Ferguson plc(US:FERG)2025-12-09 14:32Financial 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]