FERG Q1 2026 Earnings Call Summary | Stock Taper
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FERG

FERG — Ferguson plc

NYSE

Q1 2026 Earnings Call Summary

May 5, 2026

Ferguson (FERG) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

  • Sales: $8.2 billion, up 5% year-over-year (YoY), with organic growth of 4% and acquisition growth of 1%.
  • Gross Margin: 30.7%, an increase of 60 basis points YoY.
  • Operating Profit: $808 million, a 14% increase YoY, resulting in a 9.9% operating margin (up 80 basis points).
  • Diluted Earnings Per Share (EPS): $2.84, up nearly 16% YoY.
  • Capital Deployment: $511 million in capital expenditures (CapEx) and $372 million returned to shareholders via dividends and share repurchases.
  • Balance Sheet: Strong with a net debt to EBITDA ratio of 1.1 times.

2. Strategic Updates and Business Highlights

  • Acquisition: Completed the acquisition of Moore Supply Company, enhancing HVAC presence in the Chicago area.
  • Dividend Increase: Declared a 7% increase in quarterly dividend to $0.89 per share.
  • Market Performance:
    • U.S. net sales grew by 5.3%, with residential markets facing challenges, down 1%.
    • Nonresidential markets saw significant growth, with revenue up 12%.
    • Waterworks revenues increased by 14%, driven by large capital projects.
  • Investment Focus: Continued investment in training, HVAC counter expansion, and technology to support growth.

3. Forward Guidance and Outlook

  • 2025 Guidance: Expecting approximately 5% revenue growth and an operating margin between 9.4% to 9.6%.
  • Interest Expense: Estimated at $190 million for the year.
  • CapEx: Projected at approximately $350 million.
  • Market Confidence: Despite near-term uncertainties, management remains optimistic about medium-term market conditions, particularly in nonresidential sectors.

4. Challenges and Points of Concern

  • Residential Market Weakness: Continued decline in new residential housing starts and repair, maintenance, and improvement (RMI) work.
  • HVAC Sector Pressure: HVAC revenues down 6% due to weak new residential construction and a pressured consumer environment.
  • Potential Lumpiness in Large Projects: While large capital projects are a growth area, the gestation period for these projects can lead to revenue variability.
  • Foreign Exchange Impact: Adverse effects from foreign exchange rates noted in Canadian operations.

5. Notable Q&A Insights

  • Large Capital Projects: Represent mid to high single digits of total revenue, with data centers comprising over 50% of that segment. The pipeline is growing, but revenue may experience lumpiness due to project timelines.
  • Market Conditions: November and early December showed a 3% growth rate, consistent with expectations of continued pressure in residential and HVAC markets.
  • Pricing Trends: Inflation was around 3%, with expectations of modest price increases entering 2026. Commodity prices are mixed, with some categories experiencing deflation.
  • Investment in Trainees: Continued commitment to training programs, adding 250-300 trainees, which is seen as foundational for long-term success.

Overall, Ferguson reported solid financial performance amid challenging market conditions, with strategic investments aimed at sustaining growth and addressing competitive pressures. The outlook remains cautiously optimistic, particularly in nonresidential markets, despite ongoing headwinds in residential sectors.

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