Core Insights - Ferguson Enterprises Inc. reported better-than-expected fiscal results for the quarter ended October 31, 2025, with sales rising 5.1% year over year to $8.169 billion, surpassing the $8.031 billion estimate [1] - GAAP diluted EPS increased by 23.9% to $2.90, while adjusted EPS rose by 15.9% to $2.84, exceeding the $2.57 estimate [1] Financial Performance - Sales growth of 5.1% year over year to $8.169 billion [1] - GAAP diluted EPS increased by 23.9% to $2.90 [1] - Adjusted EPS rose by 15.9% to $2.84, topping the estimate of $2.57 [1] Management Guidance - CEO Kevin Murphy expressed confidence in delivering strong performance for calendar year 2025, with updated guidance reflecting net sales growth of approximately 5% and an adjusted operating margin of 9.4% to 9.6% [2] - Previous guidance indicated mid-single-digit sales growth and an adjusted operating margin of 9.2% to 9.6% [2] Stock Performance - Ferguson Enterprises shares rose by 1.1% to trade at $228.44 following the earnings announcement [3] - Analysts adjusted their price targets post-earnings, with Baird maintaining an Outperform rating and raising the target from $262 to $265, Barclays maintaining an Overweight rating and lowering the target from $273 to $267, and UBS maintaining a Neutral rating while lowering the target from $225 to $220 [4]

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Core Insights - Ferguson plc is a leading distributor of plumbing and heating products, primarily operating in North America and competing with major players like Home Depot and Lowe's [1] Financial Performance - The company reported earnings per share (EPS) of $2.90, exceeding the estimated $2.77, reflecting a 13.1% increase from the previous year [2][6] - Revenue reached approximately $8.17 billion, surpassing the estimated $7.36 billion, marking a 5.3% year-over-year growth [2][6] Growth Drivers - Ferguson's success is attributed to strong non-residential demand and strategic acquisitions, particularly in the U.S. waterworks and infrastructure sectors, as well as in Canada [3] - The company achieved double-digit growth in non-residential revenue despite challenges such as rising operating costs and currency headwinds [3] Market Valuation - The company's price-to-earnings (P/E) ratio is approximately 22.8, indicating that investors are willing to pay a premium for its earnings [4][6] - Ferguson's price-to-sales ratio is about 1.43, and its enterprise value to sales ratio is around 1.59, reflecting strong market valuation [4] Financial Metrics - The enterprise value to operating cash flow ratio is approximately 25.79, and the earnings yield is about 4.39%, providing insight into cash flow generation and return on investment [5] - The debt-to-equity ratio is approximately 0.92, indicating a balanced leverage level, while the current ratio is about 1.88, suggesting a solid ability to cover short-term liabilities with short-term assets [5]

Core Viewpoint - Ferguson Enterprises Inc. reported first-quarter earnings that fell short of expectations, leading to a decline in share price and an update to full-year guidance [1] Financial Performance - Earnings per share (EPS) for the quarter was $2.84, below the consensus estimate of $2.97 [1] - Revenue increased by 5.1% year-over-year to $8.2 billion, slightly exceeding the estimate of $8.09 billion [1] - The operating margin was reported at 9.9%, reflecting an 80-basis-point adjusted improvement [2] - Gross margin rose to 30.7%, an increase of 60 basis points from the previous year [2] Future Guidance - For the calendar year 2025, the company expects net sales to grow around 5%, an adjustment from earlier guidance of mid-single-digit expansion [3] - Projected adjusted operating margin is now between 9.4% and 9.6%, compared to the previous range of 9.2% to 9.6% [3] - Capital spending is estimated at approximately $350 million, refining the earlier outlook of $300 million to $350 million [3]

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Financial Data and Key Metrics Changes - Sales reached $8.2 billion, a 5% increase year-over-year, driven by organic growth of 4% and acquisition growth of 1% [4][10] - Gross margin improved to 30.7%, up 60 basis points from the previous year [4][11] - Operating profit grew by 14% to $808 million, with an operating margin of 9.9%, reflecting an 80 basis points expansion [4][11] - Diluted earnings per share increased nearly 16% to $2.84 [5][11] - The company maintained a strong balance sheet with a net debt to EBITDA ratio of 1.1 times [6][11] Performance by Business Lines - U.S. net sales grew by 5.3%, with organic growth of 4.4% and a 0.9% contribution from acquisitions [11] - Waterworks revenues increased by 14%, driven by large capital projects and public works [7] - Ferguson Home experienced a 1% growth despite challenges in the new construction market [8] - Residential trade plumbing declined by 4%, while HVAC revenues fell by 6% due to market pressures [8] - Commercial mechanical customer group grew by 21%, supported by large capital projects [8] Market Data and Key Metrics Changes - Residential end markets faced challenges, with revenue down 1% in the quarter [7] - Non-residential end markets performed better, with revenue up 12% [7] - In Canada, net sales increased by 2.2%, with organic growth of 0.7% and a 4.6% contribution from acquisitions [12] Company Strategy and Development Direction - The company aims to leverage multi-year tailwinds in both residential and non-residential markets [6][18] - Continued focus on acquisitions to consolidate fragmented markets, with the recent acquisition of Moore Supply Company enhancing HVAC presence [14][18] - Emphasis on delivering end-to-end solutions and maximizing contractor productivity through a multi-customer group approach [9][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market performance despite current challenges [6][18] - The company expects approximately 5% revenue growth for the year and an operating margin range of 9.4% to 9.6% [15][16] - Anticipated modest price increases in line with traditional market behavior as the company enters 2026 [36] Other Important Information - The company returned $372 million to shareholders through share repurchases and dividends [5][14] - Investments in organic growth through capital expenditures totaled $118 million for the quarter [13][14] Q&A Session Summary Question: Data center and large capital projects growth - Management estimates large capital projects account for mid- to high-single-digits percentage of total revenue, with data centers making up over 50% of that [20][22] Question: Outlook for November and early 2026 - Current growth for October and November is about 3%, with expectations for continued pressure in new residential and HVAC markets [25][27] Question: Pricing trends and commodity outlook - Inflation was approximately 3%, with expectations for modest price increases entering 2026 [36][37] Question: Impact of pricing on margins - Operating margins are expected to progress modestly, with guidance to be provided in February [42][44] Question: Revenue from major projects - Revenue from large capital projects typically represents 2% to 4% of the construction value [68][69]

