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    FERG
    Earnings call· Dec 2025(FY25)

    Ferguson Enterprises Inc. /DE/ FERG

    Feb 24, 2026 Source

    Executive summary

    Ferguson FY25 — Strong Profit Expansion Amidst Mixed Markets

    Ferguson delivered strong FY25 results, achieving record revenue and operating profit despite mixed market conditions, with robust performance in nonresidential segments offsetting residential weakness. The company is strategically positioned to capitalize on long-term structural trends in large capital projects, water infrastructure, climate, and housing, leveraging its scale and multi-customer group approach for continued market outperformance and shareholder value creation.

    Highlights

    5

    • Revenue of $31.3 billion, up 5% year-over-year.

    • Operating profit of $3 billion, up 11.3% year-over-year, representing a 9.6% operating margin.

    • Diluted earnings per share came in at $10.58, a 13.4% increase over last year.

    • Operating cash flow was strong with $2.2 billion, enabling continued investment and capital returns.

    • Nonresidential revenue grew 11%, driven by strong share gains in large capital projects.

    Concerns

    5

    • Residential end markets remained challenged, with residential revenue flat for the year.

    • Residential Trade Plumbing declined by 3% due to headwinds in new construction and RMI.

    • HVAC declined by 1% against a strong comparable and weaker end markets.

    • Q1 FY26 revenue is trending a touch weaker than Q4 in the low single-digit range due to residential weakness, HVAC pressure, and adverse weather.

    • Anticipate a little bit of year-over-year gross margin compression in FY26 due to normalization from outsized gains in FY25.

    Guidance & targets

    16
    CategoryTargetConfidence
    FY26 Revenue Growth
    low to mid-single-digit
    high materiality
    High
    FY26 Operating Margin
    9.4% to 9.8%
    high materiality
    High
    FY26 Interest Expense
    approximately $200 million
    medium materiality
    High
    FY26 CapEx
    approximately $350 million to $400 million
    medium materiality
    High
    FY26 Effective Tax Rate
    approximately 26%
    medium materiality
    High
    Long-term Market Growth
    approximately 2% to 4% a year
    medium materiality
    High
    Long-term Organic Growth Outperformance
    300 to 400 basis points a year
    medium materiality
    High
    Long-term Acquisition Growth
    1% to 3% incremental annual growth
    medium materiality
    High
    Long-term Total Annual Growth
    6% to 11%
    high materiality
    High
    Long-term Operating Margin Expansion
    roughly 10 to 30 basis points a year
    high materiality
    High
    Long-term EPS Growth
    low double-digit to mid-teens range
    high materiality
    High
    Medium-term Revenue Target
    $40 billion
    high materiality
    High
    Medium-term Adjusted Operating Profit Target
    over $4 billion
    high materiality
    High
    Medium-term Operating Margin Target
    over a 10%
    high materiality
    High
    FY26 Residential Market Outlook
    down low to mid-single digits
    medium materiality
    High
    FY26 Nonresidential Market Outlook
    up low to mid-single digits
    medium materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    US Residential End Markets
    Remained challenged. New residential housing starts and permit activity were down on the prior year, and repair, maintenance and improvement work also remained soft. Outperformed weak markets.
    		—flat——
    US Nonresidential End Markets
    Performed better than residential. Driven by large capital project activity and strong share gains.
    		—up 11%——
    US Waterworks
    Highly diversified customer group saw strength across large capital projects, public works, general municipal and metering technology, offsetting weakness in residential.
    		—13% (FY25), 9% (Q4 FY25)——
    Ferguson Home
    Challenging new construction and remodel market. Outperformed against the broader market by catering to higher-end projects.
    		—1% (FY25), flat (Q4 FY25)——
    Residential Trade Plumbing
    Due to headwinds in both new construction and RMI construction.
    		—declined by 3% (FY25), down 4% (Q4 FY25)——
    HVAC
    Against a strong 10% prior year comparable and weaker end markets, impacted by the industry's transition to new efficiency standards and weak new residential construction activity as well as a pressured consumer.
    		—declined by 1% (FY25), down 7% (Q4 FY25)——
    Commercial/Mechanical
    Driven by large capital projects such as data centers and partially offset by weaker activity in traditional nonresidential projects.
    		—18% (FY25), 18% (Q4 FY25)——
    Fire & Fabrication
    Saw growth during the year as we take share and leverage the benefits of our unique multi-customer group approach.
    		—growth (FY25), continued growth (Q4 FY25)——
    Facilities Supply
    Saw growth during the year as we take share and leverage the benefits of our unique multi-customer group approach.
    		—growth (FY25), continued growth (Q4 FY25)——
    Industrial Customer groups
    Saw growth during the year as we take share and leverage the benefits of our unique multi-customer group approach.
    		—growth (FY25), continued growth (Q4 FY25)——

