HVACR products distribution giant Watsco reported third-quarter 2026 sales of $2.22 billion, up 7% year-over-year and 4% on a same-store basis, as the company cited improving residential HVAC demand alongside significant acquisition activity.

The Miami-based distributor’s Oct. 27 results marked a further acceleration from its 2% sales growth in 2Q, when same-store revenue increased 1%.

Excluding acquisitions, HVAC equipment sales increased 5% and represented 67% of revenue. Residential equipment sales grew 7%, including 5% unit volume growth and a 2% increase in average selling prices. Commercial HVAC equipment sales declined 5%, while other HVAC products increased 2% and commercial refrigeration sales rose 10%.

Watsco said same-store growth improved throughout the summer selling season, with further momentum emerging in early 4Q as markets continued stabilizing following the industry’s A2L refrigerant transition.

“We are encouraged to see residential unit volumes return to growth and steadily improve throughout the season,” Watsco Chairman and CEO Albert Nahmad said.

Other 3Q financial highlights included:

• Gross profit increased 3% to $586 million, while gross margin contracted 110 basis points to 26.4%.
• Operating profit decreased 4% to $225 million, with operating margin narrowing to 10.1% from 11.4%.
• Earnings per share declined 5% to $3.77.
• eCommerce sales increased 10%, reaching $2.75 billion for the trailing 12 months, or 37% of total revenue.

Watsco attributed margin pressure to customer and end-market mix, lower manufacturer pricing increases compared with 2025 and differences in equipment versus non-equipment sales growth.

Through the first nine months of 2026, revenue increased 3% to $5.86 billion, while operating cash flow jumped 79% to $304 million.

Acquisitions and Financing

The results follow Watsco’s Oct. 12 completion of its acquisition of The Granite Group, adding approximately $500 million in annual sales and 82 plumbing and HVAC distribution locations across seven Northeast states.

That followed Watsco’s June acquisition of Jackson Supply, which added approximately $230 million in annual revenue and 25 Sunbelt locations. Jackson contributed $78 million in Watsco’s 3Q sales.

Combined, the acquisitions added 107 locations and approximately $730 million in annualized revenue — representing roughly 10% incremental annual revenue — while expanding Watsco’s plumbing distribution exposure.

On Oct. 22, Watsco also completed a five-year, $750 million unsecured revolving credit facility, expanding borrowing capacity and flexibility for acquisitions, working capital and other corporate purposes.

MDM Analysis

Watsco’s 5% residential equipment unit growth provides encouraging evidence that HVAC replacement demand is recovering following the disruptive A2L transition. However, continued margin compression shows that improving volumes don’t necessarily translate into stronger profitability as manufacturer pricing normalizes and customer mix shifts.

Meanwhile, Watsco’s acquisitions and expanded credit capacity reinforce its aggressive consolidation strategy, increasingly extending beyond HVAC into plumbing. For competing distributors, the implications go beyond scale: Watsco is combining geographic expansion with digital capabilities and purchasing leverage, potentially raising the competitive bar across both trades.

“Watsco’s balance sheet remains solid, enabling incremental investments in growth and the company’s industry-leading technology platforms,” the company said in its 3Q26 news release. “The company is also introducing AI-driven initiatives to leverage Watsco’s extensive data assets and enrich the customer experience. The company believes its technology ecosystem offers a durable and widening competitive advantage. “