Watsco B 2025 Q2 Earnings Net Income Gains Amid Revenue Dip

Watsco B (WSO.B) reported its fiscal 2025 Q2 earnings on Jul 30th, 2025. The total revenue of Watsco B decreased by 3.6% to $2.06 billion in 2025 Q2, down from $2.14 billion in 2024 Q2. Watsco B's EPS rose 0.7% to $4.52 in 2025 Q2 from $4.49 in 2024 Q2, marking continued earnings growth. Meanwhile, the company's profitability strengthened with net income of $216.77 million in 2025 Q2, marking 1.0% growth from $214.65 million in 2024 Q2. Analysts had anticipated a revenue decline due to softer market conditions and transition complexities, but the company’s EPS and net income results exceeded expectations. Watsco continues to leverage its entrepreneurial culture to maintain margin growth and implement strategic actions for operational efficiencies.

Revenue

The second quarter revenues for Watsco B stood at $2.06 billion, reflecting a 3.6% decline from the previous year. Domestic markets experienced a 3% drop, while non-US markets saw a 12% decline. HVAC equipment sales, comprising 68% of total sales, decreased by 6%. Sales for other HVAC products remained flat, accounting for 28% of revenue, and commercial refrigeration products saw a 3% increase, contributing 4% to overall sales.

Earnings/Net Income

Watsco B's earnings per share experienced a marginal increase of 0.7% to $4.52 in 2025 Q2 compared to $4.49 in 2024 Q2. Net income rose by 1.0% to $216.77 million. The company's strategic pricing optimization and OEM pricing actions contributed to record gross profit margins, reinforcing its earnings growth trajectory.

Post-Earnings Price Action Review

The strategy of buying Watsco B shares 30 days post-earnings and holding for another 30 days resulted in no returns over the past three years, underperforming the benchmark return by 87.61%. Despite risk-averse characteristics, the approach failed to yield positive outcomes, with a CAGR of 0.00% and maximum drawdown remaining flat. The strategy’s volatility measures further highlighted its inefficacy. The analysis underscores the need for reevaluating investment strategies in response to earnings reports, particularly in industries facing transitional challenges and regulatory shifts.

CEO Commentary

Albert Nahmad, Chairman and CEO, remarked, “Our second quarter results reflect softer market conditions and the complexities associated with the industry-wide transition to new A2L products. Despite the challenging environment, I am proud that we improved gross margins and generated a measure of earnings growth, which highlights our entrepreneurial culture and the resilience of our business model. Our leaders are taking actions to boost sales, sustain margins and improve operating efficiencies to drive growth for the balance of the year.” Nahmad emphasized the importance of technology investments and the ongoing transition to next-generation equipment as vital to the company’s future success.

Guidance

Watsco expects to continue leveraging its market leadership to drive growth, aiming for a gross profit margin target of 30% and revenue of $10 billion as part of its long-term strategy. The company anticipates ongoing improvements in operational efficiencies and higher sales in subsequent quarters as the impacts of the A2L transition diminish. Management remains optimistic about achieving consistent earnings growth and maintaining a solid balance sheet to support future investments.

Additional News

Watsco B's recent strategic moves include the acquisition of three distributors in key Sunbelt markets during 2025, reinforcing its presence in the HVAC distribution landscape. This expansion aligns with Watsco's "buy and build" strategy, contributing approximately $1.6 billion in annualized sales and adding 120 locations across its network. Additionally, Watsco announced an 11% increase in its annual dividend, raising it to $12.00 per share, reflecting its commitment to returning value to shareholders while maintaining a conservative financial position. These developments highlight Watsco's focus on expanding its market reach and strengthening its financial stability amid challenging industry conditions.