Monitor closing of Jackson Supply acquisition (expected Q2 2026) and its margin profile. Also watch for Q2 seasonal uptick in HVAC sales, which could confirm stabilization. The company's strong cash position and absence of debt support continued M&A.
Price Chart
Executive Summary
Watsco reported flat Q1 2026 revenue of $1.53B (slightly above consensus $1.49B) and a 3% decline in EPS to $1.87, as the A2L refrigerant transition continued to weigh on HVAC equipment volumes. The company also announced the pending acquisition of Jackson Supply Company ($230M annual sales), which expands its Sunbelt footprint. Combined with a strong balance sheet and stabilized market conditions, the results signal cautious optimism despite lingering headwinds.
Key Financial Metrics
Key Facts
- Q1 2026 revenue flat at $1.53B, slightly above consensus estimate of $1.49B
- EPS declined 3% to $1.87 from $1.93 a year ago
- Operating income down 2% to $110M; operating margin 7.2% vs 7.3%
- Gross profit margin contracted 20 bps to 27.9%
- Cash used in operations improved to $19M from $178M (a $159M improvement)
- Entered agreement to acquire Jackson Supply Company, with annual sales of $230M
- Dividend increased 10% to $13.20 per share (announced previously in Feb 2026)
- No debt on balance sheet; cash and short-term investments of $593M
Financial Impact
Acquisition of Jackson Supply adds ~$230M in annual sales (about 3% of Watsco's revenue); no purchase price disclosed.
Risk Factors
- Continued unit volume weakness in HVAC equipment due to A2L transition
- Housing slowdown could further pressure demand
- Integration risk with Jackson Supply and future acquisitions
- Potential for increased competition and pricing pressure
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 6 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001193125-26-183549 |
| Document: wso-20260428.htm | 0001193125-26-183549 |
| Document: 0001193125-26-183549-index-headers.html | 0001193125-26-183549 |
| Document: 0001193125-26-183549-index.html | 0001193125-26-183549 |
| Document: 0001193125-26-183549.txt | 0001193125-26-183549 |
| 8-K Data (Synthetic) | 0001193125-26-183549 |
US Market Status
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