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]

Core Insights - The article discusses the earnings call insights compiled from various transcripts and content available on the Seeking Alpha website, emphasizing the limitations of AI-generated insights [1] Group 1 - The earnings call insights are based on transcripts and other content from Seeking Alpha, highlighting the reliance on AI tools for generating these insights [1] - There is a disclaimer regarding the accuracy, completeness, and timeliness of the earnings call insights, indicating that they have not been curated or reviewed by editors [1] - The insights are intended for informational purposes only and do not account for individual financial situations or objectives [1]

Financial Data and Key Metrics Changes - Sales for the fourth quarter reached $8.5 billion, a 6.9% increase year-over-year, driven by organic growth of 5.8% and acquisition growth of 1.1% [3][4][15] - Gross margin improved to 31.7%, up 70 basis points from the previous year [4][15] - Operating profit for the quarter was $972 million, reflecting a 13.4% increase year-over-year, with an operating margin of 11.4% [4][16] - Diluted EPS increased by 16.8% to $3.48 [4][16] - Full-year revenue was $30.8 billion, a 3.8% increase from the previous year, with operating profit of $2.84 billion, up 0.6% [8][9] Performance by Business Lines - HVAC revenue decreased slightly due to market conditions, but overall HVAC revenue for the year increased by 8% [10][11] - Waterworks revenue grew by 10% for the fiscal year, driven by diversification efforts [12] - Commercial mechanical revenue increased by 21%, while waterworks revenues rose by 15% [8][12] - Residential trade plumbing revenues decreased by 2% due to headwinds in new construction and ongoing PVC price deflation [7][10] Performance by Markets - In the U.S. market, net sales increased by 7.1%, with non-residential revenue growth of approximately 15% [6][16] - Residential end markets remained subdued, with flat revenue due to weakened new construction starts and soft demand in repair, maintenance, and improvement [6][10] - Canada saw net sales increase by 4.8%, with a 4.9% contribution from acquisitions [16] Company Strategy and Industry Competition - The company is focused on HVAC expansion, waterworks diversification, and large capital projects as key growth areas [11][23] - The merger of residential building and remodel with residential digital commerce into Ferguson Home aims to enhance customer experience and drive growth [8][14] - The company continues to consolidate fragmented markets through acquisitions, completing nine acquisitions in the fiscal year [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market conditions despite current uncertainties, leveraging multi-year tailwinds in both residential and non-residential markets [5][23] - The company anticipates mid-single-digit revenue growth for calendar year 2025, with an operating margin range of 9.2% to 9.6% [22] - Management acknowledged challenges in the residential market, particularly in new construction and repair, maintenance, and improvement [28][81] Other Important Information - The company plans to change its fiscal year-end from July 31 to December 31, allowing for better focus during peak seasons [20][21] - The board declared a quarterly dividend of $0.83 per share, reflecting a 5% increase over the prior year [18] Q&A Session Summary Question: Growth and end market outlook - Analyst inquired about growth assumptions and market trends, particularly regarding residential and non-residential sectors [26] - Management noted that while residential markets are expected to remain weak, non-residential markets are showing resilience, particularly in large capital projects [27][28] Question: Non-residential bidding activity - Analyst asked for details on bidding activity and momentum in non-residential markets [41] - Management confirmed healthy backlogs across various segments, including commercial mechanical and waterworks, with strong bidding activity [42][44] Question: Pricing and margin expectations - Analyst sought clarification on pricing trends and gross margin expectations [45] - Management indicated that while pricing has improved, commodity prices remain volatile, and gross margins are expected to normalize [46][49] Question: Residential remodel demand - Analyst questioned the demand trends in the residential remodel market [71] - Management acknowledged continued pressure in the remodel market but noted positive growth in the higher-end segment [72] Question: New residential construction market - Analyst asked about trends in new residential construction and expectations for the second half of the year [80] - Management anticipated a slight decline in new residential construction activity but did not foresee a dramatic drop [81]

Financial Data and Key Metrics Changes - Sales for the fourth quarter reached $8.5 billion, a 6.9% increase year-over-year, driven by organic growth of 5.8% and acquisition growth of 1.1% [3][4] - Gross margin improved to 31.7%, up 70 basis points from the previous year [3][4] - Operating profit for the quarter was $972 million, reflecting a 13.4% increase year-over-year [4][16] - Diluted EPS rose 16.8% to $3.48 compared to the prior year [4][16] - For the full year, revenue was $30.8 billion, a 3.8% increase, with operating profit of $2.84 billion, up 0.6% [7][8] Performance by Business Lines - HVAC revenue slightly declined due to market conditions, while commercial mechanical revenue grew 21% and waterworks revenue increased 15% [6][7] - Ferguson Home, a unified brand for residential building and remodel, saw a revenue growth of 3% in the fourth quarter [7][14] - The industrial, fire and fabrication, and facility supply customer groups delivered a combined net sales growth of 5% [7] Performance by Markets - U.S. net sales increased by 7.1%, with non-residential revenue growth of approximately 15% [5][16] - Residential end markets remained subdued, with flat revenue due to weakened new construction starts and soft demand in repair, maintenance, and improvement [5][6] - Canada saw net sales growth of 4.8%, with a 0.3% organic growth and a 4.9% contribution from acquisitions [16] Company Strategy and Industry Competition - The company is focused on HVAC expansion, waterworks diversification, and large capital projects, which are key growth areas [4][10] - The multi-customer group approach is emphasized as a competitive advantage in managing complex projects [12][35] - The company completed four acquisitions in the fourth quarter, enhancing its capabilities in HVAC and waterworks [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market conditions despite current uncertainties, leveraging multi-year tailwinds in both residential and non-residential markets [5][24] - The outlook for calendar year 2025 anticipates mid-single-digit revenue growth, with operating margins expected to improve slightly [23][24] - Management acknowledged challenges in the residential market but highlighted strong performance in non-residential sectors, particularly large capital projects [30][80] Other Important Information - The company plans to change its fiscal year-end from July 31 to December 31, allowing for better focus during peak seasons [21][22] - A quarterly dividend of $0.83 per share was declared, representing a 5% increase over the prior year [18] Q&A Session Summary Question: Outlook on growth and end market dynamics - Management noted that while residential markets are expected to be down low to mid-single digits, non-residential markets showed resilience with a 7% growth in Q4 [29][30] Question: Details on large capital projects and bidding activity - Management confirmed strong bidding activity across various sectors, including data centers and biotechnology, with healthy backlogs in commercial mechanical and waterworks [41][42] Question: Pricing and margin expectations - Management indicated that pricing is expected to stabilize with modest inflation anticipated, while gross margins are expected to normalize around 30% to 31% [44][47] Question: Insights on residential remodel market - Management acknowledged continued pressure in the remodel market but noted that higher-end projects are performing better, with Ferguson Home showing a 3% growth [71] Question: Performance in the industrial market - Management explained that the industrial market is experiencing slower growth due to commodity deflation but remains optimistic about market share gains [81]