Watsco (WSO) Q2 2026 earnings summary

Executive summary

• Revenue grew 2% year-over-year to $2.1 billion in Q2 2026, driven by acquisitions, modest same-store growth, and stabilizing markets.

• Residential HVAC equipment, the largest segment, grew 5% with gains in both unit volume and pricing.

• The acquisition of Jackson Supply was completed in June, adding $230 million in annual sales, 25 locations, and expanding Sunbelt market presence.

• Net income attributable to shareholders declined 11% to $163 million, primarily due to lower gross margins and higher SG&A expenses.

• Technology investments and e-commerce adoption continue to drive operational efficiencies and digital sales growth.

Financial highlights

• Gross profit was $579 million, with a gross margin of 27.5% versus 29.3% last year.

• Operating income reached $238 million, with an operating margin of 11.3%, both down year-over-year.

• Diluted EPS for Q2 2026 was $4.00, down from $4.52 in Q2 2025.

• SG&A expenses rose to 16.6% of sales, reflecting technology investments and the Jackson Supply acquisition.

• Cash and cash equivalents at June 30, 2026 were $464 million, with no debt at quarter-end.

Outlook and guidance

• Organic growth of 4%-5% was seen in July, with expectations for continued unit growth into Q3.

• Management expects more conventional supply-chain trends, better inventory turns, and enhanced returns on invested capital for the remainder of 2026.

• Regulatory changes on refrigerants and efficiency standards are expected to drive higher average selling prices over time.

• No formal guidance provided, but trends indicate market stability and potential for conventional growth over the next several years.

• Management remains focused on achieving a long-term gross margin goal of 30%.