Ferguson Raises Sales Outlook Driven by Nonresidential Demand

Ferguson Enterprises Inc. (NYSE:FERG) is in focus Monday after the company reported better-than-expected third-quarter results and raised its full-year revenue outlook.

Ferguson reported adjusted earnings of $3.43 per share, exceeding the $3.30 analyst estimate.

Sales rose 9.5% year over year to $9.03 billion, above the $8.74 billion consensus estimate.

Earnings Snapshot

The sales growth was driven by organic growth of 7.0% and acquisition growth of 2.7%, partially offset by 0.2% from divestments in Canada.

Price inflation was low to mid single digits.

Gross margin fell 40 basis points to 30.9%, while adjusted operating margin remained flat at 10.7%.

CEO Kevin Murphy said the company delivered strong third quarter results despite mixed market conditions.

Murphy highlighted Ferguson’s 11 acquisitions during the year and reaffirmed its commitment to organic investments and strategic acquisitions to expand its value-added solutions and geographic footprint.

Performance Led By U.S. Business Amid Strong Nonresidential Demand

Ferguson’s U.S. net sales rose 10.2%, including 7.4% organic growth and a 2.8% contribution from acquisitions.

Residential revenue increased 6%, despite the headwinds from weak new construction activity and continued softness in the repair, maintenance and improvement work market.

Nonresidential revenue climbed 15%, supported by market share gains, healthy large-project activity, rising open orders and strong bidding activity.

Adjusted operating profit increased 8.8% to $952 million.

Ferguson completed three acquisitions during the quarter across its Industrial and Waterworks businesses. The deals expanded its geographic reach and specialized capabilities.

After the quarter ended, Ferguson acquired Canyon Systems, establishing a process solutions platform for water and wastewater treatment across six Western states.

In Canada, sales fell 4.5%. Organic growth of 0.6% was more than offset by a 3.2% impact from a non-core divestiture and a 1.9% headwind from foreign exchange rates.

Market conditions remained challenging, particularly in residential, while adjusted operating profit increased by $1 million to $23 million.

Capital Return and Balance Sheet

Ferguson declared a quarterly dividend of 89 cents per share, payable Jan. 8 to shareholders of record Nov. 20.

During the quarter, the company deployed $108 million in capital expenditure and invested $1.7 billion in acquisitions, which included FloWorks. Net debt to adjusted EBITDA at Sept. 30 was 1.7 times.

The company temporarily paused its share repurchase program in connection with the FloWorks acquisition and expects to resume buybacks as leverage approaches the lower end of its targeted 1–2 times net debt-to-adjusted EBITDA range.

During the quarter, it priced public offerings totaling $1.2 billion of senior unsecured notes and also entered into an unsecured $900 million term loan maturing in 2029. The financing proceeds were used to fund the FloWorks acquisition, with the remainder earmarked for general corporate purposes.

Ferguson held cash and cash equivalents of $476 million at the quarter end.

Outlook Raised

Management highlighted long-term growth opportunities across water infrastructure, large capital projects, climate and comfort solutions, and aging and underbuilt housing stock.

Large capital project activity remained strong, with increasing open order volumes and robust bidding activity, supporting management’s confidence in continued non-residential growth.

Ferguson raised its fiscal 2026 net sales growth forecast to about 7% from its previous forecast for mid-single-digit growth.

The company also raised the lower end of its adjusted operating margin outlook to 9.6%-9.8% from 9.5%-9.8%.

Ferguson increased its capital expenditure forecast to about $425 million from $375 million-$425 million.

The updated outlook reflects the company’s latest operating performance and includes the contribution from FloWorks, acquired on Aug. 31.

FERG Price Action: Ferguson Enterprises shares closed at $233.70 on Friday and had not traded in Monday’s premarket session at the time of publication, according to Benzinga Pro data.

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