Record Revenue Highlights Watsco’s Upbeat Quarterly Report

“Third-quarter results and early fourth-quarter sales trends are indicative of continued improvement in end-market demand,” said Albert H. Nahmad, Watsco’s chairman and CEO, in a press release. “We are encouraged to see residential unit volumes return to growth and steadily improve throughout the season.” 

Nahmad was upbeat on an October 27 earnings call, touting the company’s success in weathering difficult business conditions over the last few years. 

“The last six years brought a pandemic, supply chain disruption, regulatory transitions, and tariff volatility,” Nahmad said on the call. “Through it all, we stayed the course and invested in our business. Demand trends are now normalizing, organic growth is improving, and our digital system — ecosystem — is producing measurable results in driving growth.” 

Gross profit for the quarter was a record $586 million, up 3%. The gross profit margin for the quarter was 26.4%, down year over year from 27.5%. Earnings per share decreased 5% to $3.77. 

The company said the gross margin was affected by the mix of customers and markets it serves, differences in sales growth between equipment and other products, and smaller and differently timed manufacturer price increases compared with last year. Watsco also said its third-quarter gross margin was more consistent with normal seasonal patterns, while its year-to-date margin reflects current market conditions, including a return to more typical manufacturer pricing practices. 

Watsco also noted a 5% increase in overall HVAC equipment sales, which represented nearly two-thirds of all sales, and a 2% increase in sales of other HVAC products, which represented 29% of all sales. Sales of commercial refrigeration products, 4% of sales, were up by 10%. 

Year-to-date revenue was $5.86 billion, the company reported. HVAC equipment sales were up 2%, sales of other HVAC products up 1%, and sales of commercial refrigeration products up 14%. 

The third quarter also saw the completion of Watsco’s acquisition of The Granite Group, an HVAC and plumbing products distributor with 82 locations in the Northeast. The Granite Group is the fourth business acquired by Watsco that serves dual-trade (HVAC and plumbing) contractors. Of Watsco’s 804 locations, 112 now sell both HVAC and plumbing products. 

Watsco in June completed the purchase of Jackson Supply Co., which has more than two dozen locations in the South and Southwest. 

“Jackson Supply had a terrific quarter as part of Watsco, and we are excited that The Granite Group offers extended opportunities for us to expand into the growing community of HVAC and plumbing contractors,” Nahmad said. “Both are wonderful companies that diversify our product mix, extend our reach, and broaden our technology advantage. We look forward to supporting their ambitious growth plans.”