Watsco, Inc. reported its first quarter 2025 operating results, with sales of $1.53 billion, a 2.2% decrease year-over-year. Net income for the quarter was $80.1 million, translating to diluted earnings per share of $1.93. These results reflect the early stages of a large-scale product transition to A2L refrigerants, which impacts approximately 55% of Watsco’s sales.
Despite the overall sales decline, Watsco's core U.S. residential replacement sales increased by 10%, or 12% on a same-day basis. This growth was driven by new customer acquisition, unit growth, effective price-capture, and an improved mix of higher-efficiency products, contributing to improved gross margins. However, sales to international markets, which represent 9% of first-quarter sales, declined by 9%, and volumes related to new housing markets were lower.
The A2L product transition requires converting nearly $1 billion of inventory over the year, leading to a use of $178 million in operating cash flow during the first quarter for inventory investments. As of March 31, 2025, Watsco maintained a strong financial position with $432 million in cash, no outstanding debt, and $3 billion in shareholders’ equity. The company also announced the acquisition of two new companies in 2025, further expanding its network.
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