Second quarter
Filed Aug 10, 2026Continued Execution Drives Solid Results; Full Year Guidance Increased
Net sales, operating profit and diluted earnings per share increased, supported by organic growth and non-residential strength, while the company increased full-year net sales and adjusted operating margin guidance. Gross margin declined and Canadian adjusted operating profit was lower.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, three months ended June 30, 2026GAAP | $8,751 million | – | +4.6% |
| Gross margin, three months ended June 30, 2026GAAP | 31.0% | – | (20) bps |
| Operating profit, three months ended June 30, 2026GAAP | $893 million | – | +6.1% |
| Adjusted operating profit, three months ended June 30, 2026non-GAAP | $932 million | – | +2.9% |
| Operating margin, three months ended June 30, 2026GAAP | 10.2% | – | +10 bps |
| Adjusted operating margin, three months ended June 30, 2026non-GAAP | 10.7% | – | (10) bps |
| Diluted earnings per share, three months ended June 30, 2026GAAP | $3.43 | – | +6.9% |
| Adjusted diluted earnings per share, three months ended June 30, 2026non-GAAP | $3.39 | – | +5.3% |
| Adjusted EBITDA, three months ended June 30, 2026non-GAAP | $994 million | – | +3.2% |
| Net debt : Adjusted EBITDA, three months ended June 30, 2026non-GAAP | 1.3x | – | – |
| Net sales, six months ended June 30, 2026GAAP | $16,223 million | – | +4.2% |
| Gross margin, six months ended June 30, 2026GAAP | 31.0% | – | Flat |
| Operating profit, six months ended June 30, 2026GAAP | $1,505 million | – | +11.6% |
| Adjusted operating profit, six months ended June 30, 2026non-GAAP | $1,579 million | – | +5.1% |
| Operating margin, six months ended June 30, 2026GAAP | 9.3% | – | +60 bps |
| Adjusted operating margin, six months ended June 30, 2026non-GAAP | 9.7% | – | +10 bps |
| Diluted earnings per share, six months ended June 30, 2026GAAP | $5.56 | – | +12.6% |
| Adjusted diluted earnings per share, six months ended June 30, 2026non-GAAP | $5.67 | – | +7.0% |
| Adjusted EBITDA, six months ended June 30, 2026non-GAAP | $1,705 million | – | +5.6% |
| Net debt : Adjusted EBITDA, six months ended June 30, 2026non-GAAP | 1.3x | – | – |
| US adjusted operating profit, three months ended June 30, 2026non-GAAP | $925 million | – | +2.9% |
| Canada adjusted operating profit, three months ended June 30, 2026non-GAAP | $22 million | – | (4.3) % |
| US adjusted operating profit, six months ended June 30, 2026non-GAAP | $1,581 million | – | +4.7 % |
| Canada adjusted operating profit, six months ended June 30, 2026non-GAAP | $27 million | – | (6.9) % |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| USOrganic revenue growth of 4.0% and a further 1.0% contribution from acquisitions. Residential revenue was up 2% and non-residential revenue increased 8%. | $8,343 million | – | +5.0 % |
| CanadaOrganic growth of 1.7% was fully offset by 3.6% from a non-core business divestment. Markets remained challenging, particularly in residential. | $408 million | – | (1.9) % |
January 1 - December 31, 2026 outlook
- RevenueMid-single digit growth
- Tax rate~26%
- NoteAdjusted operating margin*: 9.5% - 9.8%
- NoteInterest expense: ~$200 million
- NoteCapital expenditures: $375 - $425 million
- NoteUpdated guidance does not include the expected impact of the FloWorks acquisition, expected to close during the third quarter.
Capital returns
- Share repurchases of $202 million during the quarter.
- Declared quarterly dividend of $0.89.
- The dividend will be paid on October 7, 2026 to stockholders of record as of August 21, 2026.
What drove it
- Quarterly net sales growth was driven by organic revenue growth of 3.8% and acquisition growth of 1.0%, partially offset by 0.2% from a divestment in Canada.
- Price inflation was in the low single digits.
- US non-residential revenue increased 8% as scale, expertise, a multi-customer group approach and value-added solutions drove strong share gains in a mixed market.
