Watsco, Inc. (NYSE: WSO) reported fourth-quarter results that missed analyst expectations, although shares climbed more than 4% intra-day on Tuesday.
The HVAC/R distributor posted earnings per share of $1.68, falling $0.20 short of the $1.88 consensus estimate. Revenue totaled $1.58 billion, below the expected $1.62 billion and down 10% compared with the same quarter last year.
Operating income declined 25% to $102 million, while operating margin contracted to 6.4% from 7.8% a year earlier. HVAC equipment sales, which account for 67% of total revenue, dropped 13% during the quarter.
For full-year 2025, revenue decreased 5% year over year to $7.24 billion, and earnings per share fell to $12.25 from $13.30 in 2024. Despite the softer performance, the company announced a 10% increase in its annual dividend to $13.20 per share.
Management attributed the downturn to industry volatility, including the transition to A2L refrigerant products. The shift affected approximately 55% of products sold and required the conversion of more than $1 billion in inventory.
On a positive note, Watsco generated record operating cash flow of $400 million in the fourth quarter, supported by a significant inventory reduction from a peak of $2.1 billion during 2025 to $1.4 billion at year-end.
