Overview

* Watsco ( WSO ) Q3 revenue declined 4% to $2.07 bln, missing analyst expectations

* Gross profit margin expanded 130 basis-points to a record 27.5%

* Company invested in AI and tech to enhance customer experience and efficiency

Outlook

* Company expects fourth quarter results to be impacted by same factors as third quarter

* Watsco ( WSO ) anticipates improved operating efficiency in 2026 due to non-recurring costs

* Company targets further inventory reductions in fourth quarter

Result Drivers

* A2L TRANSITION - Regulatory shift to A2L refrigerants impacted 55% of products, causing sales volatility and inventory conversion costs

* PRICING STRATEGY - Double-digit pricing for A2L products and OEM price actions helped offset unit declines

* TECHNOLOGY INVESTMENTS - Investments in AI and digital platforms aim to enhance customer experience and operational efficiency

Key Details

Metric Beat/Mis Actual Consensu

s s

Estimate

Q3 Sales Miss $2.06 $2.21

bln bln (12

Analysts

)

Q3 EPS $3.98

Analyst Coverage

* The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 3 "strong buy" or "buy", 13 "hold" and 1 "sell" or "strong sell"

* The average consensus recommendation for the electrical components & equipment peer group is "buy."

* Wall Street's median 12-month price target for Watsco Inc ( WSO ) is $437.50, about 18.1% above its October 28 closing price of $358.39

* The stock recently traded at 26 times the next 12-month earnings vs. a P/E of 29 three months ago

Press Release:

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)