Watsco Reports Record Third Quarter Sales, Strong Cash Flow and Improving Demand
WATSCO INC (WSO) filed an SEC Form 8-K — Results of Operations and Financial Condition. EXHIBIT 99.1 Watsco Reports Record Third Quarter Sales, Strong Cash Flow and Improving Demand ____ ________ Recent Acquisitions, Entrepreneurial Culture, Strong Balance Sheet and Technology Advantage Position Company for Growth MIAMI, FLORIDA – (GLOBENEWSWIRE), October 27, 2026 –
How this was made
The 30-second read
Why it matters
The earnings release provides fresh quantitative data that can shift valuation models and short‑term price action.
Market read
First‑report earnings data for a large industrial distributor; likely to influence WSO's stock and peers in the HVAC distribution space.
What to watch
The impact of recent acquisitions on future margin expansion and AI‑driven efficiencies may be underappreciated.
Watsco Reports Record Third Quarter Sales, Strong Cash Flow and Improving Demand
Third-quarter revenue reached a record $2.22 billion and nine-month operating cash flow increased 79% to $304 million, but third-quarter operating income declined 4%, diluted EPS declined 5%, and gross margin declined to 26.4% from 27.5%.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Third-quarter revenuesGAAP | $2.22B | – | increased 7% |
| Third-quarter cost of salesGAAP | $1.63B | – | – |
| Third-quarter gross profitGAAP | $586.3M | – | increased 3% |
| Third-quarter gross profit marginGAAP | 26.4% | – | – |
| Third-quarter selling, general and administrative expensesGAAP | $370.7M | – | increased 8% |
| Third-quarter other incomeGAAP | $9.67M | – | – |
| Third-quarter operating incomeGAAP | $225.2M | – | decreased 4% |
| Third-quarter operating marginGAAP | 10.1% | – | – |
| Third-quarter interest income, netGAAP | $4.60M | – | – |
| Third-quarter income before income taxesGAAP | $229.8M | – | – |
| Third-quarter income taxesGAAP | $46.96M | – | – |
| Third-quarter net incomeGAAP | $182.8M | – | – |
| Third-quarter net income attributable to non-controlling interestGAAP | $27.47M | – | – |
| Third-quarter net income attributable to Watsco, Inc.GAAP | $155.4M | – | – |
| Third-quarter earnings allocated to Watsco, Inc. shareholdersGAAP | $145.2M | – | – |
| Third-quarter weighted-average diluted sharesGAAP | 38,558,158 | – | – |
| Third-quarter diluted earnings per share for Common and Class B common stockGAAP | $ 3.77 | – | decreased 5% |
| Nine-month revenuesGAAP | $5.86B | – | increased 3% |
| Nine-month cost of salesGAAP | $4.27B | – | – |
| Nine-month gross profitGAAP | $1.59B | – | decreased 1% |
| Nine-month gross profit marginGAAP | 27.2% | – | – |
| Nine-month selling, general and administrative expensesGAAP | $1.04B | – | increased 4% |
| Nine-month other incomeGAAP | $23.58M | – | – |
| Nine-month operating incomeGAAP | $573.8M | – | decreased 7% |
| Nine-month operating marginGAAP | 9.8% | – | – |
| Nine-month interest income, netGAAP | $14.55M | – | – |
| Nine-month income before income taxesGAAP | $588.3M | – | – |
| Nine-month income taxesGAAP | $121.2M | – | – |
| Nine-month net incomeGAAP | $467.1M | – | – |
| Nine-month net income attributable to non-controlling interestGAAP | $69.31M | – | – |
| Nine-month net income attributable to Watsco, Inc.GAAP | $397.8M | – | – |
| Nine-month earnings allocated to Watsco, Inc. shareholdersGAAP | $371.6M | – | – |
| Nine-month weighted-average diluted sharesGAAP | 38,240,651 | – | – |
| Nine-month diluted earnings per share for Common and Class B common stockGAAP | $ 9.72 | – | decreased 7% |
| Third-quarter same-store revenue growthnon-GAAP | 4% increase on a same-store basis | – | 4% increase on a same-store basis |
| Third-quarter same-store gross profit marginnon-GAAP | 26.5% on a same-store basis | – | – |
| Third-quarter same-store SG&A growthnon-GAAP | 5% increase on a same-store basis | – | 5% increase on a same-store basis |
| Nine-month same-store SG&A growthnon-GAAP | 2% increase on a same-store basis | – | 2% increase on a same-store basis |
| Nine-month operating cash flowGAAP | $303.7M | – | increased 79% |
| Third-quarter operating cash flowGAAP | $325M | – | – |
| Nine-month capital expenditures, netGAAP | $25.62M | – | – |
| Nine-month business acquisitions, net of cash acquiredGAAP | $7.66M | – | – |
| Cash and cash equivalents as of September 30, 2026GAAP | $498.7M | – | – |
| Short-term cash investments as of September 30, 2026GAAP | $150M | – | – |
| Accounts receivable, net as of September 30, 2026GAAP | $1.01B | – | – |
| Inventories, net as of September 30, 2026GAAP | $1.84B | – | – |
| Total assets as of September 30, 2026GAAP | $5.23B | – | – |
| Accounts payable and accrued expenses as of September 30, 2026GAAP | $1.00B | – | – |
| Total liabilities as of September 30, 2026GAAP | $1.70B | – | – |
