Watsco (WSO) Q1 2026 earnings summary

Executive summary

• First quarter 2026 results showed stabilizing markets, flat revenues at $1.53 billion, and improved operating efficiency, with digital and e-commerce initiatives driving growth.

• Net income attributable to shareholders was $79.1 million, a 1% decrease year-over-year, and gross profit margin declined by 20 basis points to 27.9%.

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

• E-commerce sales grew 16% year-over-year, with OnCallAir® digital platform GMV up 20% to $394 million in Q1 2026.

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

Financial highlights

• Revenues were flat at $1.53 billion, with U.S. sales up 2% and international sales down 11%.

• Gross margin was 27.9%, down from 28.1% year-over-year, and operating margin was 7.2%.

• SG&A expenses were flat as a percentage of revenue at 21.1%.

• Cash and short-term investments totaled $593 million, with no debt.

• Working capital was $2.23 billion at quarter-end.

Outlook and guidance

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

• Management expects continued uncertainty from tariffs, supply chain costs, and regulatory changes.

• Anticipates improved inventory optimization and operating efficiency long-term.

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

• The Jackson Supply Company acquisition is expected to close in Q2 2026, expanding Sunbelt market presence.