Ferguson Enterprises Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the quarter ended September 30, 2026, reached $9.0 billion, a 9.5% increase year-over-year, driven by 7.0% organic growth and 2.7% acquisition growth.
• Gross margin was 30.9%, a 40 basis point decrease from the prior year.
• Reported operating profit was $885 million (9.8% margin), up 4.9% year-over-year; adjusted operating profit was $962 million (10.7% margin), up 8.9%.
• Diluted earnings per share (EPS) were $3.08, a 4.9% decrease year-over-year; adjusted diluted EPS was $3.43, up 7.9%.
• Adjusted EBITDA for the quarter was $1,028 million, up 9.0% year-over-year.
• Net debt to adjusted EBITDA ratio stood at 1.7x as of September 30, 2026, compared to 1.0x in the prior year period.
• For the nine months ended September 30, 2026, net sales were $25.2 billion (up 6.0%), operating profit was $2.39 billion (up 9.0%), and adjusted EPS was $9.09 (up 7.2%).
• Capital expenditures for the quarter were $108 million; total capex for the nine months was $342 million.

Guidance and Future Outlook:

• Full-year 2026 net sales guidance was raised to approximately 7% growth from the prior mid-single digit range.
• Adjusted operating margin guidance for 2026 was raised to 9.6%–9.8% from the prior 9.5%–9.8% range.
• Interest expense guidance for 2026 was increased to approximately $235 million from ~$200 million.
• Capital expenditure guidance for 2026 was raised to approximately $425 million from the prior $375–$425 million range.
• The adjusted effective tax rate guidance remains at approximately 26%.
• Management expects to resume share repurchases as leverage trends back toward the lower end of the 1–2x net debt to adjusted EBITDA target range.

Business Segments and Product Lines:

• US net sales increased 10.2% (7.4% organic), with non-residential sales growing 15% and residential sales growing 6%.
• Canada net sales decreased 4.5% due to a 3.2% impact from non-core business divestments and a 1.9% foreign exchange headwind, partially offset by 0.6% organic growth.
• Completed three acquisitions during the quarter and one subsequent to quarter-end, bringing the total to 11 acquisitions in 2026 with aggregate annualized revenue of approximately $1.5 billion.
• Acquired FloWorks (August 31, 2026), strengthening valve and flow control solutions with over 60 locations.
• Acquired Brax Company, Inc., scaling pump and repair capabilities in Southern California.
• Acquired Rogers Supply Company, Inc., expanding HVAC presence in Illinois and Indiana.
• Acquired Canyon Systems, Inc. subsequent to quarter-end, establishing a water and wastewater treatment platform in six Western states.

Market and Competitive Landscape:

• Non-residential markets showed strong share gains driven by scale, multi-customer group approaches, and value-added solutions.
• Large capital project activity remained healthy with growth in open order volumes and strong bidding activity.
• Residential end markets faced pressure from weak new construction activity and softness in repair, maintenance, and improvement (RMI) work.
• Price inflation remained low to mid-single digits.
• Ferguson operates in a $400 billion residential and non-residential construction market.

Risks and Challenges:

• Residential markets remain challenged by weak new construction and soft RMI activity.
• Canada markets remain challenging, particularly in the residential sector.
• Gross margin was temporarily elevated in the prior year due to the timing and extent of supplier price increases.
• Foreign exchange rates created a 1.9% headwind for Canada sales.
• Non-core business divestments in Canada contributed a 3.2% negative impact to sales.

Management Commentary and Tone:

• CEO Kevin Murphy stated that expert associates delivered strong results and the company continues to invest organically and through acquisitions to expand value-added solutions and geographic footprint.
• Management expressed confidence in delivering market outperformance by deploying scale locally and leveraging growth drivers including water infrastructure, large capital projects, climate and comfort, and aging/underbuilt housing.
• The tone was confident regarding the ability to capitalize on growth drivers and provide essential water and air solutions for specialized professional needs.

Other Key Points:

• Declared a quarterly dividend of $0.89, payable on January 8, 2027, to stockholders of record as of November 20, 2026.
• Temporarily paused share repurchase program in connection with the FloWorks acquisition.
• Priced public offerings totaling $1.2 billion in senior unsecured notes.
• Entered into an unsecured $900 million term loan maturing in 2029.
• Proceeds from debt offerings were used to finance the FloWorks acquisition, with the remainder allocated to general corporate purposes.
• Total acquisition investment during the quarter was $1.7 billion.
• Ferguson has approximately 36,000 associates in over 1,800 locations.