3.

It competes with other distributors and with manufacturers that sell through their own distribution arms 3. The industry has more than 2,100 distribution companies 3.

Current problems

The federal tax credits for home HVAC systems ended after 31 December 2025 4. The EPA proposed on 3 October 2025 to extend the sale of matching older 410A systems, and the annual report says no final rule had been issued 4.

The umbrella, in words

Exhibit 21 lists significant subsidiaries, among them Baker Distributing, Gemaire Distributors, Gateway Supply and Homans Associates, each owned 100 percent, and Carrier Enterprise, LLC, owned 80 percent 5. Carrier Enterprise Canada is owned 60 percent 5.

The first Carrier venture owns 38.4 percent of Russell Sigler, a Western US distributor with 36 locations and about $1.2 billion of 2025 sales 3. Granite Group Holdings and its parent became wholly owned subsidiaries when the merger closed on 9 October 2026 7.

The Nahmad family controls the votes, because Class B stock carries ten votes a share against one for common stock 3. Albert H Nahmad holds 46.8 percent of combined voting power 9. Directors and officers together hold 56 percent 3.

Capital International Investors held 13.4 percent of the common stock and BlackRock 10.8 percent on 6 April 2026 9.

The company expects Jackson Supply and The Granite Group to add about 10 percent to annual revenue 1. Chairman Albert H Nahmad said on 27 October 2026 that early fourth-quarter sales trends point to improving demand 1.

He also said the long-range objectives for sales, margin and cash flow remain intact 1. The company states a goal of annual operating cash flow above net income 1.

SupplySync, a platform for large institutional buyers, is in a pilot program, and the company is introducing AI tools 1. The company raised its annual dividend 10 percent to $13.20 per share in April 2026 1.

The new credit facility permits up to $375.0 million of added revolving capacity or term loans 2. The first Carrier venture is obliged to buy Russell Sigler shares that its holders choose to sell 6. Up to 80 percent of any such purchase could be paid in Watsco stock, capped at $125.0 million in any 12 months 6.

The annual report says the company will assess selling matching 410A systems once the EPA finalizes its rule 4.