Detailed narrative
Headline results and margin execution
Ferguson posted Q1 FY26 (period ended March 31, 2026) net sales of $7.5B, up 3.6% (organic +2.8%, acquisitions +0.8%) with mid-single-digit price inflation. Gross margin expanded 30 bps to 31% on productivity initiatives, cost discipline, owned-brand growth (now slightly above 10% of revenue), strong pricing execution, and a sequential step-up in inflation from Q4 to Q1.
Adjusted operating profit grew 8.4% to $647M for an 8.7% operating margin (+40 bps), and adjusted diluted EPS rose 9.1% to $2.28, aided by the buyback.
End-market and customer-group dynamics
Residential (~half of revenue) fell 1% as new construction and RMI stayed weak, yet Ferguson outperformed the market. Nonresidential rose 8% on share gains, driven by large capital projects. By U.S. customer group: Waterworks +5% (on an 11% comp, all organic volume), Commercial Mechanical +18% (on a 9% comp, led by data centers), Industrial +10% (power gen, life sciences, pharma, chemical), Facility Supply +3%, Fire and Fabrication -6%, Ferguson Home -2%, Residential Trade Plumbing -2%, and HVAC returned to growth at +1% (on a 5% comp; 6% two-year stack).
Large capital projects and data centers
Management emphasized robust and growing backlog, open orders, and bidding activity in the large-capital-project space, with Commercial Mechanical backlog up more than the 18% revenue growth. Data-center demand remains strong with earlier looks at orders, aided by Ferguson's multi-customer-group approach and value-added services (fabrication, valve and automation).
Management sees knock-on demand in power generation (combined-cycle plants), water sourcing/treatment, onshoring of manufacturing, and pharma (e.g., GLP-1 production), viewing it as a multi-year tailwind, especially as projects move to liquid cooling.
Segment results — US and Canada
U.S. net sales grew 3.5% (organic +2.9%, acquisitions +0.6%) with operating profit of $656M, up $45M, for a 9.2% operating margin. Canada net sales rose 5.5% (acquisitions +5.8%, organic -0.3%) as markets, particularly residential, stayed subdued; adjusted operating profit was $5M, down $1M YoY.
Cash flow, capital allocation and M&A
EBITDA was $711M (+$60M YoY). Operating cash flow of $772M fell $100M on working-capital investment for growth (partly offset by cash-tax timing); after $92M CapEx, free cash flow was $688M. Net debt/EBITDA held at 1.0x, below the 1-2x target range.
Ferguson returned $410M via buybacks ($236M) and dividends ($0.89/share declared), and the Board approved a new $2B repurchase authorization. Two Waterworks deals closed in Q1 (Technology Sales Associates, Chesapeake Environmental Equipment); Carrier Great Lakes (HVAC) closed post-quarter; and three more (Dealer Supply, New England Applied Products, PRD Technologies) are signed to close in Q2 — six deals totaling ~$350M in aggregate annual revenue.
Inflation, commodities and cost pass-through
Finished goods (~85% of revenue) ran mid-single-digit inflation; the commodity basket (15%) moved to very low single-digit inflation. Within commodities, plastic pipe (~half the basket) stayed deflationary (down low double digits) though price-increase announcements are emerging on resin/transport costs tied to the Iran/Middle East conflict; copper tube and fittings was the strongest inflationary category (now lapping outsized increases); steel ran low-to-mid single-digit.
Section 232 tariffs are prompting more branded price-increase announcements, though stickiness remains uncertain.
Fuel, fleet and productivity
Ferguson does not use fuel surcharges as a matter of principle; roughly half of revenue is delivered on its final-mile fleet of over 5,900 trucks. Diesel is a headwind but not material, currently offset by productivity — notably a fleet optimization/rationalization program.
The prior-year $100M cost-savings program was largely executed in April 2025 and fully annualized by May 1; Q1 costs rose ~3% against 3.6% revenue growth, yielding ~10 bps of leverage.