    Operational metrics

    47
    Adjusted Revenue
    $31.3 billion5% ahead of last year
    FY25

    For the full calendar year 2025.

    Organic Revenue Growth
    4.5%
    FY25

    For the full calendar year 2025.

    Acquisition Growth
    1%
    FY25

    Contribution to revenue growth for FY25.

    Sales Day Impact
    0.4%1 fewer sales day
    FY25

    Negative impact on revenue growth for FY25.

    FX & Divestment Impact
    0.1%adverse impact
    FY25

    Combined adverse impact of foreign exchange rates and a divestment in Canada on revenue growth for FY25.

    Price Inflation
    low single digits
    FY25

    With improvement in finished goods pricing, offset by deflation in certain commodity-related product categories.

    Adjusted Gross Margin
    31%increased 70 basis points over last year
    FY25

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

    Adjusted Operating Profit
    $3 billionup 11.3%
    FY25

    For the full calendar year 2025.

    Adjusted Operating Margin
    9.6%50 basis points of expansion over the prior year
    FY25

    For the full calendar year 2025.

    Adjusted Diluted EPS
    $10.5813.4% above last year
    FY25

    Driven by operating profit growth and the impact of share repurchases.

    Net Debt to EBITDA
    1.1x
    FY25

    Balance sheet remains strong.

    CapEx
    $354 million
    FY25

    Investment in organic growth during the year.

    M&A Investment
    $276 million
    FY25

    Invested in acquisitions during the year.

    Dividends Paid
    $656 million
    FY25

    Part of capital returned to shareholders.

    Shares Repurchased
    4.5 million
    FY25

    Number of shares repurchased during the year.

    Share Repurchase Value
    $902 million
    FY25

    Value of shares repurchased during the year.

    Return on Capital
    31%
    FY25

    Strong overall return on capital for the year.

    Quarterly Dividend
    $0.89
    Q1 FY26

    Declared dividend to be paid in April.

    Net Sales
    $7.5 billion3.6% ahead of last year
    Q4 FY25

    For the calendar fourth quarter.

    Organic Revenue Growth
    3%
    Q4 FY25

    For the calendar fourth quarter.

    Acquisition Growth
    0.9%
    Q4 FY25

    Contribution to revenue growth for Q4 FY25.

    FX & Divestment Impact
    0.3%adverse impact
    Q4 FY25

    Combined adverse impact of foreign exchange rates and a divestment in Canada on revenue growth for Q4 FY25.

    Price Inflation
    low to mid-single digits
    Q4 FY25

    For the calendar fourth quarter.

    Adjusted Gross Margin
    30.6%increased 90 basis points over last year
    Q4 FY25

    For the calendar fourth quarter.

    Adjusted Operating Profit
    $625 millionup 13.8%
    Q4 FY25

    For the calendar fourth quarter.

    Adjusted Operating Margin
    8.3%70 basis points of expansion over the prior year
    Q4 FY25

    For the calendar fourth quarter.

