Ferguson plc (FERG) Q1 2026 Earnings Call Transcript
Ferguson plc distributes plumbing and heating products in the United States and Canada. It offers plumbing and heating solutions to customers in the residential, commercial, civil/infrastructure, and industrial end markets. The company also provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, fabrication, and others, as well as heating, ventilation, and air conditioning products under the Ferguson brand name. In addition, it supplies pipes, valves, fittings, plumbing supplies, water and wastewater treatment products, and refrigeration products under Wolseley brand name. Further, the company provides after-sales support comprising warranty, credit, project-based billing, returns, maintenance, repair, and operations support. It sells its products through wholesale distributors, supply houses, retail enterprises, and online. Ferguson plc was founded in 1887 and is headquartered in Wokingham, the United Kingdom.
Ferguson posted 2025 results with solid profit growth and margin expansion, reinforced by a diversified, acquisition-driven growth strategy and a cautious 2026 outlook anchored in above-market, structural tailwinds.
⭐ Key Highlights
✔Positive Signals
- Resilient full-year revenue growth (5%) and expanding gross margin (31% to 30.6% year-end) driven by disciplined execution.
- Strong operating profit growth (11.3%) and margin expansion to 9.6% in 2025.
- Robust cash flow generation ($2.2B operating cash flow) supporting growth investments.
- Significant capital returns to shareholders ($1.6B) and a healthy 31% ROIC.
- Healthy M&A pipeline with a track record of ~50 acquisitions over 5 years and expectation of 2026 to be more active.
✖Negative Signals
- Residential markets remained weak, with mixed performance across end markets and weather headwinds early in 2026.
- 2026 gross margin is expected to face some compression versus 2025, requiring SG&A leverage to offset.
- Guidance implies mid-to-low single-digit top-line growth with structural headwinds in residential and HVAC segments.
- Near-term volatility from macro/household housing cycle could impact volumes, especially in residential channels.
- Reliance on acquisitions to meet growth targets introduces integration and timing risks.
📊Financial Results
- Full-year net sales: $31.3B, +5% YoY.
- Operating profit: $3.0B, +11.3% YoY, 9.6% operating margin (up 50 bps).
- Diluted EPS: $10.58, +13.4% YoY.
- Free cash flow: $1.9B (vs $1.8B prior year).
- Open orders/backlog: strong; 2025 cash flow used for $276M in M&A and $902M in share repurchases.
🔮Future Guidance
- 2026 revenue growth: low-to-mid single digits; organic growth is the primary driver with minimal acquisitions in the plan.
- 2026 operating margin: 9.4%–9.8% (vs 9.6% in 2025), with SG&A leverage dependent on market strength.
- Capex: $350M–$400M; effective tax rate around 26%; interest expense about $200M.
- Longer-term growth algorithm targets 6%–11% revenue growth with 11%–14% flow-through and 10–30 bps annual margin expansion.
💡Interesting Insights
- Large capital projects and data center/industrial megaprojects are becoming a core driver; Ferguson is coordinating across four specialized customer groups (waterworks, HVAC/plumbing, fire & fabrication, and industrial) to deliver end-to-end project management and off-site fabrication, which differentiates its competitive edge.
Detailed Analysis
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