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    FERG
    Earnings call· Jul 2025(Q4 FY25)

    Ferguson Enterprises Inc. /DE/ FERG

    Sep 16, 2025 Source

    Executive summary

    Ferguson Q4 FY25 — Strong Non-Residential Growth and Strategic Investments Drive Outperformance

    Ferguson delivered strong Q4 FY25 results, outperforming challenging markets with robust nonresidential growth and strategic investments in HVAC, Waterworks, and large capital projects. The company is navigating residential market softness and commodity deflation while maintaining a strong balance sheet and returning capital to shareholders. A fiscal year-end change to December 31 will streamline operations, with guidance provided for calendar year 2025.

    Highlights

    5

    • Sales of $8.5 billion increased 6.9% over prior year, driven by organic growth of 5.8%.

    • Operating profit of $972 million grew 13.4% over last year, with operating margin expanding 60 basis points to 11.4%.

    • Diluted EPS increased 16.8% to $3.48.

    • Nonresidential revenue grew approximately 15%, with commercial up 17% and civil infrastructure up 13%.

    • Operating cash flow was strong at $1.9 billion for the full year, enabling $1.4 billion returned to shareholders.

    Concerns

    4

    • Residential end market revenue was flat in the quarter, impacted by weakened new construction starts and soft RMI demand.

    • HVAC revenue was slightly down due to softer market conditions, new efficiency standards transition, and weak new residential construction.

    • Residential trade plumbing revenues decreased 2% due to headwinds in new construction and ongoing PVC price deflation.

    • Commodity-related categories were down low single digits in Q4, and pricing for the full year was slightly down.

    Guidance & targets

    6
    CategoryTargetConfidence
    Calendar Year 2025 Revenue Growth
    mid-single-digit
    high materiality
    High
    Calendar Year 2025 Operating Margin
    9.2% to 9.6%
    high materiality
    High
    Calendar Year 2025 Interest Expense
    $180 million to $200 million
    medium materiality
    High
    Calendar Year 2025 Effective Tax Rate
    approximately 26%
    medium materiality
    High
    Calendar Year 2025 Capital Expenditures
    $300 million to $350 million
    medium materiality
    High
    HVAC Counter Conversions
    650
    low materiality
    High

    Segment performance

    13
    SegmentRevenueYoYQoQMargin
    U.S.
    Strong growth driven by nonresidential markets. Operating profit of $962 million, up $118 million over prior year.
    Organic growth: 6.1%Acquisition contribution: 1%
    		—7.1%—11.9%
    Canada
    Residential activity softer than non-residential. Operating profit of $24 million, up $2 million over prior year.
    Organic growth: 0.3%Acquisition contribution: 4.9%Foreign exchange impact: -0.4%
    		—4.8%——
    Residential end market (U.S.)
    Makes up about half of U.S. revenue. Weakened new construction starts, permit activity, and soft RMI demand.
    		—flat——
    Nonresidential end markets (U.S.)
    Represents the other half of U.S. revenue. Continued resilience with increased activity on large capital projects.
    		—approximately 15%——
    Commercial (U.S. Nonresidential)
    Part of nonresidential growth.
    		—17%——
    Civil Infrastructure (U.S. Nonresidential)
    Part of nonresidential growth.
    		—13%——
    Industrial (U.S. Nonresidential)
    Part of nonresidential growth.
    		—5%——
    HVAC (U.S.)
    Softer market conditions due to new efficiency standards transition and weak new residential construction. Full year FY25 revenue increased 8%.
    		—slightly down——
    Residential Trade Plumbing (U.S.)
    Faces headwinds in new construction and ongoing PVC price deflation. RMI performing better.
    		—decreased 2%——
    Ferguson Home (U.S.)
    Unified brand for residential building and remodel and residential digital commerce, focusing on higher-end project market.
    Share of U.S. sales: approximately 19%
    		—3%——
    Commercial Mechanical (U.S.)
    Driving strong activity on large capital projects.
    		—21%——
    Waterworks (U.S.)
    Driving strong activity on large capital projects. Full year FY25 revenue grew 10%.
    		—15%——
    Industrial, Fire & Fabrication and Facilities Supply (U.S.)
    Combined net sales growth.
    		—5%——

    Operational metrics

    52
    Organic revenue growth
    5.8%YoY
    Q4 FY25

    Driven by market outperformance.

