Watsco’s first quarter was marked by flat year-on-year sales but outperformance versus Wall Street revenue and profit expectations. The market reacted negatively, reflecting concerns about underlying volume trends and broader industry normalization. Management highlighted the stabilization of A2L refrigerant product transitions, improved operating efficiency, and a notable increase in e-commerce sales as key drivers. CEO Albert H. Nahmad emphasized, “Our technology platform continues to provide a long-term competitive advantage,” while also addressing ongoing investments in digital tools and operational improvements.
Is now the time to buy WSO? Find out in our full research report (it’s free for active Edge members).
Watsco (WSO) Q1 CY2026 Highlights:
- Revenue: $1.53 billion vs analyst estimates of $1.48 billion (flat year on year, 3.4% beat)
- Adjusted EPS: $1.87 vs analyst estimates of $1.69 (10.5% beat)
- Adjusted EBITDA: $121.2 million vs analyst estimates of $113.7 million (7.9% margin, 6.6% beat)
- Operating Margin: 7.2%, in line with the same quarter last year
- Market Capitalization: $15.96 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Watsco’s Q1 Earnings Call
- Ryan James Merkel (William Blair) asked about signs of improved stability heading into the summer. President Aaron J. Nahmad described early April as incrementally better but cautioned it was too soon to call a full recovery.
- David John Manthey (Baird) probed the rationale behind the Jackson Supply acquisition. CEO Albert H. Nahmad emphasized Jackson’s strong leadership and market fit, particularly in Texas, and Watsco’s ability to provide capital and technology.
- Thomas Allen Moll (Stephens) asked about recent trends in equipment volumes and inventory strategy. Rick Gomez, CFO, stressed that while volumes stabilized late in Q1, inventory turns are expected to improve as the selling season progresses.
- Jeffrey David Hammond (KeyBanc Capital Markets) inquired about the impact of tariffs and expected price increases from manufacturers. CEO Nahmad confirmed upward price pressure and said further increases are likely but not yet fully quantified.
- Christopher M. Snyder (Morgan Stanley) questioned the drivers of elevated inventory levels. Paul Johnston, COO, clarified that higher inventory reflects mix and pricing changes, not units, and added that new digital tools should allow for increased assortment with less inventory over time.
Catalysts in Upcoming Quarters
Looking forward, our analysts will focus on (1) the successful closing and integration of the Jackson Supply acquisition and its impact on Sunbelt market share, (2) the ongoing adoption and monetization of Watsco’s digital platforms like OnCallAir and Hydros, and (3) the company’s ability to manage inventory turns and gross margins as pricing, cost, and regulatory dynamics continue to shift. The effectiveness of new AI-powered tools and expansion into non-equipment segments will also be key signposts.
Watsco currently trades at $415.10, down from $456.86 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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