Skip to content
    FERG
    Earnings call· Jun 2026(Q2 FY26)

    Ferguson Enterprises Inc. /DE/ Q2 FY26 earnings call FERG

    Aug 10, 2026 Source

    Executive summary

    Ferguson Q2 FY26 — Strong Performance Drives Upward Guidance Revision

    Ferguson delivered a strong second quarter, outperforming in a mixed market with robust revenue and profit growth, particularly in nonresidential and HVAC. The company announced a significant acquisition, FloWorks, expanding its industrial footprint and raising its full-year guidance, while maintaining a disciplined capital allocation strategy focused on organic growth, M&A, and shareholder returns.

    Highlights

    5

    • Sales increased 4.6% to $8.8 billion, driven by 3.8% organic growth and 1% acquisition growth.

    • Operating profit grew 2.9% to $932 million, resulting in a 10.7% operating margin.

    • Diluted EPS increased 5.3% to $3.39.

    • Announced 8 acquisitions year-to-date, investing nearly $600 million, including the $1.6 billion FloWorks acquisition.

    • Raised full-year net sales guidance to mid-single digits and operating margin guidance to 9.5%-9.8%.

    Concerns

    3

    • Gross margin was down 20 basis points year-over-year to 31% due to tough comparisons.

    • Operating cash flow was down approximately $400 million to $716 million year-to-date due to working capital investment and tax timing.

    • Markets in Canada remained challenging, particularly in residential, with net sales decreasing 1.9%.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year net sales growth
    mid-single digits
    high materiality
    High
    Full-year operating margin
    9.5% to 9.8%
    high materiality
    High
    Interest expense
    approximately $200 million
    medium materiality
    High
    Capital expenditure
    $375 million to $425 million
    medium materiality
    High
    Effective tax rate
    approximately 26%
    medium materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    United States
    Strong nonresidential performance with 8% growth, residential returned to 2% growth.
    Organic increase: 4%Acquisition contribution: 1%Operating margin: 11.1%
    		—5%—$925 million
    Canada
    Markets remained challenging, particularly in residential.
    Organic growth: 1.7%Divestment impact: -3.6%
    		—-1.9%—$22 million
    Waterworks
    Diversified exposure across large capital projects, public works, municipal activity, and metering technology helped offset weaker residential activity. Acquired Hamlet Environmental Technologies.
    		—3%——
    Commercial Mechanical
    Momentum driven by strong execution on large capital projects such as data centers, pharmaceutical production, biotechnology, and general manufacturing.
    		—15%——
    Industrial
    Steady demand across key sectors including life sciences, pharma and chemical, and power generation infrastructure.
    		—18%——
    Facility Supply Group
    		—5%——
    Fire and Fabrication
    		—-13%——
    Ferguson Home
    		—-1%——
    Residential Trade Plumbing
    		—relatively flat——
    HVAC
    Driven principally by healthy organic performance alongside contributions from M&A. Growth strategy includes investment in dual trade greenfield expansion and acquisitions.
    		—11%——

    Operational metrics

    24
    Acquisitions investment
    $600 million
    Q2 FY26

    Investment in 5 acquisitions closed in Q2.

    Net sales
    $16.2 billion
    H1 FY26

    Half year financials.

    Net sales growth
    4.2%YoY
    H1 FY26

    Ahead of last year.

    Organic revenue growth
    3.4%
    H1 FY26

    Contribution to H1 net sales growth.

    Acquisition growth
    0.9%
    H1 FY26

    Contribution to H1 net sales growth.

    Foreign exchange impact
    -0.1%
    H1 FY26

    Partially offset H1 net sales growth.

    Operating profit growth
    5.1%YoY
    H1 FY26

    Operating profit grew to $1.6 billion.

    Operating margin
    9.7%10 basis points of expansion
    H1 FY26

    Delivered with 10 basis points of expansion over the prior year. Prior year operating margin stepped up from 9.1% to 9.6%.

    Branded manufacturer purchases
    >90%
    Current

    Vast majority of purchases are from branded manufacturers.

