Llamadas de información financiera de Core & Main para los años 2025–2026: Surgen contradicciones en cuanto a las reducciones de costos de venta y administración, los precios del PVC y las perspectivas en el sector residencial.

Date of Call: October 2025

Financials Results

• Revenue: $2.1B, up 1% YOY
• EPS: $0.89 adjusted diluted EPS, up 3% YOY
• Gross Margin: 27.2%, up 60 basis points YOY

Guidance:

• Net sales for FY 2025 expected to be $7.6B to $7.7B, representing 4% to 5% growth excluding one fewer selling week.
• Adjusted EBITDA for FY 2025 expected to be $920M to $940M.
• Operating cash flow for FY 2025 expected to be $550M to $610M.
• End market volumes anticipated to be flat to slightly down for the year.
• Pricing expected to have a neutral impact on sales growth.
• Gross margin expected to improve year-over-year.

Business Commentary:

• Revenue and Market Performance:
• Core & Main reported net sales of $2.1 billion for Q3 2025, with a 1% increase year-over-year.

• The growth was driven by acquisitions and strong performance in municipal construction, despite a challenging residential market.

• SG&A and Cost Management:

• SG&A expenses increased 8% to $295 million, primarily due to acquisitions and inflation.

• The company implemented $30 million in annualized cost savings to improve operating leverage and efficiency.

• Gross Margin Improvement:

• Gross margin improved by 60 basis points year-over-year to 27.2%.

• This was achieved through the success of private label initiatives and disciplined sourcing and pricing execution.

• Municipal and Non-Residential Growth:

• The municipal construction segment remained strong, supported by favorable funding and demand environments.

• Non-residential growth was driven by infrastructure projects like data centers, offsetting softness in commercial sectors.

• Strategic Investments and Expansion:

• Core & Main expanded into high-growth geographies, opening new branches in Houston and Denver.
• The acquisition of Canada Waterworks expanded the company's addressable market in the Canadian market.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in long-term fundamentals, citing 'strong free cash flow', 'positive net sales growth', and 'gaining momentum across our sales, growth margin and operational initiatives'. They also announced a $500M increase to the share repurchase authorization, reflecting 'conviction in our growth outlook'.

Q&A:

• Question from Brian (Thompson Research Group): Can you talk about the large complex projects, if you have any updated market share numbers, growth rates or kind of revenue exposure numbers?
  Response: Data centers represent a low single-digit portion of sales but are growing rapidly; they drive high demand for water infrastructure, creating long-term tailwinds.

• Question from Brian (Thompson Research Group): What's causing the slight raise in the municipal outlook from low single digits to low to mid-single digits?
  Response: Confidence in municipal due to significant funding at federal, state, and local levels, including state revolving funds and new state legislation.

• Question from Matthew Bouley (Barclays): Any early thoughts on 2026 for end markets?
  Response: Municipal remains strong; nonresidential is mixed but has strength in complex projects; residential likely a headwind initially but pent-up demand expected to release; data center growth to continue.

• Question from Matthew Bouley (Barclays): Is the ~27% gross margin a new normal, and what's driving it?
  Response: Gross margin in Q4 expected between Q2 and Q3 levels, with Q3 likely the peak for the year; expecting annual expansion driven by private label and pricing/sourcing execution.

• Question from David Manthey (Baird): Is the stabilization in residential a more optimistic view than 90 days ago?
  Response: Residential softened as expected throughout the quarter, in line with prior guidance, with no significant movement; activity appears stabilized but remains challenged.

• Question from David Manthey (Baird): What is the magnitude of private label's gross margin benefit and other sourcing/initiatives?
  Response: Private label is a major driver; long-term target is 10-15% of sales, expected to add 10-20 bps annually; sourcing and pricing initiatives provide additional margin enhancement.

