Second-quarter results by HVAC distribution giant Watsco Inc. reflect a “more conventional” end-market environment, the company said, one that’s stabilizing following last year’s transition to A2L equipment.
Sales for the quarter were up 2%, year over year, totaling $2.1 billion, while gross profit fell by 4% to $579 million, for a gross profit margin of 27.5%.
“Our performance during the second quarter is indicative of improving end-market stability after a busy period of regulatory transitions,” said Albert H. Nahmad, chairman and CEO, in a press release. “We are now operating in a more conventional environment in which Watsco’s scale, OEM relationships, and technology investments can add even more value.”
Watsco held its second-quarter conference call for investors on July 29. The company reported a 3% increase in HVAC equipment sales, which represented 68% of its sales, and a 1% decrease in sales of other HVAC products, which represented 28% of sales. Commercial refrigeration product sales were up 19% and represented 4% of the quarter’s sales.
Residential HVAC equipment sales were up 5% in the quarter; that included a 2% increase in unit volume and a 2% increase in average prices.
The company also reported operating income of $238 million, a 12% decrease, and earnings per share of $4, a 12% drop.
Price hikes in 2025 by OEMS incorporated inflation and tariffs and resulted in “outsized benefits to last year’s gross margin,” the press release said. The gross margin so far this year, the press release said, is “more representative of underlying market conditions.”
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With the A2L transition “largely complete,” Watsco is focused on growth with existing customers, attracting new customers, improving efficiencies, and optimizing inventory, the press release said.
During the second quarter, Watsco completed its acquisition of Jackson Supply Co., a distributor with 25 locations across the South and Southwest. With the addition of Jackson Supply, Watsco now has more than 700 locations in the U.S., Canada, Mexico, and Puerto Rico.
“We are excited that Jackson Supply is now officially a member of the Watsco family. It is a legendary company that diversifies and expands our presence in key Sunbelt markets,” Nahmad said. “We look forward to supporting their growth.”
Watsco also recently launched SupplySync, a digital purchasing platform for large, multi-location HVAC contractors, facility owners, and other enterprise customers that provides access to the company’s entire distribution network. The platform offers unified pricing, billing, and procurement reporting.
The company touted its investments of more than $250 million in digital platforms over the last five years. “The breadth of that investment spans across the customer-engagement, internal platforms to increase the speed and efficiency of our locations and emerging AI capabilities that help customers grow and deliver technical know-how quicker,” the press release said.
The company’s HVAC Pro+ apps and e-commerce platform, the press release said, help contractors source products, get technical help, and find real-time inventory, pricing, and product information.
Watsco also features OnCallAir, a digital sales platform to help contractors engage with and provide quotes to homeowners. The gross value of products sold through OnCallAir totaled $1 billion for the first six months of the year and $1.9 billion for the 12-month period that ended June 30, the press release said. During that same 12-month period, contractors presented quotes with the use of OnCallAir to approximately 342,000 households.
E-commerce sales, the company noted, grew by 13% during the first six months of this year, and totaled $2.7 billion for the 12-month period that ended June 30. E-commerce represented 37% of all sales over that same 12-month period.
“Our technology platforms have continued to scale and deepen their impact for our customers. We believe that the growth in e-commerce, OnCallAir, and overall digital engagement across our network reflects the value these tools deliver to our customers every day,” Nahmad said.
Through the first two quarters of the year, Watsco’s revenue increased by 1% to $3.6 billion, while gross profit was at $1 billion, a 3% decrease. The gross profit margin for the first six months of the year was $27.7%.
Sales for the first two quarters were up 1% for HVAC equipment, 1% for other HVAC products, and 16% for commercial refrigeration products.
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