| Watsco, Inc. shareholders' equity as of September 30, 2026GAAP | $3.03B | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| HVAC equipment sales, third quarter excluding acquisitionsResidential products increased 7% and commercial products declined 5%. | 67% of sales | – | 5% increase |
| Residential HVAC equipment sales, third quarter excluding acquisitionsThe increase included 5% unit growth and a 2% increase in average selling price. | – | 7% increase | |
| Commercial HVAC equipment sales, third quarter excluding acquisitionsCommercial products declined while residential products grew. | – | 5% decline | |
| Other HVAC products, third quarter excluding acquisitionsSales increased 2%. | 29% of sales | – | 2% increase |
| Commercial refrigeration products, third quarter excluding acquisitionsSales increased 10%. | 4% of sales | – | 10% increase |
| HVAC equipment sales, nine months excluding acquisitionsResidential products increased 4% and commercial products declined 4%. | 67% of sales | – | 2% increase |
| Other HVAC products, nine months excluding acquisitionsSales increased 1%. | 29% of sales | – | 1% increase |
| Commercial refrigeration products, nine months excluding acquisitionsSales increased 14%. | 4% of sales | – | 14% increase |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Capital returns
- In April 2026, the Company increased its annual cash dividend by 10% to $13.20 per share.
- Dividends on common stock were $ 392,013 (in thousands) for the nine months ended September 30, 2026, compared with $ 352,085 (in thousands) for the nine months ended September 30, 2025.
- Watsco has paid dividends to shareholders for 52 consecutive years.
What drove it
- Third-quarter revenue included $78 million in sales from the acquired locations of Jackson Supply, a 16% increase over the comparable prior-year period.
- Jackson Supply, acquired in June 2026, had annual sales of approximately $230 million.
- The Granite Group, acquired in October 2026, had annual sales of approximately $500 million.
- Jackson and Granite added 107 locations and $730 million in annualized revenue to Watsco's network.
- E-commerce sales increased 12% during the nine-month period and 10% during the third quarter, reaching $2.75 billion for the 12-months ended September 30, 2026, or 37% of revenues.
- OnCallAir® GMV reached $1.6 billion for the nine-months ended September 30, 2026, a 14% increase over the same period last year.
- More than 73,000 contractors and technicians engage with the Company digitally.
Concerns
- Third-quarter gross profit margin was 26.4%, versus 27.5% last year, while nine-month gross profit margin was 27.2%, versus 28.3% last year.
- Third-quarter operating margin was 10.1%, versus 11.4% last year, and nine-month operating margin was 9.8%, versus 10.9% last year.
- Commercial HVAC equipment sales declined 5% in the third quarter and 4% for the nine-month period, excluding acquisitions.
- The Company cited customer mix, end-market mix, the timing and lower magnitude of OEM pricing actions in 2026 versus 2025, and differing growth rates of equipment versus non-equipment products as gross-margin factors.
- Accounts receivable, net and inventories, net increased to $ 1,008,554 (in thousands) and $ 1,841,814 (in thousands), respectively, at September 30, 2026.
What to watch
- Further momentum in fourth-quarter same-store sales growth following improvement through the selling season.
- Residential unit growth and average selling price trends after the prior-year transition to new A2L products.
- Gross-margin effects from customer mix, replacement versus residential new construction mix, OEM pricing actions, and equipment versus non-equipment growth.
- Integration and growth contribution from Jackson Supply and The Granite Group.
- Execution of non-equipment sourcing, pricing, logistics and distribution initiatives intended to improve attachment rates, margins and inventory turns.
Balance sheet and cash flow
- Cash and cash equivalents were $ 498,698 (in thousands) at September 30, 2026, compared with $ 433,283 (in thousands) at December 31, 2025.
- Short-term cash investments were $ 150,000 (in thousands) at September 30, 2026, compared with $ 300,000 (in thousands) at December 31, 2025.
- Inventories, net were $ 1,841,814 (in thousands) at September 30, 2026, compared with $ 1,386,317 (in thousands) at December 31, 2025.
- Net cash provided by operating activities was $ 303,659 (in thousands) for the nine months ended September 30, 2026, compared with $ 169,847 (in thousands) for the nine months ended September 30, 2025.
- Capital expenditures, net were $ 25,616 (in thousands) for the nine months ended September 30, 2026, compared with $ 22,887 (in thousands) for the nine months ended September 30, 2025.