    Gross margin
    31%down 20 basis points
    Q2 FY26

    Down 20 basis points against a tough comparison, but strong.

    Diluted EPS
    $3.395.3% above last year
    Q2 FY26

    Driven by operating profit growth and share repurchases.

    Net debt to EBITDA
    1.3x
    Q2 FY26

    Balance sheet remains strong. Expected to increase to approximately 1.8x upon closing FloWorks acquisition, remaining within target range.

    EBITDA
    $1.7 billionup approximately $90 million
    H1 FY26

    Up approximately $90 million on the prior year.

    Capital expenditures
    $234 million
    H1 FY26

    Principally in supply chain expansion, branch network, and technology initiatives.

    Capital returned to shareholders
    $375 million
    Q2 FY26

    Through dividends and share repurchases.

    Capital returned to shareholders
    $438 million
    YTD FY26

    Via share repurchases year-to-date.

    Share count reduction
    1.7 million
    YTD FY26

    Due to share repurchases.

    Quarterly dividend
    $0.89
    Q2 FY26

    Declared per share.

    Inflation
    low single digits
    Full calendar year

    Expected for the full calendar year. Finished goods inflation compressed to low single digits. Commodities (15% of revenue) were about flat, with PVC in double-digit deflation.

    SG&A growth rate
    just over 4%
    Q2 FY26

    Expected to be similar or slightly higher in H2 due to investments.

    Operating leverage
    10 bps
    Q2 FY26

    Delivered while investing for future growth.

    Contribution margin
    ~7%
    Q2 FY26

    Driven by slight compression in gross margins due to tough prior year comps.

    Dual trade customer base
    ~1/3
    Current

    Approximately 1/3 of overall customer base is engaged in dual trade, expected to grow.

    Total addressable market
    $340 billion
    Prior

    Expected to increase from $340 billion to $400 billion post-FloWorks acquisition.

    Industry KPIs

    1
    MetricValueDetails
    Daily sales rate3.8%%

    Deals & partnerships

    6
    FloWorksLeading industrial distributor and service provider of highly technical valves and flow control solutions.~$1.6 billion

    Founded 1961 in Houston, TX. Approximately $1 billion in revenue in 2025 with >60 locations, including 25 service and repair centers across the US and Canada. Expands specialty industrial flow control platform, adding technical depth in valves, automation, pumps, fluid handling systems, and specialty pipe, fittings, and flanges. Enhances growth strategy with expanded end market and product exposure, adding significant recurring MRO-driven revenue. Increases total addressable market from $340 billion to $400 billion.

    Carrier Great LakesDistributor of residential and commercial HVAC products.

    7 locations across Michigan and Ohio. Expands multi-brand HVAC offering and dual trade capabilities.

    Dealer Supply CompanyHVAC equipment, parts, supplies, and fabrication services provider.

    17 locations in the Southeastern United States.

    Hamlet Environmental TechnologiesCompany strengthening water and wastewater process equipment expertise.

    Strengthens water and wastewater process equipment expertise in Michigan.

    New England Applied ProductsManufacturer's representative of commercial HVAC systems.

    Supports a variety of traditional and large capital projects, including data centers, education, and health care systems.

    PRD Technologies GroupProvider of highly technical valves, flow control, and process equipment.

    10 locations across the United States. Further strengthens product portfolio within the industrial customer group.

    Risks & headwinds

    5
    Economic uncertainty

    Uncertain economic environment

    Mitigation: Agile business model, balanced end market exposure, continued strategic investments.

    Residential market headwinds

    Persistent headwinds across both new construction and repair, maintenance and improvement work

    Mitigation: Intentional balanced business mix, strong HVAC performance offsetting weakness.

    Challenging Canadian markets

    Markets have remained challenging in Canada, particularly in residential

    Labor availability and supply chain pressure

    Labor availability as well as overall supply chain pressure

    Mitigation: Early engagement in the process to meet project timelines.

