Abstract

Watsco will report fourth-quarter and full-year results on February 17, 2026, Pre-Market; this preview summarizes recent operating trends, consensus expectations, segment dynamics, and analyst sentiment for the quarter and year-to-date period.

Market Forecast

Consensus points to an increase in Watsco’s current-quarter revenue with steadier margin performance and a modest uptick in adjusted EPS year over year, while operational discipline remains a focus; management is expected to emphasize operating cost control and pricing normalization in its projection for the quarter. The company’s core HVAC distribution business is anticipated to highlight stable residential replacement demand and resilient commercial activity, with growth driven by product mix and service breadth. The most promising segment remains air conditioning, heating, and refrigeration equipment, supported by its scale leadership and broad OEM partnerships, where revenue remains above the billion-dollar mark and year-over-year growth is expected to be positive.

Last Quarter Review

Watsco’s last reported quarter delivered revenue of 2.07 billion USD, a gross profit margin of 27.52%, GAAP net profit attributable to the parent company of 162.00 million USD, a net profit margin of 7.82%, and adjusted EPS that improved modestly year over year. Inventory discipline improved working capital efficiency, and pricing normalization supported mix quality as demand diversified across residential and commercial channels. The main business mix was led by air conditioning, heating, and refrigeration equipment at 1.38 billion USD, with other HVAC products generating 599.43 million USD and commercial refrigeration products accounting for 82.68 million USD, reflecting steady replacement demand and service-led resilience year over year.

Current Quarter Outlook (with major analytical insights)

HVAC Distribution Core

The company’s core HVAC distribution operations remain central to quarterly performance, anchored by replacement demand in residential systems and a steady cadence of commercial projects. Seasonal patterns in the fourth quarter typically emphasize maintenance and retrofit orders rather than peak-season installations, which can moderate absolute revenue but sustain margin levels through service and parts mix. Pricing dynamics have largely normalized after the industry’s multi-year period of inflation and OEM price actions, placing more emphasis on volume, customer service, and product availability as the drivers of performance. Given Watsco’s scale, diversified supplier relationships, and broad branch network, the company is well positioned to maintain share and defend margins even if macro demand softens. The key factor to watch is order cadence into January and early February, which often serves as a read-through for the upcoming cooling season.

Air Conditioning, Heating, and Refrigeration Equipment

Air conditioning, heating, and refrigeration equipment continues to be the largest revenue contributor and the clearest growth lever this quarter. The segment benefits from replacement cycles in residential HVAC, ongoing efficiency standard changes that prompt system upgrades, and improving commercial project pipelines. Given the last quarter’s 1.38 billion USD revenue contribution from this category, management attention will remain on ensuring product availability and capturing contractor demand through strong service, financing options, and digital ordering capabilities. The balance of price versus volume will influence gross margin in the quarter, as OEM pricing has stabilized; a richer mix of higher-efficiency units can support margins, while competitive intensity may pressure pricing in certain markets. Any trade-down behavior among customers would be a watch item, but Watsco’s breadth of offerings mitigates the risk by allowing tailored solutions across budgets.

Factors Most Impacting the Stock This Quarter

Revenue trajectory relative to winter-season expectations and margin resilience are likely to be the primary drivers of investor reactions on February 17, 2026. Investors will parse gross profit margin trends for signs of sustained pricing discipline and mix improvements, especially after the last quarter’s 27.52% level. Net profit margin, which stood at 7.82% in the prior quarter, will be assessed alongside operating expense control to gauge the durability of earnings power if revenue growth is modest. Commentary on early-season orders, inventory levels, and contractor sentiment will provide color on spring and summer demand, shaping expectations for the year’s first half and influencing valuation multiples. Any updates on digital initiatives that streamline procurement and logistics could be viewed constructively, while signals of slower commercial activity would be scrutinized.

Analyst Opinions

Analyst views gathered over the past six months skew cautiously optimistic, with a majority emphasizing Watsco’s defensive positioning in replacement-driven HVAC and its consistent cash generation profile despite normalization in pricing. Several institutions highlight steady residential replacement demand and improving commercial order pipelines, with attention on margin management and inventory optimization to support EPS stability. The majority perspective anticipates revenue growth for the quarter, with limited risk to gross margins due to product mix and procurement discipline. Notably, large sell-side analysts with coverage cite Watsco’s branch density and OEM relationships as differentiators that help preserve market share and pricing discretion across regions, thereby supporting a constructive stance into the print.