• Question from Nigel Coe (Wolfe Research): Does Q4 SG&A guide fully embed the $30M in savings, and what further productivity actions are being explored?
  Response: ~$5M of savings impact in Q4, with full run rate in FY26; exploring technology investments to automate back office and improve productivity for future SG&A leverage.

• Question from Joseph Ritchie (Goldman Sachs): What are the constraints on scaling private label further, and where is biggest penetration?
  Response: Growth constrained by product development, logistics capabilities, and customer acceptance; expansion plans target 1 point per year; already a solid plan for next 2-3 years.

• Question from Joseph Ritchie (Goldman Sachs): Do you need to make regional investments to participate more in data centers, and why is this a small portion of business?
  Response: Investments in local relationships and capacity are needed; growth is local and driven by existing customer relationships; it's a small but rapidly growing part of the mix.

• Question from Anthony Pettinari (Citi): What are the drivers of mid-single-digit cost inflation vs. typical low single-digit?
  Response: Inflation driven by facilities, fleet, and medical costs; expected to moderate, with normalization around Q2 next year.

• Question from Anthony Pettinari (Citi): What is the typical timeline and visibility for data center projects?
  Response: Projects can last several years with phases; visibility is typically a year out, requiring fast-paced execution.

• Question from Patrick Baumann (JPMorgan): On pricing, is muni PVC down ~15% YOY, and will prices remain stable into '26?
  Response: Yes, PVC down ~15% YOY; pricing expected to be at least flattish for FY26, with some categories down but majority up.

• Question from Patrick Baumann (JPMorgan): What are you seeing in other commodity products?
  Response: Steel and copper favorable; most products up except municipal PVC.

• Question from Patrick Baumann (JPMorgan): What is the M&A pipeline activity and capital deployment outlook?
  Response: Pipeline remains active with several deals; lull in market activity but expecting announcements soon; capital deployment priorities unchanged: organic investment, M&A, and share repurchases.

• Question from Richard Reid (Wells Fargo): Could you give more detail on the SG&A cuts and which roles were eliminated?
  Response: Cuts focused on ~4% of non-sales headcount; reductions were targeted across back-office and support functions without compromising customer service or growth.

• Question from Richard Reid (Wells Fargo): More context on the meter business and high single-digit growth?
  Response: Success in smart meter contracts, especially with large municipalities; growth driven by converting legacy systems and leading manufacturer demand; recent large contract awards are a key driver.

• Question from Matthew Johnson (UBS): What are greenfield ambitions for the rest of the year and FY '26?
  Response: Opened 5 year-to-date; targeting more in Houston and Denver; pipeline includes over a dozen markets; typically profitable within 2-3 years.

• Question from Matthew Johnson (UBS): How large is the Texas market and how impactful is the new $20B funding bill?
  Response: Texas is a key market; new funding will be important; also provides long-term growth driver for HDPE products; expect continued investment in the state.

Contradiction Point 1

SG&A Cost-Out Initiative Magnitude and Timing

A direct reversal in guidance regarding the scale and timing of a major cost-saving initiative. In Q1 2025, the company explicitly stated no material SG&A reduction was expected for the year. By Q3 2025, a significant $40M cost-out plan is detailed, with $25M of savings flowing into Q4, directly contradicting the prior "no substantial...reduction expected" stance.

Are the SG&A cuts focused on branch or corporate-level roles, such as back-office positions? - Sam Reid (Wells Fargo)

20251209-2026 Q3: The $40M cost-out action focused on ~4% of non-sales headcount... Reductions were broad across back-office functions... - Robyn Bradbury(CFO)

Can you quantify the expected SG&A savings from the new cost-out initiatives this fiscal year? - David Emerson Ridley-Lane (BofA Securities, on behalf of Andrew Obin)

2025Q1: Cost-out initiatives... there is no substantial, quantified SG&A reduction expected for the year. - Robyn Bradbury(CFO)

Contradiction Point 2

Pricing Outlook and Commodity Dynamics

Contradictory signals on the core PVC pipe pricing trend, a key revenue driver. The outlook shifts from stabilization and a flat-to-up full-year view in Q1 2025 to an explicit declaration of PVC pricing being "down from peak levels" in Q3 2025, with the full-year expectation now including this headwind ("at least flat"). This represents a material change in a key product's financial contribution forecast.