    Adjusted Diluted EPS
    $2.1011.7% above last year
    Q4 FY25

    Driven principally by operating profit growth.

    EBITDA
    $3.2 billion$338 million ahead of prior year
    FY25

    For the full calendar year.

    Working Capital Investments
    $294 millionup from $106 million in the prior year
    FY25

    Selectively invested to support growth areas.

    Annual Revenue Growth
    8%
    past decade

    Generated over the past decade.

    Operating Profit Growth
    11%
    past decade

    Generated over the past decade.

    Operating Margin Expansion
    210 basis points
    past decade

    Expansion over the past decade.

    Operating Cash Flow to Net Income Conversion
    107%
    past 5 fiscal years

    Strong cash conversion.

    Capital Deployed
    nearly $12 billion
    past 5 fiscal years

    Deployed across 4 clear capital priorities.

    Acquisitions Completed
    over 50
    past 5 fiscal years

    Completed over the past 5 fiscal years.

    Acquired Revenue
    over $2 billion
    past 5 fiscal years

    Revenue brought in through acquisitions over the past 5 fiscal years.

    Acquisition Contribution to Annual Growth
    just under 2%
    past 5 fiscal years

    Accounting for annual growth over that period.

    Total Shareholder Return
    545%
    past decade

    Delivered over the past decade.

    Market Opportunity (Residential & Nonresidential)
    $340 billion
    current

    Total market opportunity for residential and nonresidential construction markets.

    Large Capital Projects Market Opportunity
    approximately $90 billion
    through 2031

    Potential market opportunity across customer groups.

    Owned Brands Revenue Share
    approximately 10%
    current

    21 owned brands make up approximately 10% of overall revenue.

    Customer Proximity
    95%
    current

    95% of customers are within 60 miles of a Ferguson location.

    Number of Suppliers
    37,000
    current

    Number of suppliers connected by Ferguson.

    Number of Customers
    over 1 million
    current

    Number of customers served by Ferguson.

    Number of Products
    over 1 million
    current

    Choice of products offered through Ferguson's network.

    Dual Trade HVAC and Plumbing Locations
    over 650
    current

    Full-service locations offering broad access to equipment, parts, and supplies.

    Data Center Project Revenue Generated
    over $40 million
    to date

    Revenue generated from a specific data center project example.

    Industry KPIs

    3
    MetricValueDetails
    End market growth mix50% residential and 50% nonresidential%
    ROIC capital intensity31%%
    Market volume mro market benchmark2% to 4%%

    Orderbook & backlog

    1
    Data Center Project Open Ordersover $100 millioncurrent

    Deals & partnerships

    1
    MultipleConsolidating fragmented markets and expanding capabilities

    Welcomed associates from 8 acquisitions during the year.

    Risks & headwinds

    4
    Challenging Residential End MarketsFY25, continuing into Q1 FY26

    Residential revenue flat for the year; Residential Trade Plumbing declined by 3%; HVAC declined by 1%.

    Mitigation: Multi-customer group approach, focus on higher-end projects, long-term residential recovery expected.

    HVAC Market WeaknessFY25, continuing into Q1 FY26

    HVAC declined by 1% against a strong 10% comparable and weaker end markets, impacted by the industry's transition to new efficiency standards and weak new residential construction activity as well as a pressured consumer.

    Mitigation: Counter build-out, greenfield expansion, M&A opportunities.

    Gross Margin NormalizationFY26

    Q4 FY25 gross margin at 30.6% compared to 31% for full FY25. Anticipate 'a little bit of year-over-year gross margin compression' in FY26.

    Mitigation: SG&A leverage, continued focus on value-added solutions.

    Q1 FY26 Softer RevenueQ1 FY26

    Revenue trending in the 'low single-digit range' for Q1 FY26, weaker than Q4 FY25.

    Mitigation: Expect modest improvement throughout the year, embedded in full-year guidance.