Financial Data and Key Metrics Changes - Sales reached $8.2 billion, a 5% increase year-over-year, driven by organic growth of 4% and acquisition growth of 1% [4][10] - Gross margin improved to 30.7%, up 60 basis points from the previous year [4][11] - Operating profit was $808 million, reflecting a 14% increase compared to last year [4][11] - Diluted earnings per share rose nearly 16% to $2.84 [5][11] - The company maintained a strong balance sheet with a net debt to EBITDA ratio of 1.1 times [6][11] Performance by Business Lines - Residential end markets, accounting for about half of U.S. revenue, saw a 1% decline due to weak housing starts and soft repair activity [7] - Non-residential revenue increased by 12%, driven by large capital projects [7] - Waterworks revenues grew by 14%, supported by strength in large capital projects and public works [7][8] - Ferguson Home experienced a 1% growth despite challenges in the new construction market [8] - Commercial mechanical customer group grew by 21%, benefiting from large capital projects [8] Market Data and Key Metrics Changes - U.S. net sales grew by 5.3%, with organic growth of 4.4% [11] - Canadian net sales increased by 2.2%, with organic growth of 0.7% [12] - Price inflation was approximately 3%, with finished goods pricing showing modest improvement [10][36] Company Strategy and Development Direction - The company aims to leverage multi-year tailwinds in both residential and non-residential markets [6][18] - Continued focus on acquisitions to consolidate fragmented markets, with the recent acquisition of Moore Supply Company enhancing HVAC presence [5][14] - Emphasis on delivering end-to-end solutions and maximizing contractor productivity through a multi-customer group approach [9][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market performance despite current challenges [6][18] - The company expects approximately 5% revenue growth for the year and an operating margin range of 9.4%-9.6% [15][16] - Anticipated modest price increases entering 2026, with a more normalized pricing environment expected [36] Other Important Information - The company returned $372 million to shareholders through share repurchases and dividends [5][14] - Continued investment in organic growth through capital expenditures, totaling $118 million for the quarter [13][14] Q&A Session Summary Question: Data center and large capital projects growth - Management estimates large capital projects account for mid to high single digits of total revenue, with data centers making up over 50% of that [20][22] Question: Outlook for November and early 2026 - Current growth for October to early December is about 3%, with expectations for continued pressure in new residential and HVAC markets [25][27] Question: Pricing trends and commodity outlook - Inflation was about 3%, with expectations for modest price increases entering 2026 [36] Question: Impact of investments in trainees and HVAC expansion - The trainee program continues to add 250-300 trainees annually, and HVAC counter conversions have reached 650 [55][56] Question: Gross margin trends for the fourth quarter - Expected gross margin range is between 30% and 31% as the year ends [66]