- In October 2026, Watsco announced that it signed a five-year $750 million unsecured senior revolving credit facility.
Analysis
Watsco delivered record third-quarter revenue of $2.22 billion, up 7%, with same-store revenue up 4%. The reported sales trend points to an improving residential market: residential equipment sales increased 7%, including 5% unit growth and a 2% increase in average selling price. However, commercial equipment remained weak, declining 5% in the quarter, while acquisitions supplied $78 million of third-quarter sales from Jackson Supply locations.
Profit growth did not match sales growth. Third-quarter gross profit increased 3% to $586 million, while gross profit margin declined to 26.4% from 27.5%. SG&A increased 8%, ahead of revenue growth, and operating income declined 4% to $225 million. Diluted EPS declined 5% to $3.77. Management attributed gross-margin pressure to customer and end-market mix, OEM pricing timing and magnitude, and the differing growth rates of equipment and non-equipment products.
The nine-month results similarly show revenue growth with lower profitability. Revenues increased 3% to $5.86 billion, but gross profit declined 1% to $1.59 billion and operating income declined 7% to $574 million. Nine-month gross margin declined to 27.2% from 28.3%, operating margin declined to 9.8% from 10.9%, and diluted EPS declined 7% to $9.72. The product mix remained bifurcated, with nine-month residential equipment growth of 4%, commercial equipment down 4%, and commercial refrigeration up 14%.
Cash generation strengthened substantially, with nine-month operating cash flow increasing 79% to $304 million. The Company paid $ 392,013 (in thousands) in common-stock dividends during the nine-month period and raised its annual dividend by 10% to $13.20 per share in April. Cash and cash equivalents were $ 498,698 (in thousands) at September 30, 2026, and the Company announced a five-year $750 million unsecured senior revolving credit facility in October.
Acquisitions and technology remain the principal strategic growth levers. Jackson Supply and The Granite Group are expected to add approximately 10% to annual revenue and have added 107 locations and $730 million in annualized revenue to the network. E-commerce sales increased 12% for the nine-month period and reached $2.75 billion for the 12-months ended September 30, 2026. The release provided no formal financial outlook, so the next key evidence point is whether improving fourth-quarter same-store demand and residential unit growth can support margin recovery amid continued mix and OEM-pricing effects.
Management, verbatim
Third quarter results and early fourth quarter sales trends are indicative of continued improvement in end-market demand. We are encouraged to see residential unit volumes return to growth and steadily improve throughout the season. Our technology-enabled customers also continue to outperform the broader contractor community. Looking ahead, Watsco today is a meaningfully larger company, having added 107 locations and $730 million in annualized revenue to our network through the acquisitions of Jackson and Granite. Our long-range objectives for sales, margin and cash flow generation remain fully intact.
Albert H. Nahmad, Chairman and CEO
We believe that the growth in e-commerce, OnCallAir® and overall digital engagement across our network reflects the value these tools deliver to our customers. We have also progressed nicely with the various initiatives introduced at last year’s investor day, including the formal launch of SupplySync and the early scaling of the other initiatives. Our focus remains on advancing these unique capabilities – with AI enabling better and faster speed to market – in ways that help our customers grow.
A.J. Nahmad, Watsco’s President
Not in the filing
stated, not guessed- Formal forward financial guidance for revenue, gross margin, operating expenses, tax rate, EPS, cash flow, or capital expenditures was not provided.
- Previous-release outlook was not provided.
- Free cash flow was not reported.
- Share repurchases were not reported.
- Debt balance was not reported.
- Quarter-over-quarter comparisons for income-statement metrics were not reported.
- Reportable business-segment revenue and profitability were not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Watsco Inc. (NYSE: WSO) filed a Form 8‑K announcing its third‑quarter operating results, highlighting record sales, acquisitions, and cash flow improvements.
Ticker impact
Watsco reported Q3 results with record sales, cash flow increase and mixed earnings metrics, a primary 8‑K disclosure.
potential modest downside as EPS miss offsets revenue growth
The new EPS figure of $3.77 is down 5% YoY, a negative surprise, while revenue rose 7%; investors may weigh the miss more heavily.
Market effects
HVAC/R distribution sector may see broader scrutiny of margin trends after Watsco's mixed profit numbers.
U.S. mid‑cap industrial stocks could experience slight pressure in the near term.
Limited; the news is primarily relevant to U.S. investors focused on distribution and industrial equities.
Counterpoint
Despite the EPS miss, the record sales and strong cash flow could support a rally if investors focus on top‑line growth.
Key entities
- companyWatsco Inc.
Largest North American HVAC/R distributor, ticker WSO.
- acquired_companyJackson Supply Company
HVAC distributor acquired in June 2026, contributing $78 million of Q3 sales.
- acquired_companyThe Granite Group
HVAC/plumbing distributor acquired in October 2026.
