Ferguson Q2 2026 Earnings: Non-Residential Growth Supports Higher Guidance

Ferguson Enterprises (NYSE: FERG) reported Q2 2026 net sales of $8.751 billion for the quarter ended June 30, up 4.6% year over year, while diluted EPS increased 6.9% to $3.43 from $3.21. Organic revenue growth and acquisitions supported sales, although gross margin declined and U.S. residential demand remained subdued. Non-residential revenue growth of 8% was the principal business driver.

Core earnings data

Organic revenue increased 3.8%, acquisitions added 1.0%, and a Canadian divestment reduced growth by 0.2 percentage points. Price inflation remained in the low single digits.

Reported operating profit grew faster than adjusted operating profit, partly because the prior-year quarter included $21 million of business restructuring expenses. Adjusted operating margin edged lower despite higher sales and profit.

Business and segment performance

The U.S. business generated 5.0% sales growth, including 4.0% organic growth and a 1.0% contribution from acquisitions. U.S. adjusted operating profit rose 2.9%, slower than revenue, reflecting the pressure visible in the companywide adjusted operating margin.

Canada reported positive organic growth, but the disposal of a non-core business more than offset that increase. Canadian adjusted operating profit declined by $1 million.

Residential end markets account for approximately half of U.S. revenue. New residential construction remained weak, and repair, maintenance and improvement activity was soft, but Ferguson’s residential revenue still increased 2%.

Non-residential revenue grew 8%. Management attributed this performance to market-share gains supported by the company’s scale, specialized expertise and value-added services. Large capital project activity remained healthy, with higher open-order volumes and active bidding.

Ferguson also completed five acquisitions during the quarter across HVAC, commercial and mechanical systems, waterworks and industrial flow-control products. The eight acquisitions announced year to date have approximately $1.4 billion of aggregate annualized revenue, including the pending FloWorks transaction.

Gross margin pressure was contained by operating leverage

Gross margin declined 20 basis points to 31.0% because the prior-year result had been temporarily elevated by the timing and extent of supplier price increases. Ferguson offset that pressure at the GAAP operating level through cost discipline and operating leverage, allowing reported operating margin to rise 10 basis points.

The adjusted figures present a more restrained picture: adjusted operating margin declined 10 basis points, and adjusted operating profit grew 2.9% against sales growth of 4.6%. The gap between reported and adjusted growth also reflects the absence of the $21 million business restructuring expense recorded in Q2 2025.

EPS increased faster than net income partly because diluted weighted-average shares declined to 194.0 million from 197.5 million. The lower share count was consistent with the company’s ongoing repurchase activity.

Balance sheet and capital deployment

Ferguson invested $573 million in acquisitions and repurchased $202 million of shares during the quarter. Net debt increased to $4.468 billion from $3.582 billion a year earlier, while net debt to adjusted EBITDA rose to 1.3 times from 1.2 times. The leverage ratio remained within management’s stated target range of one to two times.

The company also declared a quarterly dividend of $0.89 per share, payable October 7, 2026, to shareholders of record on August 21.

2026 guidance

Ferguson raised its calendar 2026 sales outlook and increased the lower end of its adjusted operating margin range. The revisions reflect management’s assessment of year-to-date performance, although the economic environment remains uncertain. The updated outlook excludes the expected impact of the FloWorks acquisition, which is scheduled to close during the third quarter.

Management perspective

CEO Kevin Murphy said Ferguson continued to gain market share in non-residential categories and returned to residential growth despite difficult market conditions. Management pointed to healthy large-project activity and identified water infrastructure, major capital projects, climate and comfort needs, and aging and underbuilt housing as long-term growth drivers.

At the same time, management acknowledged continued economic uncertainty. Near-term execution therefore depends on sustaining market-share gains while balancing cost control, organic investment, acquisitions and shareholder returns.

Risks investors should monitor

• Residential demand remains soft: Weak new construction and repair activity affect an end market representing approximately half of U.S. revenue.
• Adjusted margin pressure: Sales grew faster than adjusted operating profit, while adjusted operating margin declined 10 basis points. Further gross-margin pressure could make earnings growth more dependent on cost control.
• Canadian market weakness: Canadian sales declined despite positive organic growth, and adjusted operating profit fell, with residential conditions remaining particularly challenging.
• Acquisition execution and leverage: Ferguson deployed $573 million toward acquisitions during the quarter and plans to close FloWorks in Q3. Integration requirements and additional capital deployment could affect debt and operating performance.

Summary

Ferguson’s Q2 2026 growth was led by U.S. non-residential markets, acquisitions and continued market-share gains, while residential and Canadian conditions remained constrained. Cost discipline offset lower gross margin at the reported operating level, but the slight decline in adjusted operating margin shows that underlying profitability still warrants attention. The raised 2026 guidance increases the focus on whether non-residential momentum, acquisition execution and operating leverage can continue to outweigh softer end markets.