What were the key takeaways from Ferguson Enterprises's earnings call?

What does Ferguson Enterprises do and what are its main business segments?

What factors drove the changes in Ferguson Enterprises's revenue and profit?

What is the revenue and EPS growth rate for Ferguson Enterprises year over year?

What were the key takeaways from Ferguson Enterprises’s earnings call?

What is the market's earnings forecast for Ferguson Enterprises next quarter?

What guidance did Ferguson Enterprises's management provide for the next earnings period?

What is Ferguson Enterprises's gross profit margin?

- **Revenue Growth**: Q4 $8.5B (+6.9% YoY), FY25 $38.3B (+3.8%), driven by non-residential (+15% YoY) and key growth areas (HVAC +8%, Waterworks +10%).
- **Profit Expansion**: Operating margin 9.2% FY25, EPS $9.94 (+2.6%). Gross margin improved 70 bps to 31.7% Q4.
- **Strategic Investments**: $483M in HVAC, Waterworks, and Ferguson Home. 9 acquisitions FY25, $1B buyback program.
- **Market Dynamics**: Soft residential new construction vs. resilient non-residential (data centers, biotech, water treatment). Mild inflation (2% Q4), normalization to 30-31% gross margin expected.
- **Balance Sheet**: Net debt-to-EBITDA 1.1x, returning $1.4B to shareholders FY25.

**【CEO Summary Section】**
- **Q4 Revenue Growth**: $8.5 billion, up 6.9% YoY, driven by 5.8% organic growth and 1.1% from acquisitions. Gross margin improved 70 bps to 31.7%.
- **Key Growth Areas**: HVAC (+8% FY25), Waterworks (+10% FY25), large capital projects (+17% commercial, +13% industrial), and Ferguson Home (+3% Q4). 
- **Market Performance**: Non-residential up 15% YoY, outperforming residential (flat). Operating profit grew 13.4% to $972M, EPS rose 16.8% to $3.48.
- **Balance Sheet**: Net debt-to-EBITDA 1.1x, returning $354M to shareholders via buybacks and dividends.

**【CFO Financial Commentary】**
- **FY25 Results**: Revenue $38.3B (+3.8%), operating profit $2.84B (+0.6%), EPS $9.94 (+2.6%). Operating cash flow $1.9B, free cash flow $1.65B.
- **Calendar Year Guidance**: Mid-single-digit revenue growth, operating margin 9.2%-9.6%. EBITDA $3.1B, CapEx $300-350M.
- **Fiscal Year Change**: Shift to December-end, with 5-month transition period (Aug-Oct 2025). Q1 2026 guidance: mid-single-digit growth, margin 9.2%-9.6%.

**【Q&A Key Highlights】**
- **Market Outlook**: Soft residential new construction, RMI, and HVAC affordability vs. resilient non-residential (data centers, biotech, water treatment). Q4 non-res revenue +15%, commercial +21%, Waterworks +15%.
- **Pricing & Margin**: Mild inflation (2% Q4), deflation in PVC offset by copper/steel. Gross margin normalization to 30-31% expected, operating margin 9.2%-9.6% for CY25.
- **M&A & Capital Allocation**: 9 acquisitions FY25, $1B share buyback program. Focus on bolt-on deals in HVAC, Waterworks, and large projects.
- **Risks**: Residential weakness, HVAC repair/replace mix, and commodity deflation. Non-res growth driven by large projects, not traditional non-res activity.


Ferguson Enterprises Inc. (FERG) Q4 2025 Earnings Call Transcript

- **Revenue Growth**: Q3 $7.6B (+4.3% YoY), driven by 5% organic growth and strategic acquisitions.
- **Margin Expansion**: Gross margin 31% (up 50bps YoY), operating margin 9.4% (up 20bps YoY).
- **Strategic Wins**: HVAC +10%, Waterworks +12%, and Ferguson Home launch supporting remodel growth.
- **Updated Guidance**: Full-year revenue low to mid-single-digit, operating margin 8.5%-9.0%.
- **Cash Flow Strength**: $1.15B free cash flow year-to-date, $1.1B remaining under share buyback program.

**【CEO Summary Section】**
- **Q3 Revenue Performance**: $7.6 billion, up 4.3% YoY (5% organic growth, 1% from acquisitions), despite 1.7% headwinds from foreign exchange and fewer sales days.
- **Gross Margin Expansion**: 31% (up 50bps YoY), driven by value capture initiatives and moderating deflation.
- **Operating Profit Growth**: $715 million (+6.1% YoY), operating margin 9.4% (up 20bps YoY).
- **Strategic Initiatives**: HVAC revenue +10% YoY, Waterworks +12%, and Ferguson Home launch supporting residential remodel growth.
- **Market Outlook**: Confident in medium-term growth despite near-term challenges, with focus on large capital projects and diversified end markets.

