Ferguson Enterprises Inc.
FERG · NYSE
Next quarter
Consensus is $3.28 EPS for Sep 2026 across 4 estimates, ranging $3.17 to $3.39.
FERG Jun 2026
- 4.95%
- $3.23
- $3.39
- —
- $8.75B
Reported results
- $8.75B
- 30.99%
- $893.00M
- 10.20%
- $666.00M
- $3.43
Highlights
- Earnings beat: Diluted EPS was $3.43, or $3.39 on an adjusted basis, versus the $3.23 consensus; the reported figure was a 4.95% surprise.
- Solid growth: Sales rose 4.6% year over year to $8.75 billion, while operating profit increased 6.1% to $893 million and net income rose 5.0% to $666 million.
- Underlying margins: Adjusted operating profit increased 2.9% to $932 million, with adjusted operating margin declining 10 basis points to 10.7%; gross margin fell 20 basis points to 31.0%.
- Non-residential outperformance: U.S. non-residential sales grew approximately 8%, led by commercial/mechanical, industrial and waterworks demand, while residential sales grew 2% despite weak new construction and soft RMI activity.
- Guidance raised: Calendar 2026 sales guidance moved to mid-single-digit growth from low-to-mid-single-digit growth; adjusted operating margin guidance increased to 9.5%-9.8% from 9.4%-9.8%, and capital expenditure guidance rose to $375-$425 million.
- Acquisition push: Ferguson completed five acquisitions in the quarter and has announced eight acquisitions year to date with approximately $1.4 billion of annualized revenue; the planned FloWorks purchase is valued at approximately $1.6 billion.
- Capital returns and leverage: Ferguson repurchased $202 million of stock and declared a quarterly dividend of $0.89; net debt to adjusted EBITDA was 1.3x, up from 1.2x a year earlier.
- Cash conversion pressure: Six-month operating cash flow fell to $716 million from $1.123 billion, reflecting greater working-capital investment and the timing of tax payments, while acquisition cash spending reached $583 million.
Analysis
Ferguson delivered a solid second quarter ended June 30, 2026, with adjusted EPS of $3.39 versus the $3.23 consensus, a $0.16 beat and 4.95% reported surprise. Sales of $8.75 billion increased 4.6% from $8.36 billion a year earlier, while adjusted operating profit rose 2.9% to $932 million and adjusted EPS increased 5.3% from $3.22. On a reported basis, operating profit was $893 million, net income was $666 million and diluted EPS was $3.43. Sequentially, results were materially higher than the March quarter’s $7.47 billion of revenue, $612 million of operating profit and $2.13 of EPS, although the comparison includes normal seasonal effects.
The defining feature of the print was continued market-share gains in non-residential markets, which grew approximately 8% in the U.S. and offset subdued residential demand. Growth came with modest margin pressure: gross margin declined 20 basis points to 31.0%, and adjusted operating margin fell 10 basis points to 10.7%. Ferguson nevertheless raised its 2026 sales and adjusted-margin outlook. The company also accelerated its consolidation strategy, completing five acquisitions and agreeing to buy FloWorks for approximately $1.6 billion. That deployment, alongside $202 million of quarterly buybacks, left leverage at a manageable 1.3x adjusted EBITDA.
Revenue and margins
Ferguson’s $8.75 billion of second-quarter sales grew 4.6% year over year, comprising 3.8% organic growth, 1.0% acquisition growth and a 0.2% drag from a Canadian divestment. Low-single-digit price inflation contributed to the increase alongside higher volume. Gross profit rose 3.8% to $2.712 billion, but gross margin contracted to 31.0% from 31.2% because the prior-year comparison benefited from the timing and extent of supplier price increases.
Reported operating profit increased 6.1% to $893 million, helped by lower restructuring charges. Adjusted operating profit rose 2.9% to $932 million, as higher gross profit was partly offset by higher variable operating costs. Adjusted EBITDA grew 3.2% to $994 million. Adjusted EPS increased 5.3% to $3.39, supported by profit growth and lower diluted shares of 194.0 million versus 197.5 million a year earlier.
- Six-month progress: Sales increased 4.2% to $16.223 billion, adjusted operating profit rose 5.1% to $1.579 billion and adjusted EPS increased 7.0% to $5.67.
- Reported versus adjusted: The $0.04 gap between reported EPS of $3.43 and adjusted EPS of $3.39 primarily reflects acquired-intangible amortization, restructuring costs and discrete tax adjustments.
End-market performance
The U.S. business carried the quarter, with sales up 5.0% to $8.343 billion and adjusted operating profit up 2.9% to $925 million. Ferguson said non-residential markets, approximately half of U.S. revenue, grew 8% as commercial/mechanical, industrial and waterworks activity benefited from healthy large-capital-project demand, open orders and bidding activity. Residential markets grew 2%, supported by HVAC, despite weak new construction and soft repair, maintenance and improvement work.
Canada remained a relative weak spot. Sales declined 1.9% to $408 million, as a 3.6% impact from a non-core divestment more than offset 1.7% organic growth. Adjusted operating profit decreased to $22 million from $23 million, reflecting lower gross margins partially offset by lower operating costs.
- Market mix: U.S. customer-group mix included waterworks at 24% of sales, Ferguson Home at 20%, commercial/mechanical at 16%, residential trade plumbing at 14% and HVAC at 13%.
- Operating leverage: U.S. adjusted operating profit grew more slowly than sales because higher gross profit was partly absorbed by increased variable operating costs.
Acquisition strategy
Ferguson continued to use acquisitions to expand geographic coverage and add specialized capabilities. It completed five deals during the quarter across HVAC, commercial/mechanical, waterworks and industrial distribution, including PRD Technologies Group’s specialty valve and flow-control operations. In the six months through June, cash paid for acquisitions net of acquired cash was $583 million, versus $226 million in the prior-year period.
After quarter-end, Ferguson signed an agreement to acquire FWI Holdings, known as FloWorks, for approximately $1.6 billion. The transaction is expected to close in the third quarter and will be funded with available cash and committed financing. FloWorks is not included in the company’s updated 2026 guidance. Including FloWorks, the eight acquisitions announced year to date represent approximately $1.4 billion of annualized revenue.
- Near-term earnings effect: The seven businesses acquired during the first half contributed $58 million of sales but a $15 million pretax loss, including $19 million of transaction and integration costs.
- Strategic rationale: The deals deepen Ferguson’s positions in technical valves, flow control, HVAC, water treatment and other specialized categories where its distribution scale can support share gains.
Guidance and capital
Ferguson raised its calendar 2026 outlook after the first-half performance. Sales growth is now expected to be in the mid-single digits, compared with the prior low-to-mid-single-digit range. Adjusted operating margin guidance moved to 9.5%-9.8% from 9.4%-9.8%, while capital expenditure guidance increased to $375-$425 million from $350-$400 million. Interest expense remains approximately $200 million and the adjusted effective tax rate remains approximately 26%.
Capital deployment remained active. Ferguson repurchased $202 million of stock in the quarter and paid or declared a quarterly dividend of $0.89. Six-month operating cash flow of $716 million was below $1.123 billion a year earlier because receivables and inventories absorbed more cash and tax payments reflected the transition to a calendar year-end. June 30 net debt was $4.468 billion, equal to 1.3x rolling adjusted EBITDA, with $1.6 billion of undrawn debt-facility liquidity available.
- Balance-sheet capacity: Total debt was $4.904 billion and cash was $437 million at quarter-end; the company remained in compliance with its debt covenants.
- Investment intensity: Six-month capital expenditures were $234 million versus $141 million a year earlier, reflecting spending on distribution centers, branches and technology.
