8-K: Ferguson Reports Strong 2025 Results, Issues 2026 Guidance

Ferguson Enterprises Inc. announced strong calendar year 2025 financial results, including a 5.0% sales increase and double-digit non-residential growth, while providing optimistic 2026 guidance.

Summary

• Full calendar year 2025 sales reached $31.3 billion, marking a 5.0% increase, driven by 4.5% organic growth and 1.0% from acquisitions.
• Gross margin improved by 70 basis points to 31.0% for the full year.
• Reported operating profit was $2.8 billion (8.9% operating margin), up 10.3%, while adjusted operating profit was $3.0 billion (9.6% adjusted operating margin), up 11.3%.
• Diluted earnings per share increased 24.2% to $10.16 (adjusted $10.58, up 13.4%).
• Generated strong operating cash flow of $2.2 billion and declared dividends of $3.38 per share.
• Invested $276 million in eight acquisitions, contributing over $300 million in annualized revenue.
• Repurchased $0.9 billion in shares, with approximately $0.6 billion remaining under the current share repurchase program.
• Maintained a strong balance sheet with net debt to adjusted EBITDA at 1.1x.
• Fourth quarter 2025 net sales were $7.5 billion, a 3.6% increase, with organic revenue growth of 3.0%.
• Residential end markets remained weak in Q4 2025, with residential revenue down 2%, while non-residential end markets grew 10%.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a very positive report, highlighting strong financial performance across key metrics, effective capital allocation through acquisitions and share repurchases, and confident forward-looking guidance despite mixed market conditions.

Positives

• Achieved a 5.0% increase in full calendar year 2025 sales, reaching $31.3 billion.
• Gross margin improved by 70 basis points to 31.0% for the full year, demonstrating strong execution.
• Adjusted operating margin increased by 50 basis points to 9.6% for the full year.
• Reported diluted earnings per share grew significantly by 24.2% to $10.16 (adjusted 13.4% to $10.58).
• Generated strong operating cash flow of $2.2 billion, indicating robust liquidity.
• Successfully invested $276 million in eight acquisitions, adding over $300 million in annualized revenue.
• Returned capital to shareholders through $0.9 billion in share repurchases, with $0.6 billion remaining in the program.
• Maintained a strong balance sheet with a net debt to adjusted EBITDA ratio of 1.1x, within target range.
• Achieved double-digit non-residential growth and continued market share gains despite a challenging residential market.
• Provided positive calendar 2026 guidance, projecting low to mid-single digit net sales growth and an adjusted operating margin of 9.4% 9.8%.

Negatives

• US residential end markets remained weak in the fourth quarter of 2025, with new residential housing starts, permit activity, and repair, maintenance, and improvement (RMI) work remaining soft.
• Residential revenue was down 2% in the fourth quarter of 2025.
• Adjusted operating profit for Canada decreased by 10.0% to $54 million for the twelve months ended December 31, 2025.

Risks

• Weakness in the economy, market trends, uncertainty, and other conditions in the markets, including macroeconomic impacts like inflation/deflation, recession, labor/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 as a result of operating in highly competitive industries and the impact of declines in the residential and non-residential markets, affecting inventory management.
• 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 or agentic 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 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, including the failure to quickly adapt strategy to emerging technologies.
• 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., including as a result of the use of 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 provides calendar 2026 guidance, expecting net sales growth in the low to mid-single digits and an adjusted operating margin between 9.4% and 9.8%. The company anticipates interest expense of approximately $200 million and capital expenditures between $350 million and $400 million, with an adjusted effective tax rate of around 26%. Management expects another year of outperformance, strong operational execution, and continued investment to expand market-leading capabilities and scale, confident in capitalizing on long-term growth drivers across both residential and non-residential markets.

Management Comments

• "Our associates delivered a strong year, continuing to provide essential water and air solutions for our customers."
• "We are particularly pleased with double digit non-residential growth during the year and our continued performance against a challenging residential market."
• "Our scale-advantaged business model and strong balance sheet enable us to invest in organic growth, consolidate our markets through acquisitions and return capital to shareholders."
• "While our markets remain mixed as we enter 2026, we expect another year of outperformance, strong operational execution and continued investment to expand our market leading capabilities and scale."
• "We are confident in our ability to capitalize on long-term growth drivers across both residential and non-residential markets as we provide essential water and air solutions for the complex project needs of the specialized professional."

Industry Context

StockSavvy.ai notes that Ferguson's strong non-residential growth and market share gains in a mixed market, particularly against a challenging residential backdrop, demonstrate resilience and effective strategy execution. The company's focus on essential water and air solutions aligns with broader industry trends emphasizing infrastructure investment, climate adaptation, and the need for specialized professional services in both new construction and aging infrastructure. Ferguson's active acquisition strategy further consolidates its position in a fragmented market, reinforcing its scale advantage.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct industry comparison.
• Ferguson's net debt to adjusted EBITDA ratio of 1.1x at December 31, 2025, is within its stated target range of one to two times, indicating adherence to investment-grade credit metrics.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, increased dividends ($3.38 per share declared for CY2025), and an ongoing share repurchase program ($0.9 billion repurchased, $0.6 billion remaining).
• Employees (Associates): Positive recognition for their contribution to strong results; career advancement opportunities through promotions for key personnel in investor relations and communications.
• Customers: Continued provision of essential water and air solutions, supported by investment in capabilities and a focus on complex project needs, aiming for successful and sustainable outcomes.
• Suppliers: Potential for continued strong business relationships given the company's growth and market share gains, though risks related to supply chain disruptions and price fluctuations remain a factor.
• Creditors: Strong balance sheet with a net debt to adjusted EBITDA ratio of 1.1x, indicating low leverage and robust creditworthiness, aligning with investment-grade credit metrics.

Next Steps

• An investor conference call with Kevin Murphy (CEO) and Bill Brundage (CFO) was held on February 24, 2026, at 8:30 a.m. ET.
• The company will provide an updated view of its market opportunities and strategy later on February 24, 2026.
• A quarterly dividend of $0.89 per share will be paid on April 30, 2026, to stockholders of record as of March 6, 2026.
• Brian Lantz, Vice President Investor Relations and Communications, will retire effective May 1, 2026.
• Q1 Results for the period ending March 31, 2026, will be released on May 5, 2026, with a call from 8:30 a.m. ET.
• The company expects to file a Transition Report on Form 10-KT on February 27, 2026.
• Continued investment to expand market-leading capabilities and scale is planned.
• The company aims to capitalize on long-term growth drivers across residential and non-residential markets.

Key Dates

Recommendation

Ferguson's strong calendar year 2025 results, marked by significant sales growth, improved margins, and robust EPS, demonstrate excellent operational execution and market share gains, particularly in the non-residential sector. The healthy cash generation, active capital return to shareholders through dividends and share repurchases, and a strong balance sheet (1.1x net debt to adjusted EBITDA) underscore financial stability. The positive 2026 guidance, projecting continued growth and margin expansion despite mixed market conditions, suggests sustained momentum. The strategic focus on essential water and air solutions and market consolidation through acquisitions positions the company well for long-term value creation.

Keywords

Ferguson, FERG, financial results, earnings, sales, profit, gross margin, operating margin, EPS, acquisitions, share repurchase, dividends, non-residential construction, residential construction, water solutions, air solutions, construction markets, plumbing, HVAC, PVF, water infrastructure, climate & comfort, risk management, corporate governance, SEC filing, 8-K