Watsco Posts Record Third-Quarter Sales of $2.22 Billion

The Tip Desk · November 8, 2026 · 3 min read

The HVAC/R distributor reported a 7% sales rise and $3.77 a share as residential unit volumes returned to growth.

Watsco, Inc. (WSO), the largest distributor in the highly fragmented North American HVAC/R market, reported record third-quarter sales of $2.22 billion, up 7% from a year earlier, with same-store sales up 4%.

The quarter marked a further step in the recovery that had been building through the first half of 2026. Revenue had been flat at $1.53 billion in the first quarter and up 2% to $2.1 billion in the second quarter, when same-store growth was 1%. Third-quarter same-store sales growth of 4% accelerated from 1% in the second quarter.

Residential equipment sales rose 7%, including 5% unit growth and a 2% increase in average selling price. The company said the quarter reflected continued stabilization of residential end-markets following the prior-year transition to A2L products, and that same-store sales growth rates had steadily improved throughout the selling season, with further momentum thus far in the fourth quarter. Excluding acquisitions, sales rose 5% for HVAC equipment (67% of sales), with commercial products down 5%; 2% for other HVAC products (29% of sales); and 10% for commercial refrigeration (4% of sales).

Sales also included $78 million from Jackson Supply locations acquired in June, up 16% from the comparable prior-year period. Gross profit rose 3% to a record $586 million. Gross margin was 26.4%, versus 27.5% a year earlier, or 26.5% on a same-store basis. The company said the margin was affected by customer mix, end-market mix, the timing and lower magnitude of OEM pricing actions in 2026 versus 2025, and the differing growth rate of equipment versus non-equipment products.

Selling, general and administrative expenses rose 8%, including 30 new and acquired locations, or 5% on a same-store basis. Operating income fell 4% to $225 million, with operating margin of 10.1% versus 11.4% a year earlier. Diluted earnings were $3.77 a share, down 5% from $3.98.

Chairman and Chief Executive Albert H. Nahmad said third-quarter results and early fourth-quarter sales trends were indicative of continued improvement in end-market demand, and that the company was encouraged to see residential unit volumes return to growth.

Watsco closed on The Granite Group in October, a distributor of HVAC and plumbing products with annual sales of approximately $500 million and 82 locations in the Northeast. Together with Jackson Supply, the two deals are expected to bolster annual revenue by approximately 10%. Nahmad said the acquisitions added 107 locations and $730 million in annualized revenue, and that long-range objectives for sales, margin and cash flow remain fully intact.

For the nine months ended September 30, 2026, revenue rose 3% to $5.86 billion. Gross profit fell 1% to $1.59 billion, with margin of 27.2% versus 28.3% a year earlier. Operating income decreased 7% to $574 million, and diluted earnings were $9.72 a share. Operating cash flow increased 79% to $304 million.

E-commerce sales rose 12% in the nine-month period and 10% in the third quarter, reaching $2.75 billion for the 12 months ended September 30, 2026, or 37% of revenues. Gross merchandise value through OnCallAir reached $1.6 billion in the nine months, up 14%. In April the company raised its annual cash dividend 10% to $13.20 a share. In October it signed a five-year $750 million unsecured senior revolving credit facility. Cash and cash equivalents were $498.7 million at September 30.