Financial Data and Key Metrics Changes - Sales for the quarter reached $8.2 billion, representing a 5% increase year-over-year, driven by organic growth of 4% and acquisition growth of 1% [5][10] - Gross margin improved to 30.7%, an increase of 60 basis points compared to the previous year [6][11] - Operating profit grew by 14% to $808 million, with an operating margin of 9.9%, reflecting an 80 basis points expansion [6][11] - Diluted earnings per share rose nearly 16% to $2.84 [6][11] - The company maintained a strong balance sheet with a net debt to EBITDA ratio of 1.1 times [6][11] Performance by Business Lines - Residential end markets, which account for about half of U.S. revenue, faced challenges with a 1% decline in revenue [7] - Non-residential end markets performed better, with revenue increasing by 12% due to strength in large capital projects [7] - Waterworks revenues grew by 14%, driven by large capital projects and public works [8] - Ferguson Home experienced a 1% growth, while residential trade plumbing and HVAC declined by 4% and 6% respectively [9] Market Data and Key Metrics Changes - U.S. net sales increased by 5.3%, with organic growth of 4.4% and a 0.9% contribution from acquisitions [11] - Canadian net sales were up 2.2%, with organic growth of 0.7% and a 4.6% contribution from acquisitions, but faced a 1.6% adverse impact from foreign exchange [12] Company Strategy and Development Direction - The company is focused on leveraging multi-year tailwinds in both residential and non-residential markets, particularly in waterworks and HVAC sectors [6][17] - Ferguson aims to consolidate fragmented markets through acquisitions, with the recent acquisition of Moore Supply Company enhancing its HVAC presence [13][17] - The company is committed to returning surplus capital to shareholders while maintaining flexibility for strategic opportunities [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market performance despite current challenges, particularly in residential housing starts and HVAC markets [6][17] - The company anticipates approximately 5% revenue growth for the year and an operating margin range of 9.4% to 9.6% [15][17] - Management noted that the early part of 2026 is expected to see similar market conditions as the end of 2025, with growth rates around 3% [25][26] Other Important Information - The company declared a 7% increase in its quarterly dividend to $0.89 per share [6][13] - Capital expenditures for the quarter were $118 million, contributing to a free cash flow of $325 million [13] Q&A Session Summary Question: On data center and large capital projects - Management estimates that large capital projects account for mid- to high-single-digits percentage of total revenue, with data centers making up over 50% of that [20] Question: Outlook for November and early 2026 - Management indicated that Q4 growth rates are expected to be around 3%, consistent with prior expectations [25][26] Question: HVAC market conditions - The HVAC market is currently under pressure, with challenges expected to persist, but management remains optimistic about long-term growth [43] Question: SG&A investments and impacts - The company continues to invest in trainees and HVAC counter expansions, with positive impacts on performance despite a challenging market [46][50]

Financial Performance - Net sales reached $8.2 billion, a 5.1% increase compared to 2024, driven by market outperformance with organic growth of 4.2% and acquisition growth of 1.0%[6] - Adjusted operating profit increased by 14.4% to $808 million, with an adjusted operating margin of 9.9%, up 80 bps[6] - Adjusted diluted EPS increased by 15.9% to $2.84[6] - Adjusted EBITDA increased by 14.4% to $867 million[13] Capital Allocation - Capital deployment totaled $511 million, including a quarterly dividend of $0.89 per share, a 7% increase year-over-year[6] - $372 million was returned to shareholders through share repurchases and dividends[6] - The company completed one acquisition during the quarter[6] - The company invested $118 million in capital expenditures[25] - The company has an outstanding balance of approximately $800 million in share repurchase program[26] Segment Performance (US) - US net sales increased by 5.3%[8] - Residential sales declined by 1%, while non-residential sales increased by 12%[8] - Waterworks customer group sales increased by 14%, while Commercial/Mechanical increased by 21%[10] Guidance - The company updated its calendar 2025 net sales growth guidance to approximately 5%[27] - The company updated its calendar 2025 adjusted operating margin guidance to 9.4%-9.6%[27]

Core Insights - Ferguson Enterprises Inc. reported strong financial results, achieving a net sales increase of 5.1% year-over-year, driven by organic revenue growth of 4.2% and acquisition growth of 1.0% [4][11] - The company is optimistic about its performance in calendar year 2025, expecting mid-single digit growth in net sales and maintaining a strong balance sheet while returning capital to shareholders [2][12] - Non-residential revenue grew by 12% during the quarter, significantly outperforming the residential market, which faced challenges [8][7] Financial Performance - For the quarter ended October 31, 2025, net sales reached $8.2 billion, up from $7.8 billion in the same period last year [4][37] - Gross margin improved to 30.7%, a 60 basis point increase from the previous year, while operating profit rose to $771 million, reflecting a 15.9% increase [5][37] - Diluted earnings per share increased by 23.9% to $2.90, compared to $2.34 in the prior year [6][37] Segment Analysis - In the U.S. market, net sales increased by 5.3%, with organic revenue growth of 4.4% and a 0.9% contribution from acquisitions [7][11] - The residential market, which constitutes about half of U.S. revenue, showed a decline of 1%, while non-residential markets saw a 12% increase, supported by large capital project activities [8][7] - In Canada, net sales grew by 2.2%, with organic growth of 0.7% and a 4.6% contribution from acquisitions, although the market remained subdued [10][11] Guidance and Future Outlook - The company updated its guidance for calendar year 2025, projecting mid-single digit growth in net sales and an adjusted operating margin of 9.4% to 9.6% [2][12] - Interest expenses are expected to be between $180 million and $200 million, with capital expenditures projected at approximately $300 million to $350 million [2][12] Capital Management - Ferguson completed share repurchases totaling $208 million during the quarter and has approximately $0.8 billion remaining under its current share repurchase program [12][13] - The company declared a quarterly dividend of $0.89, representing a 7% increase from the previous year, to be paid on February 27, 2026 [13][12] Financial Position - As of October 31, 2025, the net debt to adjusted EBITDA ratio was 1.1x, indicating a strong financial leverage position [12][26] - Total assets were reported at $17.7 billion, with total liabilities of $11.6 billion, resulting in stockholders' equity of $6.1 billion [38][37]