Ferguson Enterprises Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales for the quarter ended June 30, 2026, reached $8.8 billion, a 4.6% increase year-over-year, driven by 3.8% organic growth and 1.0% acquisition growth, partially offset by 0.2% from a Canadian divestment.
• Gross margin was 31.0%, a decrease of 20 basis points from the prior year, attributed to the timing and extent of supplier price increases.
• Reported operating profit was $893 million (10.2% margin), up 6.1% year-over-year; adjusted operating profit was $932 million (10.7% margin), up 2.9% year-over-year.
• Diluted earnings per share (EPS) were $3.43, up 6.9% year-over-year; adjusted diluted EPS was $3.39, up 5.3% year-over-year.
• Adjusted EBITDA for the quarter was $994 million, a 3.2% increase from the prior year.
• Net debt to adjusted EBITDA ratio was 1.3x at June 30, 2026, compared to 1.2x in the prior year period.
• For the six months ended June 30, 2026, net sales were $16.2 billion (up 4.2%), operating profit was $1.5 billion (up 11.6%), and adjusted EPS was $5.67 (up 7.0%).

Guidance and Future Outlook

• Full-year 2026 net sales guidance was raised from "low to mid-single digit growth" to "mid-single digit growth."
• Full-year 2026 adjusted operating margin guidance was raised to 9.5%–9.8% from 9.4%–9.8%.
• Full-year 2026 capital expenditures guidance was raised to $375 million–$425 million from $350 million–$400 million.
• Interest expense guidance remains at approximately $200 million, and the adjusted effective tax rate remains at approximately 26%.
• Updated guidance excludes the expected impact of the FloWorks acquisition, anticipated to close in the third quarter.
• Management expects to continue delivering market outperformance driven by water infrastructure, large capital projects, climate and comfort, and aging/underbuilt housing trends.

Business Segments and Product Lines

• US Segment: Net sales increased 5.0% year-over-year, with 4.0% organic growth and 1.0% from acquisitions; adjusted operating profit was $925 million, up 2.9%.
• Canada Segment: Net sales decreased 1.9% due to a 3.6% reduction from a non-core business divestment, partially offset by 1.7% organic growth; adjusted operating profit was $22 million, down $1 million year-over-year.
• Residential Markets: Revenue grew 2% despite weak new construction and soft repair, maintenance, and improvement (RMI) work.
• Non-Residential Markets: Revenue increased 8% driven by strong share gains, healthy large capital project activity, and growth in open order volumes.
• Acquisitions: Completed five acquisitions during the quarter (Carrier Great Lakes, Dealers Supply Company, New England Applied Products, Hamlett Environmental Technologies, and PRD Technologies Group) and signed a definitive agreement to acquire FWI Holdings, Inc. ("FloWorks").
• The aggregate annualized revenue of the eight acquisitions announced year-to-date is approximately $1.4 billion.

Market and Competitive Landscape

• The company reported outperforming its markets in the second quarter despite a challenging economic backdrop.
• Non-residential growth was fueled by scale advantages, a multi-customer group approach, and value-added solutions.
• The company operates in a $340 billion residential and non-residential construction market.

Risks and Challenges

• The economic environment remains uncertain, with weak new residential construction activity and soft RMI work impacting the residential end market.
• Canadian markets remain challenging, particularly in residential.
• Gross margin pressure was noted due to the timing and extent of supplier price increases.

Management Commentary and Tone

• CEO Kevin Murphy stated that associates continued to execute for customers, driving market outperformance and returning to residential growth despite challenges.
• Management highlighted a "scale-advantaged business model" and consistent cash generation enabling investment in organic growth, market consolidation, and capital returns.
• The tone was confident regarding the ability to capitalize on long-term growth drivers and deliver market outperformance.

Other Key Points

• Completed five acquisitions during the quarter and signed a definitive purchase agreement to acquire FloWorks.
• Declared a quarterly dividend of $0.89, payable on October 7, 2026, to stockholders of record as of August 21, 2026.
• Share repurchases totaled $202 million during the quarter.
• Invested $573 million in acquisitions during the quarter.
• Cancellation of the secondary listing on the London Stock Exchange took effect on July 20, 2026.
• Net debt increased to $4.468 billion as of June 30, 2026, from $3.582 billion in the prior year period.
• Cash and cash equivalents were $437 million as of June 30, 2026, down from $557 million at December 31, 2025.