    What to watch next

    5

    Q1 FY26 Revenue Growth

    Q2 FY26
    Currentlow single-digit range
    Targetmodest improvement

    Why it matters

    Indicates whether the residential and HVAC pressures, along with weather impact🌐s, are easing as expected and if the company is on track for its full-year guidance.

    To date, in the first quarter, revenue has been a touch weaker than Q4 so we're trending in that low single-digit range... But we expect modest improvement in growth as we move throughout the year, and that's embedded in our low to mid-single-digit guidance for the full calendar year.

    Q&A highlights

    6

    How is Ferguson thinking about outgrowth in nonresidential capital projects for 2026? Are share gains accelerating? Is the competitive landscape limited for these projects?

    Management highlighted the structural trend of large capital projects aligning with their multi-customer group strategy and early engagement in design. They acknowledged competition but emphasized Ferguson's differentiated offering, supply chain, local relationships, and value-added services like fabrication and valve automation. They noted strong growth rates in Commercial/Mechanical (18%) and Waterworks (9-13%) as evidence of share gains.

    “We think we bring something different when you talk about the supply chain, being able to deliver on those local relationships. Additionally, what we've seen, especially in the data center market is the need to complement some of the activities of the contractor base in areas like fabrication, valve and automation and off-site construction to make sure that they can deliver on that project on time.”

    asked by Philip Ng · answered by Kevin Murphy

    2 min read7 chapters

    Detailed Narrative

    01

    Strong FY25 Performance Amidst Mixed Markets

    Ferguson reported a 5% revenue increase to $31.3 billion for FY25, with operating profit growing 11.3% to $3 billion, achieving a 9.6% operating margin. Diluted EPS rose 13.4% to $10.58. This performance was driven by disciplined gross margin management and business streamlining, despite residential markets remaining challenged.

    02

    Strategic Focus on Large Capital Projects

    The company is uniquely positioned to capitalize on a $90 billion market opportunity in large capital projects, including data centers, semiconductor facilities, and advanced manufacturing. These long-cycle, high-complexity projects leverage Ferguson's multi-customer group expertise, supply chain speed, and project management capabilities, driving strong nonresidential growth (up 11% in FY25).

    03

    Water Infrastructure Modernization

    Ferguson is well-positioned to benefit from the significant investment required to upgrade America's aging water systems. Its Waterworks business engages in public and private utility projects, offering solutions for water treatment, transmission, distribution, and smart technology, playing a vital role wherever water flows.

    04

    Climate and Comfort Evolution

    The market is shifting towards efficient equipment, smarter systems, and dual-trade capabilities blending HVAC and plumbing. Ferguson is investing in counter expansion, greenfield locations, and M&A in this space, with over 650 full-service dual-trade locations, capitalizing on this durable structural growth driver.

    05

    Long-Term Residential Opportunity

    Despite short-term challenges, the aging U.S. housing stock (average 4 decades old) and a significant housing shortage create a long-term demand opportunity for repair, replacement, upgrades, and new construction. Ferguson serves both RMI and new construction through its multi-customer group approach, including Ferguson Home's showrooms and digital experience.

    06

    Disciplined Capital Allocation and M&A Strategy

    Ferguson maintains a disciplined capital allocation framework, prioritizing organic growth investments, followed by bolt-on geographic and capability acquisitions. Over the past five years, it completed over 50 acquisitions, adding $2 billion in revenue. The company expects a more active M&A year in FY26, focusing on HVAC and nonresidential capabilities like fabrication and process equipment.

    07

    Long-Term Financial Algorithm

    The company targets long-term annual revenue growth of 6% to 11% (2-4% market growth + 300-400 bps outperformance + 1-3% M&A). This is expected to drive operating margin expansion of 10-30 basis points annually, leading to low double-digit to mid-teens EPS growth and aiming for $40 billion in revenue and over $4 billion in adjusted operating profit with over 10% operating margin in the medium term.

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