    Acquisition growth contribution
    1.1%YoY
    Q4 FY25
    Gross margin
    31.7%up 70 bps YoY
    Q4 FY25

    Driven by strong execution and timing/extent of supplier price increases.

    Operating profit growth
    13.4%YoY
    Q4 FY25

    Resulting from disciplined cost management.

    Operating margin
    11.4%up 60 bps YoY
    Q4 FY25
    Diluted EPS growth
    16.8%YoY
    Q4 FY25

    Driven by operating profit growth and share repurchases.

    Net debt to EBITDA
    1.1x
    Q4 FY25

    Balance sheet remains strong.

    Capital deployment
    $483 million
    Q4 FY25

    Investments in HVAC expansion, Waterworks diversification, large capital projects, Ferguson Home.

    Shareholder returns (Q4)
    $354 million
    Q4 FY25
    Pricing contribution
    approximately 2%
    Q4 FY25

    Return to mild inflation, improvement in finished goods pricing.

    Commodity-related categories pricing
    low single digitsdown
    Q4 FY25
    Canada organic growth
    0.3%YoY
    Q4 FY25
    Canada acquisition contribution
    4.9%
    Q4 FY25
    Canada FX impact
    0.4%adverse
    Q4 FY25
    Canada operating profit
    $24 millionup $2 million YoY
    Q4 FY25
    Cost as percentage of sales
    20.3%roughly flat YoY
    Q4 FY25

    Good underlying cost reductions from streamlining actions, offset by sales volume and cost inflation.

    August sales per day growth
    5%
    August 2025

    Stepped down a touch from Q4 FY25.

    August HVAC sales growth
    low single digitsdown
    August 2025
    August gross margin
    —
    August 2025

    Started to see normalization play through, settling back into 30-31% range.

    Annualized cost savings from restructuring
    $100 million
    annual

    Playing through in underlying cost base, with approximately $25 million expected per quarter over next three quarters.

    Quarterly dividend
    $0.83 per shareup 5% YoY
    Q4 FY25

    Consistent with Q3, reflecting confidence in business and cash generation.

    Share repurchase program remaining authorization
    approximately $1 billion
    Q4 FY25
    Target leverage range
    1 to 2x
    ongoing

    Intend to operate towards the low end of this range.

    M&A valuation range
    7 to 10x
    current

    Valuations still towards the upper end of typical range.

    Revenue growth
    3.8%YoY
    FY25
    Organic growth
    3.2%YoY
    FY25
    Acquisition contribution
    1%
    FY25
    Sales day impact
    0.4%adverse
    FY25

    Due to 1 fewer sales day.

    Pricing for the year
    slightly down
    FY25

    Result of deflation in certain commodity-related categories, particularly early in the year.

    Gross margin
    30.7%up 20 bps YoY
    FY25
    Operating profit growth
    0.6%YoY
    FY25
    Operating margin
    9.2%
    FY25
    Diluted EPS growth
    2.6%YoY
    FY25
    Capital expenditures
    $305 million
    FY25
    Proceeds from asset sales
    $51 million
    FY25
    Shareholder returns (FY)
    $1.4 billion
    FY25
    Share repurchases
    $948 millionvs $634 million prior year
    FY25
    Share count reduction
    approximately 5 million
    FY25
    Residential end markets growth
    approximately 3%declined
    FY25

    Due to weak new construction and softer RMI markets.

    Residential organic revenue growth
    1%up
    FY25

    Outperformed market decline.

