Abstract

Watsco, Inc. will report fourth-quarter 2025 results on February 17, 2026 Pre-Market, with current forecasts calling for revenue of $1.62 billion and EPS of $1.89, implying year-over-year declines of 2.59% and 11.77%, respectively, and institutional sentiment tilting toward a Hold/Neutral stance.

Market Forecast

Consensus forecasts for Watsco, Inc.’s current quarter point to revenue of $1.62 billion, down 2.59% year over year, EPS of 1.89, down 11.77% year over year, and EBIT of $115.60 million, down 9.37% year over year. Margin forecasts were not provided in the collected dataset, so gross and net margin outlooks are omitted here.

The core revenue engine remains the sale of air conditioning, heating and refrigeration equipment, complemented by parts, supplies, and commercial refrigeration, with continued emphasis on pricing discipline, inventory efficiency, and cash flow execution. The most promising near-term contribution is expected from other HVAC products (parts, supplies, controls, and accessories) given its margin profile and mix benefits, which generated $599.43 million last quarter; year-over-year growth for this segment was not disclosed in the collected data.

Last Quarter Review

Watsco, Inc. reported last quarter revenue of $2.07 billion (-4.31% year over year), a gross profit margin of 27.52%, GAAP net income attributable to shareholders of $162.00 million (net margin 7.82%), and EPS of 3.98 (-5.69% year over year). Sequentially, net profit decreased by 12.00%, reflecting seasonal revenue patterns and a normalization from prior pricing actions that contributed to a tougher comparison base. By category, equipment generated $1.38 billion (67.00% of sales), other HVAC products $599.43 million (29.00%), and commercial refrigeration $82.68 million (4.00%); year-over-year segment growth rates were not disclosed in the dataset.

Current Quarter Outlook

Core equipment sales in a seasonally smaller quarter

The equipment category remains the largest revenue contributor, at $1.38 billion last quarter and 67.00% of total sales, so modest volume or price variances can have an outsized effect on quarterly EPS. The current-quarter revenue forecast of $1.62 billion and EPS of 1.89, both down year over year, suggest that pricing normalization and seasonally lighter volumes are the dominant near-term headwinds. Execution on product mix and disciplined promotional activity will therefore matter for gross margin, especially relative to the 27.52% level recorded last quarter; while we do not have an explicit gross margin forecast, investors will parse management’s commentary on price-cost dynamics and sell-through versus sell-in. Given the small absolute scale of EBIT implied by the $115.60 million forecast, operating discipline, expense control, and supplier rebate capture can move the needle on margin. A sharper-than-expected rebound in late-quarter order intake, favorable product mix toward higher-efficiency systems, or lower-than-expected promotional intensity could provide upside to EBIT conversion and EPS.

Aftermarket and supplies as the near-term opportunity

Other HVAC products delivered $599.43 million last quarter, representing 29.00% of revenue, and typically include parts, supplies, controls, and accessories that can exhibit steadier demand and attractive margins relative to large-ticket equipment. In the current quarter, this category can help offset unit volatility in equipment by supporting daily-turn business, attachment rates, and service-related demand; even modest mix improvement toward these lines could protect gross profit dollars despite the lower revenue base forecast. As digital ordering, branch logistics, and account-level analytics mature, incremental share-of-wallet gains within existing customers can occur without significant working capital strain, which would be constructive for cash conversion in a seasonally lighter revenue period. The growth rate for this segment was not disclosed; nevertheless, commentary on attachment rates for controls and air quality products, service parts cadence, and backlog conversion will be critical markers for whether this line provides a buffer to top-line softness. If the mix skews toward higher-margin consumables, EBIT sensitivity could be lower than top-line declines imply, mitigating the EPS headwind.

