Research · Sep 3, 2026
[WSO] Watsco Thesis 2026: A2L Refrigerant Transition Drives Pricing Power and Acquisitions
Watsco Inc. FY25 revenue $7.24B (-5%); op income $693M (-11%); NI $497M (-7%); EPS $12.25 (-8%). Q4: double-digit pricing gains on new A2L (low-GWP refrigerant) products; gross margin +40bp to 27.1%; SG&A -2% on operating efficiency. 12 business acquisitions FY25 (disciplined HVAC distribution consolidation). Annual dividend boosted +10%. Ecommerce 35% of sales nationally / 60%+ in some US markets. OnCallAir digital selling platform GMV +20% to $1.8B. Mobile app user expansion. Commercial product down high single digits Q4; international weak (Canada better Q4; Latin America similar to prior year). AI + pricing optimization tools deployed; non-equipment market initiative launched. FY26 outlook: margins gradually improve as A2L transition matures; focus on inventory turns + incremental cash flow generation; continued investment in innovation + technology + ecommerce; industry sell-through volumes uncertain but more conventional starting place after 2025 correction.