8-K: Ferguson Delivers Strong Q1, Boosts 2025 Outlook

Ferguson Enterprises Inc. reported strong financial results for the quarter ended October 31, 2025, with sales up 5.1% and diluted EPS up 23.9%, leading to an updated and improved calendar year 2025 guidance.

Summary

• Net sales reached $8.2 billion, marking a 5.1% increase, driven by 4.2% organic growth and 1.0% from acquisitions, partially offset by adverse foreign exchange rates and a divestment.
• Gross margin improved by 60 basis points to 30.7% compared to the prior year.
• Reported operating profit was $771 million (9.4% operating margin), up 15.9%, while adjusted operating profit was $808 million (9.9% adjusted operating margin), up 14.4%.
• Diluted earnings per share increased by 23.9% to $2.90 (reported) and 15.9% to $2.84 (adjusted).
• A quarterly dividend of $0.89 was declared, representing a 7% increase over the prior year.
• One acquisition, Moore Supply Company, an HVAC equipment and supplies business, was completed during the quarter.
• Share repurchases totaled $208 million during the quarter, with approximately $0.8 billion remaining under the current program.
• The balance sheet remains strong with a net debt to adjusted EBITDA ratio of 1.1x.
• US business net sales increased by 5.3%, with non-residential revenue growing 12% and residential revenue declining 1%.
• Canadian net sales increased by 2.2%, but adjusted operating profit for Canada decreased by 30.4% due to subdued markets.
• Calendar Year 2025 guidance was updated, with net sales growth now expected at approximately 5% (previously mid-single digit) and adjusted operating margin at 9.4% 9.6% (previously 9.2% 9.6%).
• Interest expense guidance was updated to approximately $190 million (from $180 $200 million), and capital expenditures to approximately $350 million (from $300 $350 million).

Sentiment

Score: 8

Explanation: The company reported strong financial performance with significant increases in sales, margins, and EPS, outperforming challenging residential markets. The updated calendar year guidance is also improved, reflecting confidence in future performance and effective execution of strategy. The strong balance sheet and capital return to shareholders further contribute to a positive outlook.

Positives

• Net sales increased by 5.1% to $8.2 billion for the quarter ended October 31, 2025.
• Gross margin improved by 60 basis points to 30.7% from the prior year.
• Operating margin increased by 80 basis points on both a reported (9.4%) and adjusted (9.9%) basis.
• Reported diluted earnings per share rose by 23.9% to $2.90, and adjusted diluted earnings per share increased by 15.9% to $2.84.
• A quarterly dividend of $0.89 was declared, reflecting a 7% increase over the prior year.
• Completed one acquisition, Moore Supply Company, an HVAC equipment and supplies business, during the quarter.
• Repurchased $208 million in shares, with a remaining outstanding balance of approximately $0.8 billion under the current share repurchase program.
• Maintained a strong balance sheet with net debt to adjusted EBITDA of 1.1x.
• US non-residential revenue grew by 12%, demonstrating strong performance and market share gains in that segment.
• Updated Calendar Year 2025 guidance for net sales growth to approximately 5% (from mid-single digit growth) and adjusted operating margin to 9.4% 9.6% (from 9.2% 9.6%), indicating improved outlook.

Negatives

• Residential end markets in the US remained challenged, with residential revenue down 1% in the quarter.
• Canadian markets remained subdued, particularly in residential, leading to a 30.4% decrease in adjusted operating profit for Canada.
• Net sales were partially offset by a 0.1% adverse impact from foreign exchange rates and a divestment in Canada.
• Canada's net sales were negatively impacted by 1.6% from adverse foreign exchange rates and 1.5% from a non-core business divestment.

