Core Investment Overview - NIA Impact Advisors initiated a position in Core & Main by acquiring 66,437 shares valued at approximately $3.58 million after the stock dropped nearly 20% in a single day during Q3 2025 [1][2] - This new position represents 1.2% of NIA's total reportable U.S. equity holdings of $307.72 million as of September 30, 2025 [3] Company Performance Metrics - As of December 10, 2025, Core & Main's stock price was $55.19, reflecting a 3% increase over the past year, but underperforming the S&P 500 by 10 percentage points [3] - Core & Main has a market capitalization of $10.52 billion, with trailing twelve months (TTM) revenue of $7.74 billion and net income of $431 million [4][5] Industry Position and Strategy - Core & Main is a leading distributor of water, wastewater, and fire protection infrastructure products in the U.S., serving municipalities, private water companies, and contractors [5][7] - The company operates in a highly fragmented industry, with the top two players controlling one-third of the market, presenting acquisition opportunities [10] - Core & Main's strategic focus on essential utility markets and specialized services supports a resilient business model [8] Financial Metrics and Valuation - The company trades at a forward price-to-earnings ratio of 24 and an enterprise value to EBITDA multiple of 13, indicating a valuation that is cheaper than the broader market [3][12] - Core & Main's return on invested capital has consistently been above 10%, showcasing its effectiveness as a profitable acquirer and integrator of businesses [11]

Financial Data and Key Metrics Changes - The company reported nearly 7% net sales growth in Q2 2025, reaching $2.1 billion, with approximately 5% organic growth [3][5] - Gross margin improved to 26.8%, up 10 basis points sequentially and 40 basis points year-over-year [4][6] - Adjusted diluted earnings per share increased approximately 13% to $0.87 compared to $0.77 in the prior year [6] - SG&A expenses rose 13% to $302 million, with half of the increase attributed to acquisitions and one-time costs [6][42] Business Line Data and Key Metrics Changes - Sales of meter products declined year-over-year due to project delays, but a growing backlog is expected to support strong sales growth in the second half [4][47] - The municipal market remains strong, with healthy demand driven by funding and infrastructure projects [3][9] - Residential lot development slowed, particularly in the Sun Belt markets, leading to a revised outlook for residential demand [3][4] Market Data and Key Metrics Changes - Municipal end market volumes are expected to grow in the low single digits, while non-residential volumes are projected to be roughly flat [6] - Residential lot development is anticipated to decline in the low double digits for the full year [6][18] Company Strategy and Development Direction - The company is focusing on organic growth and complementary acquisitions, with recent acquisition of Canada Waterworks enhancing its position in the Canadian market [4][5] - Investments are being made in new locations and technology solutions to improve efficiency and support long-term margin expansion [4][6] - The company aims to capture growth opportunities in aging U.S. water infrastructure and is confident in its long-term growth and profitability prospects [4][6] Management's Comments on Operating Environment and Future Outlook - Management noted that higher interest rates and affordability concerns are impacting residential demand, which is expected to remain soft [3][4] - The company is implementing targeted cost-out actions to improve productivity and operating margins, with some benefits expected in the second half of the year [4][6] - Management remains optimistic about the long-term demand characteristics across its end markets and the potential for above-market growth [6][18] Other Important Information - The company generated $34 million of operating cash flow in the quarter and returned $8 million to shareholders through share repurchases [6] - Total liquidity was reported at $1.1 billion, primarily from availability under the ABL credit facility [6] Q&A Session Summary Question: What are the factors affecting the revenue guidance? - Management indicated that the decline in residential outlook is the main driver, but there are positive contributions from municipal markets and successful sales initiatives [8][9] Question: What are the growth opportunities in the evolving water market? - Management expressed optimism about the water market, highlighting increased demand from data centers and aging infrastructure projects [10][11] Question: How is the company addressing higher operating expenses? - Management acknowledged stubborn inflation and higher costs but emphasized ongoing cost-out actions and targeted investments for growth [15][16] Question: What is the outlook for residential demand? - Management noted that residential demand weakened throughout Q2 and is expected to remain low double digits for the rest of the year [17][18] Question: How does the company view the competitive environment? - Management stated that the competitive environment remains typical, with no significant changes, and emphasized the stability Core & Main provides to customers [59][60]