Core & Main Fiscal Q2 2026 Earnings: Cost Control and Buybacks Lift EPS

Core & Main (NYSE: CNM) reported fiscal Q2 2026 net sales of $2.145 billion, up 2.5% year over year, and diluted EPS of $0.77, up 10.0%, for the quarter ended August 2, 2026. Acquisitions, pricing, and volume supported sales, while lower SG&A expenses and a reduced share count helped earnings grow faster than revenue despite a slight decline in gross margin.

Core Earnings Data

Revenue increased by $52 million, with contributions from volume, pricing, and acquisitions. Gross profit grew slightly more slowly than sales, lowering gross margin by 10 basis points to 26.7%, while non-GAAP adjusted EBITDA margin reached 12.8%.

Operating income and net income increased faster than revenue. Diluted EPS growth was higher still, reflecting both increased earnings and fewer Class A shares following repurchases.

Product and End-Market Performance

Performance varied across product categories. Pipes, valves, and fittings sales increased because of acquisitions, while storm drainage sales were essentially flat. Fire protection products benefited from both higher volumes and selling prices, and smart utility product sales rose primarily because of pricing.

Management described municipal demand as a source of strength. Fire protection and large capital projects, including treatment plants and data centers, also generated growth, helping offset a broader mixed demand environment.

Cost Actions and Buybacks Lifted EPS Faster Than Sales

SG&A expenses declined 0.3% to $301 million even as revenue increased. As a percentage of sales, SG&A improved to 14.0% from 14.4%, primarily due to recent cost actions and lower variable compensation. These benefits were partly offset by higher distribution costs and investments in greenfield locations and sales initiatives.

This expense control helped operating income rise 6.6%, well above the 2.5% increase in sales. Share repurchases provided another lift to per-share results: diluted shares used to calculate EPS declined to 193.4 million from 198.3 million, or approximately 2.5%. As a result, diluted EPS increased 10.0%, faster than both operating income and net income.

Cash Flow, Liquidity, and Capital Allocation

Quarterly operating cash flow was $62 million. For the first six months of fiscal 2026, operating cash flow increased to $144 million from $111 million, reflecting higher net income, lower tax payments, and working-capital changes, partly offset by higher interest payments.

Cash and cash equivalents stood at $312 million at quarter-end, up from $220 million at the start of the fiscal year. Over the same period, receivables increased to $1.439 billion and inventories rose to $1.137 billion, while accounts payable increased to $815 million.

Net debt was $2.166 billion, compared with $2.253 billion a year earlier. Core & Main had no outstanding borrowings under its senior asset-based revolving credit facility and approximately $1.226 billion of available borrowing capacity after letters of credit.

The company spent $169 million to repurchase 3.7 million shares during the quarter and another $11 million on 0.3 million shares after quarter-end. Open-market repurchases for the fiscal year through the announcement totaled nearly $270 million and 5.7 million shares. Core & Main also opened seven greenfield locations during fiscal 2026, including two during and after the quarter.

Fiscal 2026 Guidance

Core & Main reaffirmed the full-year outlook originally issued in March 2026. The unchanged guidance calls for 2% to 3% sales growth and a non-GAAP adjusted EBITDA margin of 12.2% to 12.4%.

Management’s confidence in the outlook rests on municipal demand, growth in fire protection and large capital projects, and opportunities in the acquisition pipeline.

Risks Investors Need to Watch

• Mixed demand: Municipal infrastructure and large projects were supportive, but storm drainage sales were flat and management characterized the overall demand environment as mixed.
• Acquisition dependence and execution: Acquisitions drove growth in pipes, valves, and fittings, while first-half revenue growth was primarily acquisition-related. Future results therefore depend partly on identifying and integrating suitable targets.
• Margin pressure: Quarterly gross margin declined by 10 basis points, and higher distribution costs and growth investments partly offset cost actions. A widening gap between product costs and pricing could pressure profitability.
• Working-capital requirements: Receivables and inventories increased from the start of the fiscal year. Although first-half operating cash flow improved, continued working-capital expansion could absorb cash needed for acquisitions, expansion, debt service, or repurchases.

Summary

Core & Main delivered modest fiscal Q2 revenue growth across acquisitions, volume, and pricing, while cost control and share repurchases helped earnings per share grow considerably faster than sales. Municipal, fire protection, and large-project demand supported the quarter, but gross-margin pressure and mixed conditions in other areas remain important. Investors should monitor second-half organic demand, acquisition contributions, working-capital conversion, and whether the company remains within its reaffirmed full-year margin and cash-flow ranges.