Watsco (WSO) Q1 2026 earnings summary

Executive summary

• First quarter results showed stabilizing markets, improved operating efficiency, and expanded technology adoption, with expectations for a more simplified business environment in 2024 and 2026.

• Announced the acquisition of Jackson Supply, a major Sunbelt distributor with $230 million in annual sales, expanding presence by 25 locations and diversifying brands and products; closing expected in Q2 2026.

• E-commerce sales grew 16% year-over-year, and OnCall Air digital platform sales increased 20%, with gross merchandise value expected to exceed $2 billion in 2024 and reaching $394 million in Q1 2026.

• Digital engagement with 74,000 contractors and AI-driven initiatives are enhancing customer experience and efficiency.

Financial highlights

• U.S. sales increased 2% year-over-year, while international sales declined 11%.

• Revenues were flat at $1.53 billion compared to the same quarter last year.

• Gross profit was flat at $428 million, with a gross margin of 27.9% versus 28.1% last year; gross margins remained stable, supported by effective price management and ongoing initiatives targeting a long-term 30% gross margin.

• Operating income decreased 2% to $110 million; operating margin was 7.2% versus 7.3% last year.

• Earnings per share decreased 3% to $1.87.

• Cash used in operations improved to $19 million from $178 million last year.

• SG&A expenses were flat as operational efficiencies offset technology investments and new locations.

• The company remains debt-free with a strong balance sheet and $593 million in cash and short-term investments.

Outlook and guidance

• Momentum from March and early April has sustained, indicating incremental stability and a positive start to the year, though caution remains as the main selling season approaches.

• Market conditions are expected to become more conventional with better growth prospects as 2026 progresses.

• Anticipates further improvement in operating efficiency and inventory turns, contributing positively to cash flow.

• Expects price increases from OEMs due to new tariffs, with further clarity anticipated in the second quarter.