- Large capital project activity remained healthy, with growth in open order volumes and strong bidding activity.
- The company completed five acquisitions during the quarter and subsequently entered into a definitive agreement to acquire FloWorks.
Concerns
- Gross margin of 31.0% was 20 basis points below the prior year, which was temporarily elevated by the timing and extent of supplier price increases.
- Residential end markets, representing approximately half of revenue, remained subdued. New residential construction activity was weak and RMI work remained soft.
- Canada net sales decreased by 1.9%, and Canada adjusted operating profit of $22 million was $1 million below last year.
- The economic environment remains uncertain.
- Updated guidance does not include the expected impact of the FloWorks acquisition.
What to watch
- Delivery of mid-single digit net sales growth and adjusted operating margin of 9.5% - 9.8% under updated 2026 guidance.
- Residential market conditions, including new residential construction activity and RMI work.
- Non-residential growth, open order volumes and bidding activity in large capital projects.
- Completion of the FloWorks acquisition during the third quarter.
- Capital expenditures of $375 - $425 million and interest expense of ~$200 million.
Balance sheet and cash flow
- Net debt to adjusted EBITDA at June 30, 2026 was 1.3x.
- During the quarter we invested $573 million in acquisitions.
- The aggregate annualized revenue of the eight acquisitions announced year-to-date is approximately $1.4 billion.
Analysis
Ferguson reported second-quarter net sales of $8,751 million, up +4.6%, with organic revenue growth of 3.8% and acquisition growth of 1.0%. A 0.2% impact from a Canadian divestment partially offset growth. The US business produced net sales of $8,343 million, up +5.0%, while Canada net sales were $408 million, down (1.9) %.
Demand was differentiated across end markets. Residential end markets, representing approximately half of revenue, remained subdued, with weak new residential construction and soft RMI work, although residential revenue was up 2%. Non-residential revenue increased 8%, supported by share gains, value-added solutions, healthy large-project activity, growth in open order volumes and strong bidding activity.
Gross margin was 31.0%, down (20) bps from 31.2%, as the prior-year period was temporarily elevated by the timing and extent of supplier price increases. Despite that pressure, reported operating margin rose +10 bps to 10.2%, reflecting operating leverage, disciplined cost management and growth investments. Adjusted operating margin declined (10) bps to 10.7%, while adjusted operating profit increased +2.9% to $932 million. Diluted earnings per share increased +6.9% to $3.43, and adjusted diluted earnings per share increased +5.3% to $3.39.
Capital allocation included $573 million invested in acquisitions and $202 million returned through share repurchases, alongside a declared quarterly dividend of $0.89. The company completed five acquisitions during the quarter, announced eight acquisitions year-to-date with aggregate annualized revenue of approximately $1.4 billion, and signed an agreement to acquire FloWorks. Net debt to adjusted EBITDA was 1.3x at June 30, 2026.
The company increased 2026 net sales guidance from low to mid-single digit growth to mid-single digit growth and raised the lower bound of adjusted operating margin guidance from 9.4% to 9.5%, while retaining the 9.8% upper bound. Capital expenditure guidance increased to $375 - $425 million. The filing provides no sequential financial comparisons, so changes versus the prior quarter cannot be assessed from the reported figures.
Management, verbatim
Our associates continued to execute for our customers, driving market outperformance in the second quarter.
Kevin Murphy, Ferguson CEO
We delivered another strong quarter of non-residential growth and we returned to growth in residential despite the challenging market backdrop.
Kevin Murphy, Ferguson CEO
While the economic environment remains uncertain, our performance year-to-date enables the upward revision of our full year guidance.
Kevin Murphy, Ferguson CEO
Not in the filing
stated, not guessed- GAAP net income
- non-GAAP net income
- Operating cash flow
- Free cash flow
- Cash balance
- Gross debt balance
- Absolute net debt
- Quarter-over-quarter comparisons for reported financial metrics
- Guidance for gross margin
- Guidance for operating expenses
- Forward-looking GAAP reconciliation for adjusted operating margin and adjusted effective tax rate
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.