Watsco Q1 2025 Earnings Report
Key Takeaways
Watsco posted a slight decline in revenue and net income in Q1 2025 amid the early stages of a large-scale product transition to A2L refrigerants. While U.S. replacement market sales were strong, weakness in other end-markets and seasonal headwinds impacted overall performance.
Revenue declined 2% YoY to $1.53 billion due to product transition and international softness.
Net income attributable to Watsco was $80.1 million, down from $87 million in Q1 2024.
EPS fell to $1.93 from $2.17 a year earlier.
Strong sales and margins in the U.S. core replacement market offset declines in new housing and international sales.
Watsco
Watsco
Watsco Revenue by Segment
Watsco Revenue by Geographic Location
Forward Guidance
Watsco anticipates stronger performance in upcoming quarters driven by improved demand during the peak HVAC selling season and continued adoption of new A2L refrigerant products.
Positive Outlook
- Core U.S. replacement market saw strong 10% YoY growth.
- Improved gross margins and higher efficiency product mix.
- Healthy balance sheet with $432 million in cash and no debt.
- Strong customer adoption of digital platforms aiding growth and efficiency.
- Expecting more resilient demand in Q2 and Q3.
Challenges Ahead
- Ongoing challenges from A2L product transition.
- Revenue and net income declined YoY.
- International sales fell 9% YoY.
- Lower volumes in new housing markets.
- SG&A expenses increased by 4%.
Revenue & Expenses
Visualization of income flow from segment revenue to net income