What will likely drive the stock this quarter

The first swing factor is the magnitude of any variance to the revenue and EPS forecasts: a narrower-than-expected revenue decline versus the guided -2.59% year-over-year path, combined with stable gross margin versus last quarter’s 27.52%, would likely be received positively. The second is operating leverage in a down-revenue quarter, where expense control, supplier incentive capture, and working-capital release can support EBIT resilience despite lower throughput; investors will weigh the $115.60 million EBIT estimate against commentary on cost initiatives and store productivity. Third, cash flow and inventory normalization are important in the seasonally slower months: positive working-capital dynamics can augment confidence in capital returns, especially as Watsco, Inc. maintained its quarterly dividend at $3.00 per share for the January 30 payout. Finally, any qualitative cues on early-season order trends, pricing cadence entering spring, and procurement conditions for key lines can shift expectations for the next two quarters, shaping the multiple investors are willing to assign ahead of the higher-demand periods. If management tempers expectations for near-term growth yet signals stable margins and strong cash conversion, the stock could trade on forward seasonality rather than the quarter’s headline revenue decline.

Analyst Opinions

The balance of institutional commentary identified in the review window leans Neutral/Hold. UBS maintained a Neutral rating and cut its price target to $370 from $390 on January 5, reinforcing a cautious stance into the print. In aggregate, the rating profile skews Hold with a mean price target near $397.60, signaling that most published opinions await clearer evidence of top-line inflection and margin durability before shifting decisively bullish.

This Neutral view centers on the translation of seasonal and pricing dynamics into current-quarter results. The revenue estimate of $1.62 billion points to a modest 2.59% year-over-year decline, and the EPS estimate of 1.89 suggests a steeper 11.77% year-over-year contraction given the combination of lighter seasonal volumes and a smaller EBIT base. Analysts appear focused on whether the company can hold the 27.52% gross margin seen last quarter while navigating a less supportive pricing backdrop; in a quarter where absolute EBIT is forecast at $115.60 million, even small deviations in product mix, supplier incentives, and logistics efficiency can drive notable percentage changes in profitability. A Neutral posture therefore reflects a preference to see confirmation on these operating variables—especially sell-through performance late in the quarter, the cadence of parts and supplies, and any early-season signals—before revising forward estimates.

Caution also stems from the prior quarter’s trends: revenue down 4.31% year over year to $2.07 billion, EPS of 3.98 down 5.69%, and a sequential net income decline of 12.00%. While the company’s mix shows breadth—$1.38 billion in equipment, $599.43 million in other HVAC products, and $82.68 million in commercial refrigeration—analysts note that the dominant equipment category amplifies the effects of modest price and volume shifts on quarterly earnings per share. As a result, the “wait-and-see” stance concentrates on how mix management can protect profitability and whether parts and supplies can provide a sufficient partial offset to equipment variability in the seasonally softer quarter.

At the same time, Neutral does not imply a negative structural stance. The maintained $3.00 quarterly dividend and the scheduled event to discuss full-year and fourth-quarter performance on January 30 indicate confidence in capital returns and operational continuity. What investors seek is a clearer bridge from a low-volume quarter and a -2.59% year-over-year revenue comparison to a more constructive setup into the higher-demand months, one that either stabilizes margins near the 27.52% level or yields evidence of improved operating leverage despite lower volumes. Should the company’s commentary point to steadier pricing, consistent parts-and-supplies throughput, and healthy cash conversion, the Neutral camp could migrate toward a more constructive outlook as near-term uncertainty abates.

In summary, the prevailing institutional stance is Neutral/Hold heading into February 17, 2026 Pre-Market. The emphasis is on the degree to which revenue and EPS track the -2.59% and -11.77% year-over-year estimates, on the stability of gross profit against last quarter’s 27.52%, and on cash and working-capital signals that inform capital return durability. Clarity on the trajectory of equipment volumes and the resilience of other HVAC products—alongside any read-throughs on early-season order trends—will likely determine whether consensus estimates for the next period are revised up or down and, by extension, whether the stock’s multiple expands or contracts following the print.