Risks

• Weakness in the economy, market trends, uncertainty, and other conditions in the markets, including macroeconomic impacts such as inflation/deflation, recession, labor and wage pressures, trade restrictions, interest rates, and geopolitical conditions.
• Failure to rapidly identify or effectively respond to direct and/or end customers' wants, expectations, or trends, including costs and potential problems associated with new or upgraded information technology systems or the ability to timely deploy new omni-channel capabilities.
• Decreased demand for products due to operating in highly competitive industries and the impact of declines in the residential and non-residential markets, as well as the ability to effectively manage inventory.
• Changes in competition, including as a result of market consolidation, new entrants, vertical integration, or competitors responding more quickly to emerging technologies (such as generative artificial intelligence).
• Failure of a key information technology system or process, as well as payment-related risks, including exposure to fraud or theft.
• Privacy and protection of sensitive data failures, including failures due to data corruption, cybersecurity incidents, network security breaches, or the use of AI.
• Ineffectiveness of or disruption in the domestic or international supply chain or fulfillment network, including delays in inventory availability, increased delivery costs, or lack of availability due to loss of key suppliers.
• Failure to effectively manage and protect facilities and inventory or to prevent personal injury to customers, suppliers, or associates, including as a result of workplace violence.
• Unsuccessful execution of operational strategies.
• Failure to attract, retain, and motivate key associates.
• Exposure of associates, contractors, customers, suppliers, and other individuals to health and safety risks and fleet incidents.
• Risks associated with acquisitions, partnerships, joint ventures, and other business combinations, dispositions, or strategic transactions.
• Risks associated with sales of private label products, including regulatory, product liability, and reputational risks, and the adverse impact such sales may have on supplier relationships and rebates.
• The failure to achieve and maintain a high level of product and service quality or comply with responsible sourcing standards.
• Inability to renew leases on favorable terms or at all, as well as any remaining obligations under a lease when a facility is closed.
• Changes in, interpretations of, or compliance with tax laws and accounting standards.
• Access to capital, indebtedness, and changes in credit ratings and outlook.
• Fluctuations in product prices/costs (e.g., due to commodity-priced materials, inflation/deflation, trade restrictions, and/or failure to qualify for or maintain supplier rebates) and foreign currency.
• Funding risks related to defined benefit pension plans.
• Legal proceedings in the ordinary course of business, as well as any failure to comply with domestic and foreign laws, regulations, and standards, as those laws, regulations, and standards or interpretations and enforcement thereof may change.
• The occurrence of unforeseen developments such as litigation, investigations, governmental proceedings, or enforcement actions.
• Failure to comply with the obligations associated with being a public company listed on the New York Stock Exchange and London Stock Exchange and the costs associated therewith.
• The costs and risk exposure relating to sustainability matters and disclosures, including regulatory or legal requirements and disparate stakeholder expectations.

Future Outlook

Ferguson updated its Calendar Year 2025 guidance, now expecting net sales growth of approximately 5% (up from mid-single digit growth) and an adjusted operating margin of 9.4% 9.6% (up from 9.2% 9.6%). Interest expense is projected to be around $190 million, and capital expenditures approximately $350 million. The company remains confident in its markets over the medium term, focusing on multiyear tailwinds in both residential and non-residential sectors despite an uncertain environment.

Management Comments

• "Our associates again delivered strong results, continuing to execute our growth strategy in a challenging market environment."
• "We are particularly pleased with another quarter of double-digit non-residential revenue growth."
• "Our scale-advantaged business model and consistent market outperformance enable us to invest in organic growth, as well as consolidate our markets and return capital to shareholders while maintaining a strong balance sheet."
• "We are poised to deliver a strong calendar year 2025 performance and we remain confident in our markets over the medium term."
• "While we continue to operate in an uncertain environment, we will stay focused on leveraging multiyear tailwinds in both residential and non-residential markets as we support the complex project needs of the water and air specialized professional."

Industry Context

Ferguson operates in the North American construction market, serving both residential and non-residential sectors. While the residential market, particularly new housing starts, permits, and repair, maintenance, and improvement (RMI) work, remains challenged, Ferguson's non-residential business is outperforming, driven by large capital projects and waterworks/commercial/mechanical segments. This indicates a divergence in market strength, with commercial and infrastructure projects providing a stronger tailwind compared to the softer housing market.

Stakeholder Impact

• Shareholders: Benefit from increased dividend, ongoing share repurchases, strong financial performance, and improved future guidance.
• Employees: Continued strong execution and growth strategy, though non-GAAP adjustments mention corporate and business restructuring expenses which could imply some operational streamlining.
• Customers: Benefit from the company's scale, expertise, multi-customer group approach, and value-added services, particularly in supporting complex project needs.
• Suppliers: Continued business activity, but the company notes risks related to supply chain disruption and product price fluctuations.
• Creditors: The company maintains investment-grade credit metrics with a net debt to adjusted EBITDA ratio of 1.1x, indicating strong financial health and ability to service debt.

Next Steps

• Payment of the quarterly dividend of $0.89 per share on February 27, 2026.
• Release of results for the period ending December 31, 2025, on February 24, 2026.
• Continued focus on leveraging multiyear tailwinds in both residential and non-residential markets.
• Continued investment in organic growth and market consolidation.

Key Dates

Recommendation

Ferguson's latest filing demonstrates robust financial health and strategic execution, significantly outperforming in a mixed market environment. The company achieved strong sales growth, substantial margin expansion, and double-digit EPS increases. Management's decision to raise calendar year 2025 guidance for both sales and operating margin, coupled with a 7% dividend increase and ongoing share repurchases, signals strong confidence in future performance and commitment to shareholder returns. The strong balance sheet, evidenced by a low net debt to adjusted EBITDA ratio of 1.1x, provides further stability. While residential markets face headwinds, the company's strong non-residential growth and ability to gain market share underscore its resilient business model and competitive advantages. These factors collectively present a compelling investment case.

Keywords

Ferguson Enterprises, FERG, Wholesale Distribution, Plumbing, HVAC, Waterworks, Non-residential Construction, Residential Construction, Financial Results, Earnings, Dividend, Share Repurchase, Acquisition, SEC Filing, 8-K, Q1 2026