    Nonresidential end markets growth
    approximately flat
    FY25

    Large capital project activity offset weaker traditional non-res activity.

    Nonresidential organic growth
    6%up
    FY25

    Outperformed typical 300-400 bps market outperformance.

    HVAC revenue growth
    8%YoY
    FY25
    Waterworks revenue growth
    10%YoY
    FY25

    Driven by diversification efforts.

    Total nonresidential growth
    7%YoY
    FY25

    Driven by unique approach to large capital projects.

    Working capital investments
    $300 milliongenerally in line with prior year
    FY25
    Interest and tax payments
    $800 milliongenerally in line with prior year
    FY25
    EBITDA
    $3.1 billionup $44 million YoY
    FY25
    Calendar H1 Sales
    $15.6 billionup 5% YoY
    H1 CY24

    For the 6 months ended June 30.

    Calendar H1 Operating profit
    $1.5 billionup 8% YoY
    H1 CY24
    Calendar H1 Operating margin
    9.6%up 30 bps YoY
    H1 CY24

    From 9.3% in prior year.

    Price/cost spread
    —
    Q4 FY25

    Price inflected positive, but commodity basket still in low single-digit decline (PVC deflation). Modest overall inflation expected, but difficult to predict.

    Industry KPIs

    1
    MetricValueDetails
    ROIC capital intensityapproximately 29.4%%

    Deals & partnerships

    6
    Manufactured Duct & Supply CompanyHVAC supplies and parts distributor

    Strengthens HVAC strategy by expanding footprint in Atlanta and Southeast markets.

    more supplyHVAC distributor

    Subsequent to year-end. Based in Chicago, serves HVAC and dual trade professionals. Further strengthens HVAC strategy.

    TempletonStrengthens expertise in water and wastewater treatment plant design

    Part of Waterworks diversification efforts to expand capabilities and address aging infrastructure.

    Ritchie EnvironmentalStrengthens expertise in water and wastewater treatment plant design

    Part of Waterworks diversification efforts to expand capabilities and address aging infrastructure.

    HPS SpecialtiesManufacturer's representative of HVAC, plumbing and hydronic supplies

    Serves commercial mechanical and industrial engineering professionals in the Northeast and Mid-Atlantic regions.

    Water Resources, Inc.Exclusive distributor of Neptune Technology Group products and water meters

    Distributes in the Greater Chicago metro area.

    Risks & headwinds

    7
    Weakened new construction starts and permit activityQ4 FY25, FY25, near-term (H2 CY25)

    Residential revenue flat in Q4 FY25; residential end markets declined approximately 3% in FY25.

    Mitigation: Balanced end market exposure, focus on nonresidential large capital projects, HVAC expansion, Waterworks diversification, Ferguson Home.

    Soft demand in repair, maintenance and improvement (RMI)Q4 FY25, FY25, near-term (H2 CY25)

    Residential revenue flat in Q4 FY25; residential end markets declined approximately 3% in FY25.

    Mitigation: Ferguson Home (higher-end project market) performing better.

    Softer HVAC market conditionsQ4 FY25, near-term (H2 CY25)

    HVAC revenue slightly down in Q4 FY25.

    Mitigation: HVAC Everywhere strategy (counter conversions, geographic expansion, M&A), focus on dual trade contractors.

    Industry transition to new HVAC efficiency standards (A2L)Q4 FY25, ongoing

    Impacting HVAC revenue in Q4 FY25.

    Mitigation: Sold through majority of 410A systems, managing transition to A2L.

    Weak new residential construction activityQ4 FY25, near-term (H2 CY25)

    Impacting HVAC revenue in Q4 FY25. Residential trade plumbing revenues decreased 2%.

    Mitigation: Diversified business mix, focus on non-residential, HVAC expansion.

    PVC price deflationQ4 FY25, ongoing

    Residential trade plumbing revenues decreased 2% due to this. Commodity-related categories down low single digits in Q4 FY25.