    Commodity price volatility (PVC)Q2 FY26

    PVC is still very much in deflation... down about double-digit

    Mitigation: Commodities as a basket were about flat; overall inflation in low single digits.

    What to watch in Q3 FY26

    5

    Large Capital Projects Backlog Conversion

    Next quarter
    CurrentBacklogs building, above current growth rates in commercial mechanical, industrial, and Waterworks.
    TargetContinued strong revenue growth in commercial mechanical, industrial, and waterworks.

    Why it matters

    Large capital projects are a key growth driver and tailwind for the next couple of years, and their conversion into revenue is critical for sustained performance.

    the backlogs, the open orders continue to build, both if you look at commercial mechanical and industrial and even Waterworks, which had a bit of a lumpier quarter this quarter. You see those backlogs building and those backlogs continuing to be above what those growth rates were for the quarter.

    Q&A highlights

    6

    Can you elaborate on the strong performance in large capital projects, particularly commercial mechanical, and how open orders and backlog contribute to future guidance?

    Management confirmed strong growth in commercial mechanical (15% on a 20% prior-year comp) and industrial (18% on a 6% comp), driven by large capital projects. Backlogs and open orders continue to build, exceeding current growth rates, indicating a tailwind for the next couple of years. Early engagement in the supply chain is crucial for project timelines.

    “the backlogs, the open orders continue to build, both if you look at commercial mechanical and industrial and even Waterworks, which had a bit of a lumpier quarter this quarter. You see those backlogs building and those backlogs continuing to be above what those growth rates were for the quarter.”

    asked by Matthew Bouley · answered by Bill Brundage

    2 min read5 chapters

    Detailed Narrative

    01

    Nonresidential Strength and Diversification

    Ferguson's nonresidential segment demonstrated robust performance, growing 8% year-over-year, building on a 13% comparable from the prior year. This growth was primarily fueled by strong activity in large capital projects, including data centers, pharmaceutical production, biotechnology, and general manufacturing. The company's scale, diversified supply chain, and early engagement in project processes enabled significant market share gains, effectively offsetting softer activity in traditional nonresidential areas.

    02

    Residential Market Recovery Driven by HVAC

    Despite persistent headwinds in new construction and repair, maintenance, and improvement (RMI) work, the residential market returned to growth, increasing 2% in the quarter. This recovery was largely attributed to the strong performance of the HVAC customer group, which saw an 11% revenue increase. Strategic investments in dual trade greenfield expansion and acquisitions, such as Carrier Great Lakes and Dealer Supply Company, underpinned this HVAC outperformance.

    03

    Strategic Acquisitions and Expanded Market Reach

    Ferguson announced 8 acquisitions year-to-date, with 5 closing in the second quarter, representing an investment of nearly $600 million. The most significant is the definitive agreement to acquire FloWorks for approximately $1.6 billion. This acquisition is expected to expand Ferguson's total addressable market from $340 billion to $400 billion, adding technical depth in industrial flow control and enhancing exposure to high-growth end markets like data centers, semiconductors, and power generation.

    04

    Disciplined Capital Allocation and Strong Balance Sheet

    The company continues to prioritize capital allocation towards organic growth, bolt-on acquisitions, sustainably growing dividends, and returning surplus capital to shareholders. Ferguson invested $234 million in CapEx for supply chain and technology initiatives and returned $375 million to shareholders in Q2 through dividends and share repurchases. The balance sheet remains strong with net debt to EBITDA at 1.3x, projected to rise to 1.8x post-FloWorks, staying within the target range of 1x to 2x.

    05

    Inflation Management and Gross Margin Stability

    Inflation decelerated to the upper portion of low single digits in the quarter, with finished goods in the low single-digit range and commodities (representing 15% of revenue) remaining flat, notably with PVC in double-digit deflation. Despite tough prior-year comparisons, gross margin remained strong at 31%, down only 20 basis points year-over-year, reflecting effective execution of pricing tools and product strategy.

    AI-generated summary of the company’s earnings call. Not investment advice.