The earnings miss and margin compression are the primary drivers — the 180 bps gross margin decline and 12% operating income drop signal that the A2L transition tailwinds have fully reversed. Monitor the Q3 earnings call for commentary on whether gross margins stabilize at current levels (~27.5%) or face further pressure from OEM pricing normalization. The Jackson Supply acquisition adds ~$230M in revenue but will take time to integrate.
Price Chart
Executive Summary
Watsco's Q2 2026 earnings missed consensus estimates, with EPS of $4.00 falling 8.9% below the $4.39 consensus and revenue of $2.10B missing the $2.15B estimate. Operating income declined 12% YoY and gross margins compressed 180 bps to 27.5%, driven by the normalization of OEM pricing actions after outsized 2025 benefits. The company completed the Jackson Supply acquisition ($230M annual sales) and maintained a debt-free balance sheet with $464M cash, but the earnings miss and margin compression are the dominant signals for this filing.
Key Financial Metrics
Key Facts
- Q2 2026 EPS of $4.00 missed consensus of $4.39 by 8.9%
- Q2 2026 revenue of $2.10B missed consensus of $2.15B
- Operating income decreased 12% YoY to $238M; operating margin fell from 13.2% to 11.3%
- Gross profit margin compressed 180 bps YoY to 27.5% due to normalization of OEM pricing actions
- Completed Jackson Supply acquisition with ~$230M annualized sales in June 2026
- Debt-free balance sheet with $464M in cash and cash investments; annual dividend raised 10% to $13.20/share
- E-commerce sales grew 13% in H1 2026, reaching 37% of total sales ($2.7B trailing 12 months)
Financial Impact
EPS miss of $0.39 (-8.9%) vs consensus; operating income down $33.5M (-12%) YoY; gross margin down 180 bps
Risk Factors
- Further gross margin compression if OEM pricing actions continue to normalize
- Seasonal working capital buildup could pressure cash flow in H2
- Integration risk from Jackson Supply acquisition
- Potential for slower end-market demand if housing/construction activity weakens
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 6 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001193125-26-322168 |
| Document: wso-20260729.htm | 0001193125-26-322168 |
| Document: 0001193125-26-322168-index-headers.html | 0001193125-26-322168 |
| Document: 0001193125-26-322168-index.html | 0001193125-26-322168 |
| Document: 0001193125-26-322168.txt | 0001193125-26-322168 |
| 8-K Data (Synthetic) | 0001193125-26-322168 |
Track record builds as more directional reports settle.
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Jul 29, 2026 9w ago | 8-K | $320.02 $313.22 | ▲ +2.12% | ▲ +7.14% | $299.21 (+6.50%) |
Jul 16, 2026 11w ago | Press Release | $371.91 $313.06 | ▼ −15.82% | ▼ −20.27% | $299.21 (−19.55%) |
Jun 2, 2026 17w ago | Press Release | $361.67 $407.62 | ▲ +12.70% | ▲ +14.52% | $299.21 (−17.27%) |
Apr 28, 2026 22w ago | Press Release | $436.60 $378.85 | ▼ −13.23% | ▼ −18.68% | $299.21 (−31.47%) |
Apr 10, 2026 25w ago | Press Release | $408.87 $429.24 | ▲ +4.98% | ▼ −3.55% | $299.21 (−26.82%) |
Apr 1, 2026 26w ago | Press Release | $373.10 $428.51 | ▲ +14.85% | ▲ +5.13% | $299.21 (−19.81%) |
Feb 28, 2026 30w ago | Institutional Cluster | $408.84 $346.14 | ▼ −15.34% | ▼ −7.40% | $299.21 (−26.82%) |
US Market Status
Subscribe to SecBot
Get Real-Time SEC Filing Intelligence
Comprehensive SEC filing analysis delivered the moment filings hit EDGAR. Sentiment scoring, impact analysis, and actionable insights for every material event.
Try SecBot Free Coming soon: SecBot Pro with alerts, watchlists, and API access