    Mitigation: Modest overall inflation expected, but commodity basket still in decline.

    Pressured consumer and affordability issues (HVAC)Near-term (H2 CY25)

    Movement to more repair versus replace in HVAC.

    Mitigation: Focus on dual trade contractors, expanding counters and locations.

    What to watch in Q1 FY26

    5

    Calendar Year 2025 Revenue Growth

    Next quarter
    Currentmid-single-digit
    TargetPerformance against mid-single-digit growth

    Why it matters

    This is the primary top-line guidance for the calendar year, reflecting overall market conditions and company execution.

    We expect mid-single-digit revenue growth in calendar 2025

    Q&A highlights

    7

    Seeking clarity on the drivers behind the mid-single-digit CY25 growth guidance, considering dynamic end markets, recent price/volume trends, and future market assumptions.

    Management noted Q4 FY25 outperformance driven by key growth areas (HVAC, Waterworks, large capital projects). They expect softer growth in H2 CY25 due to continued new residential construction weakness, softer RMI, and HVAC affordability issues, despite non-residential strength. August sales per day were up 5%, a slight step down from Q4.

    “If I take a step back, if we look at when we entered fiscal year '25, we came into the year believing that our markets would be down, low single digits... And so suffice it to say, we're pretty pleased with Q4 plus 7% and a year-to-date of plus 3.8%. August sales per day were up about 5%.”

    asked by Matthew Bouley · answered by Kevin Murphy, Bill Brundage

    2 min read7 chapters

    Detailed Narrative

    01

    Fiscal Year-End Transition

    Ferguson is changing its fiscal year-end from July 31 to December 31. A 5-month transition period from August 1 to December 31, 2025, will precede the new fiscal year beginning January 1, 2026. This change aims to shift year-end activities away from the seasonally busiest period, allowing associates to focus on customers during peak season.

    02

    Non-Residential Market Strength

    The nonresidential end markets, representing half of U.S. revenue, demonstrated continued resilience, growing approximately 15% in Q4 FY25. This growth was primarily driven by increased activity in large capital projects, with commercial and civil infrastructure end markets growing 17% and 13% respectively. Data center construction, biotechnology, pharma, and large-scale hospital work are key drivers.

    03

    Residential Market Headwinds

    The residential end market, comprising about half of U.S. revenue, remained subdued. Residential revenue was flat in Q4 FY25, impacted by weakened new construction starts, permit activity, and soft demand in repair, maintenance, and improvement (RMI). Residential trade plumbing revenues decreased 2% due to these headwinds and ongoing PVC price deflation.

    04

    HVAC Strategy and Performance

    Despite softer market conditions, including the transition to new efficiency standards and weak new residential construction, Ferguson's HVAC revenue was only slightly down in Q4 FY25. The company is executing its "HVAC everywhere" strategy through dual trade counter conversions (over 600 completed towards a goal of 650 by early 2026), geographic expansion, and strategic acquisitions.

    05

    Waterworks Diversification

    Waterworks revenue grew 15% in Q4 FY25, driven by diversification efforts to address aging infrastructure and provide integrated solutions. This includes collaborating with engineers and construction professionals early in projects and broadening product offerings to include process equipment solutions, strengthened by acquisitions like Templeton and Ritchie Environmental.

    06

    Ferguson Home Rollout

    The Ferguson Home brand, launched in February, unifies residential building and remodel and residential digital commerce, focusing on the higher-end project market. This customer group, accounting for approximately 19% of U.S. sales, delivered 3% revenue growth in Q4 FY25, supported by dedicated sales and showroom consultants.

    07

    Capital Allocation and Balance Sheet

    Ferguson generated strong operating cash flow of $1.9 billion for the full year, enabling $483 million in capital deployment in Q4 and $1.4 billion returned to shareholders for the full year through share repurchases and dividends. The balance sheet remains strong with net debt-to-EBITDA at 1.1x, providing flexibility for future growth investments and M&A.

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