FERG

Ferguson Enterprises Inc. 10-Q Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026, and the six-month period ended on the same date. Ferguson Enterprises Inc. is a value-added distributor of essential water and air solutions serving residential and non-residential construction markets in North America. The company operates two reportable segments: United States and Canada. This report follows a fiscal year-end transition from July 31 to December 31, with the prior year comparison reflecting the calendar year structure.

Key Financial Metrics

Note: Total debt includes $448 million in short-term debt and $4,456 million in long-term debt as of June 30, 2026.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 4.6% in Q2 2026 and 4.2% YTD compared to 2025, driven by low single-digit price inflation, volume growth, and acquisitions (contributing ~1.0% to Q2 sales).
• Profitability: Operating profit rose 6.1% in Q2 and 11.6% YTD. Adjusted operating profit increased 2.9% in Q2 and 5.0% YTD.
• Restructuring: Restructuring expenses were minimal in 2026 ($2 million in Q2, $4 million YTD) compared to significant charges in 2025 ($25 million in Q2, $76 million YTD), which included $72 million in business restructuring costs.
• Cash Flow: Operating cash flow decreased significantly YTD ($716 million vs. $1,123 million in 2025) due to increased working capital investment (higher receivables and inventory) and timing of tax payments related to the fiscal year-end transition.
• Debt Levels: Total debt increased from $4.126 billion at year-end 2025 to $4.904 billion at June 30, 2026, driven by borrowings under the Receivables Facility ($525 million) and Revolving Facility ($250 million).

Guidance, Outlook, and Risks

• Acquisition Activity: The company acquired seven businesses in the first half of 2026 for a total consideration of $638 million. On July 13, 2026, Ferguson announced a definitive agreement to acquire FWI Holdings, Inc. for approximately $1.6 billion, expected to close in Q3 2026.
• Capital Allocation: The company authorized a new $2 billion share repurchase program in April 2026, replacing a prior $5 billion program. As of June 30, 2026, $136 million had been repurchased under the new program. Dividends declared were $0.89 per share in Q2.
• Segment Performance: The U.S. segment saw sales growth of 5.0% in Q2, driven by non-residential markets (up ~8%). The Canada segment saw a 1.9% sales decline in Q2 due to divestments and lower volume, though YTD sales were up 1.2%.
• Risks: Key risks include macroeconomic weakness, supply chain disruptions, inflation, interest rate fluctuations, and the successful integration of acquisitions. The company notes that forward-looking statements are subject to uncertainties regarding global economic conditions and regulatory changes.

Investor Verification Checklist

• Working Capital Trends: Verify the sustainability of the increased investment in receivables and inventory, which significantly reduced operating cash flow YTD.
• Acquisition Integration: Monitor the financial impact and integration progress of the seven acquisitions completed in H1 2026 and the pending $1.6 billion FWI Holdings acquisition.
• Debt Servicing: Review the impact of increased debt levels ($4.9 billion total) on interest expense and liquidity, particularly with $150 million in private placement notes maturing in November 2026 and $300 million in senior notes maturing in April 2027.
• Non-GAAP Reconciliations: Review the reconciliation of GAAP to Adjusted Operating Profit and Adjusted EPS to understand the impact of amortization of acquired intangibles and discrete tax items.
• Share Repurchase Execution: Track the pace of the new $2 billion share repurchase program and its impact on diluted share count and EPS.