Q2 2026 Ferguson Enterprises Inc Earnings Call Transcript
Key Points
- Ferguson Enterprises Inc (FERG) delivered strong revenue growth of 4.6% in Q2, driven by organic growth of 3.8% and acquisition growth of 1%, with volume growth returning as inflation eased.
- The company saw robust performance in nonresidential markets, with commercial mechanical up 15% and industrial up 18%, fueled by large capital projects like data centers, power generation, and water infrastructure.
- Ferguson Enterprises Inc (FERG) announced the acquisition of Flow Works, a leading industrial distributor, expected to be immediately accretive to adjusted EPS and expand its total addressable market from $340 billion to $400 billion.
- The company raised its full-year guidance for net sales growth to mid-single digits and increased the lower end of its operating margin guidance to 9.5%-9.8%, reflecting strong year-to-date results.
- Ferguson Enterprises Inc (FERG) maintained a strong balance sheet with net debt-to-EBITDA of 1.3 times, returned $375 million to shareholders via dividends and buybacks, and completed five acquisitions in the quarter to enhance capabilities in HVAC, waterworks, and industrial.
- Gross margin declined 20 basis points year-over-year to 31%, impacted by tough comparisons and timing of supplier price increases, with expectations of further compression in Q3.
- Residential markets remain challenged, with Ferguson Home declining 1% and residential trade plumbing flat, despite a slight overall improvement in the residential segment.
- Operating cash flow decreased by approximately $400 million in the first half due to working capital investments in HVAC and large capital projects, as well as timing of tax payments.
- Inflation decelerated to low single digits, with PVC still in double-digit deflation, creating uncertainty in pricing and margin sustainability.
- The Flow Works acquisition will increase leverage to approximately 1.8 times net debt-to-EBITDA, potentially pausing share repurchases until leverage returns to the lower end of the target range.
Good morning, ladies and gentlemen. My name is Elliot, and I will be your conference operator today. At this time, I would like to welcome you to Ferguson's second quarter results for the period ended June 30, 2026 conference call. (Operator Instructions)
I would now like to turn the call over to Pete Kennedy, Ferguson's Vice President of Investor Relations and Sustainability. You may begin your conference call.
Good morning, everyone, and welcome to Ferguson's quarterly earnings conference call and webcast. Hopefully, you've had a chance to review the earnings announcement we issued this morning. The announcement is available in the Investors section of our corporate website and on our SEC filings web page.
A recording of this call will be made available later today. I want to remind everyone that some of our statements today may be forward-looking and are subject to certain risks and uncertainties that could cause actual results to differ materially from those
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