Watsco Reports Record Q3 2026 Sales of $2.22B and Accelerating Cash Flow

Executive Summary

On October 27, 2026, Watsco, Inc. filed a Current Report on Form 8-K under Items 2.02 (Results of Operations and Financial Condition) and 7.01 (Regulation FD Disclosure), announcing its financial results for the third quarter and nine months ended September 30, 2026.

Key Q3 2026 Financial Highlights

• Revenue: Increased 7% year-over-year to a record $2.22 billion (4% increase on a same-store basis).
• Gross Profit & Margin: Gross profit rose 3% to a record $586 million, with gross margin moderating to 26.4% (26.5% same-store) compared to 27.5% in Q3 2025, driven by customer mix, end-market shifts, and normalized OEM pricing actions.
• Operating Income: Decreased 4% to $225 million, representing an operating margin of 10.1% versus 11.4% in the prior year.
• Diluted EPS: Decreased 5% to $3.77 per share.
• Sales Trends (excluding M&A):
  • HVAC equipment up 5% (residential up 7%, commercial down 5%).
  • Other HVAC products up 2%.
  • Commercial refrigeration up 10%.

Nine-Month Performance & Cash Flow

• Nine-Month Revenue: Rose 3% to $5.86 billion.
• Nine-Month Operating Cash Flow: Surged 79% to $304 million.
• Dividends: Annual dividend increased by 10% in April 2026 to $13.20 per share, marking 52 consecutive years of dividend payments.

Strategic Acquisitions and Capital Structure

• Jackson Supply Company: Acquired in June 2026 ($230M annual sales, 25 locations in Sunbelt markets), contributed $78 million in Q3 sales (+16% YoY).
• The Granite Group: Acquired in October 2026 ($500M annual sales, 82 locations in the Northeast), expanding dual-trade HVAC/plumbing coverage.
• Liquidity: Executed a new five-year, $750 million unsecured senior revolving credit facility in October 2026 with enhanced borrowing flexibility.