Watsco posts record Q3 sales of $2.22 billion as EPS slips 5%

Watsco posted record third-quarter sales of $2.22 billion, up 7%, but earnings slipped 5% as the HVAC distributor's gross margin narrowed and costs rose with newly acquired locations.

Earnings per share fell to $3.77, according to the earnings release attached to its 8-K on Tuesday. Same-store sales rose 4%. Gross profit grew 3% to a record $586 million, while the gross margin narrowed to 26.4% from 27.5%.

Selling, general and administrative expenses rose 8%, including 30 new and acquired locations. Operating income fell 4% to $225 million, for an operating margin of 10.1% versus 11.4%.

Cash and deals

Operating cash flow rose 79% to $304 million. Watsco describes itself as the largest distributor in the North American HVAC/R market.

The company recently closed two acquisitions it expects to add about 10% to annual revenue: Jackson Supply Company, a Sunbelt HVAC distributor with about $230 million of annual sales acquired in June, and The Granite Group, a Northeast HVAC and plumbing distributor with about $500 million of annual sales acquired in October.

Excluding acquisitions, HVAC equipment sales rose 5% in the quarter, according to the release.

Watsco raised its annual dividend 10% to $13.20 per share in April and has paid dividends for 52 consecutive years.

By the numbers

• Q3 revenue: $2.22 billion, up 7% (4% same-store)
• EPS: $3.77, down 5%
• Gross margin: 26.4% vs. 27.5%
• Operating cash flow: $304 million, up 79%
• Annual dividend: $13.20 per share

Sources

1. WATSCO INC, Form 8-K with third quarter 2026 earnings release, filed Oct. 27, 2026 (accession 0001193125-26-432680)

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