Has muni PVC pipe pricing decreased by ~15% while other products increased by low single digits? Will this trend continue into 2026 to maintain stable net pricing? - Patrick Baumann (JPMorgan)

20251209-2026 Q3: PVC pricing is down from peak levels, and other categories like steel and copper are favorable. Pricing is expected to be at least flat for FY '26... - Robyn Bradbury(CFO)

Can you clarify the pricing dynamics between commodities and finished goods and their outlook? Is the current market weakness a signal or an unusual comparison? - David John Manthey (Robert W. Baird & Co. Incorporated)

2025Q1: Pricing improved sequentially... PVC has been stable. For the full year, pricing is expected to be flat to slightly up. - Robyn Bradbury(CFO)

Contradiction Point 3

Residential Market Outlook and Performance

A contradiction in the timing and characterization of the residential market downturn. In Q1 2025, softening was framed as a watch item beginning in Q2. By Q3 2025, the company confirms the softening occurred "as expected" in Q3, with a "low double-digit to mid-teens decline," directly countering the earlier implication of a more gradual or anticipated-onset slowdown.

Did your Q3 stabilization in residential markets signal a more optimistic outlook than 90 days ago? - David Manthey (Baird)

20251209-2026 Q3: Residential softened as expected, with a low double-digit to mid-teens decline in Q3... - Robyn Bradbury(CFO)

Can you explain the residential construction slowdown, its magnitude, and timing? What is the growth outlook for the meter product category? - David John Manthey (Robert W. Baird & Co. Incorporated)

2025Q1: Residential (lot development) was resilient in Q1 but began softening in Q2... - Mark R. Witkowski(CEO)

Contradiction Point 4

Gross Margin Peak and Outlook

A clear change in financial forecast regarding the peak of a critical profitability metric. In Q3 2025, management explicitly states Q3 is "likely being the peak for the year" for gross margin. This contradicts the forward-looking "sustainable gross margin enhancement" guidance from Q4 2025, which implies continued improvement rather than a near-term peak.

Given the strong gross margin above 27% and $25M sequential SG&A reduction in Q4, will the ~7% SG&A rate be the new normal? What's driving margins? - Matthew Bouley (Barclays)

20251209-2026 Q3: Strong Q3 gross margin... Q4 gross margin expected between Q2 and Q3 levels, with Q3 likely being the peak for the year. - Robyn Bradbury(CFO)

How did the company perform operationally in fiscal 2024, and what are gross margin expectations for fiscal 2025? - Brian Biros (Analyst)

2025Q4: For fiscal 2025, the company expects to continue driving sustainable gross margin enhancement through the execution of its initiatives. - Mark Witkowski(CEO)

Contradiction Point 5

Residential Market Outlook and Timing

Contradictory signals on the near-term catalyst for residential recovery. In Q4 2025, the outlook was tied to a specific, imminent inflection point (mortgage rates falling and sustaining). By Q3 2026, the expectation shifts to a more vague and delayed "pent-up demand" release, indicating a softening of initial bullishness and a revised timeline for market improvement.

Are there any early thoughts on 2026, considering current municipal market conditions, residential stabilization, and data center trends? - Matthew Bouley (Barclays)

20251209-2026 Q3: Residential likely to be a headwind at the start of 2026 but pent-up demand is expected to release, spurring growth. - Mark Witkowski(CEO)

What are the key drivers and expectations for fiscal 2025, considering the leadership transition and market dynamics? - David Manthey (Analyst)

2025Q4: The outlook remains bullish on long-term fundamentals, with an anticipated inflection point in residential demand as mortgage rates fall and sustain at lower levels. - Mark Witkowski(CEO)