- Watsco (WSO, Financial) reports a 2% revenue decline to $1.53 billion in Q1 2025.
- Core U.S. residential replacement sales increased by 10%, balancing international and new housing declines.
- Gross profit margin improved to 28.1% amid the A2L refrigerant transition.
Watsco, Inc. (WSO) has released its first-quarter financial results for 2025, revealing a 2% decrease in revenue to $1.53 billion. This decline is largely attributed to a significant product transition impacting 55% of its sales, as the company advances towards environmentally friendly A2L refrigerant systems.
Despite the revenue drop, Watsco's gross profit remained stable at $430 million, with margins improving to 28.1%. This improvement reflects successful pricing strategies and a shift toward higher-efficiency products. The core U.S. residential replacement market, a vital segment for Watsco, demonstrated robust growth with a 10% increase in sales, mitigating declines in international markets and new housing sectors.
In addition to financial performance, Watsco's strategic transition involves converting nearly $1 billion in inventory to new A2L refrigerant systems throughout 2025. CEO Albert H. Nahmad expressed optimism regarding the regulation-driven transition, emphasizing its potential positive impact on sales and customer engagement.
Notably, Watsco's financial health remains strong, with $432 million in cash and no debt, enabling the company to increase its annual dividend by 11% to $12.00 per share. Despite a reduction in earnings per share to $1.93 from $2.17 in the previous year, the company's balance sheet supports continued investment and acquisition opportunities.
Watsco's operating environment and strategic moves position it competitively as the HVAC industry undergoes significant regulatory changes. The company's investment in technology and inventory aims to capture market share during peak demand seasons while easing contractors' adoption of the new refrigerant systems.