**【CFO Financial Commentary】**
- **Earnings Highlights**: Diluted EPS $2.50 (+7.8% YoY), net debt/EBITDA 1.2x, strong free cash flow of $1.15 billion year-to-date.
- **Restructuring Impact**: $68 million nonrecurring charge for severance and branch closures, expected to deliver $100 million annualized savings.
- **Updated Guidance**: Full-year revenue growth low to mid-single-digit, operating margin 8.5%-9.0% (vs. prior 8.3%-8.8%).
- **Capital Allocation**: $690 million deployed in Q3 (3 acquisitions, $417M share buybacks), $1.1B remaining under repurchase program.

**【Q&A Key Highlights】**
- **Organic Growth Drivers**: Nonresidential end market (+7% YoY) outperformed residential, driven by large capital projects and Waterworks diversification.
- **Gross Margin Sustainability**: 31%+ gross margin achievable in Q4, with pricing strategy balancing volume and margin capture.
- **Tariff and Commodity Impact**: 2/3 of branded suppliers announced mid-single-digit price increases, but mid-single-digit deflation persists in commodities.
- **Ferguson Home Progress**: Early-stage success with showroom consultations increasingly starting on digital platform, targeting project-based professionals.
- **Supply Chain Optimization**: 5 market distribution centers operational, 2 more in development, with automation investments driving efficiency.

Ferguson (FERG)-3 Jun 25-2025 Q3 Earnings call transcript

- **Q2 Growth**: $6.9B sales (+3% YoY), 5% volume growth vs. 2% deflation.
- **Key Initiatives**: 500+ HVAC counter conversions, Ferguson Home launch, cross-group project collaboration.
- **Margin Challenges**: 29.7% gross margin (-70bps YoY), 8.3-8.8% operating margin guidance.
- **Tariff Outlook**: Steel price increases may stabilize deflation, but PVC deflation persists.
- **Cost Management**: 5.5% OpEx growth vs. 5% volume, $508M share buybacks in H1.
- **FY25 Guide**: Low single-digit sales growth, 8.3-8.8% operating margin.


**【CEO Opening Remarks】**
- Q2 net sales: $6.9B (+3% YoY), driven by 5% volume growth offset by 2% commodity deflation.
- Adjusted operating profit: $449M (-13% YoY) due to deflation and mix shift to lower-margin HVAC/Waterworks.
- Key initiatives: 
  1. HVAC expansion: 500+ dual-trade counters converted (650+ target by FY26), 20 new markets entered.
  2. Large capital projects: Collaborative approach across 5+ customer groups for data centers, infrastructure.
  3. Ferguson Home launch: Omnichannel experience integrating showrooms and digital commerce.
- Capital deployment: $500M+ in Q2, $1B share buyback authorization increase.

**【CFO Financial Breakdown】**
- Gross margin: 29.7% (-70bps YoY) due to deflation and mix.
- Operating expenses: +5.5% YoY vs. 5% volume growth, reflecting disciplined cost management.
- Free cash flow: $545M (H1) vs. $468M prior year, driven by $508M share buybacks.
- FY25 guidance: 
  - Sales: Low single-digit growth (markets down low single-digits).
  - Adj. operating margin: 8.3-8.8% (vs. 7.9% H1).
  - CapEx: $325-375M (up from $300M prior).

**【Q&A Highlights】**
1. **Growth Investment Quantification**: 
   - HVAC/Waterworks growth ~80% organic, 20% M&A.
   - OpEx deleverage: 20bps YoY, 40bps from deflation.
2. **Gross Margin Pressure**: 
   - 2/3 from deflation, 1/3 from mix (HVAC/Waterworks growth).
   - 6th consecutive quarter of deflation, but tariffs may stabilize steel prices.
3. **Tariff Impact**: 
   - Steel pipe price increases announced, but PVC deflation expected to persist.
   - Gross margin target: >30% over medium term.
4. **Customer Behavior**: 
   - No significant trade-down, but repair vs. replace focus in HVAC.
   - Civil infrastructure growth offsetting residential weakness.
5. **Cost Actions**: 
   - Streamlining non-customer-facing roles, aiming to slow cost growth in H2.


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