Ferguson Enterprises Inc. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. 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 recently transitioned its fiscal year-end from July 31 to December 31, with this filing representing the first full quarter under the new calendar year structure.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $7,472 million | $7,213 million |
| Gross Profit | $2,318 million (31.0% margin) | $2,216 million (30.7% margin) |
| Operating Profit | $612 million | $507 million |
| Net Income | $414 million | $345 million |
| Diluted EPS | $2.13 | $1.73 |
| Operating Cash Flow | $772 million | $874 million |
| Total Debt | $4,127 million | $4,126 million |
| Cash & Equivalents | $820 million | $557 million (Dec 31, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 3.6% year-over-year, driven by mid-single digit price inflation and 0.8% growth from acquisitions, partially offset by lower sales volume.
- Profitability: Operating profit rose 20.7% to $612 million. Adjusted operating profit increased 8.4% to $647 million. The improvement was driven by higher gross profit and improved operating leverage, despite higher variable costs.
- Restructuring: Restructuring expenses dropped significantly to $2 million in Q1 2026 compared to $51 million in Q1 2025. The prior year included $36 million in severance and $15 million in non-cash lease impairments.
- Segment Performance:
- United States: Sales up 3.5%; Non-residential markets grew ~8%, while residential markets declined ~1% due to weak new construction.
- Canada: Sales up 5.5%, driven by acquisitions and currency impacts, though adjusted operating profit declined slightly due to higher operating costs.
- Cash Flow: Operating cash flow decreased $102 million to $772 million, primarily due to increased working capital investment (higher receivables and inventory) and timing of vendor payments.
Guidance, Outlook, and Risks
Capital Allocation: The Company repurchased $236 million of shares in Q1 2026. In April 2026, the Board authorized a new $2 billion share repurchase program, replacing the prior $5 billion program which was nearly exhausted ($4.7 billion utilized). Dividends declared were $0.89 per share.
Liquidity: As of March 31, 2026, the Company held $820 million in cash and had $2.4 billion in available liquidity from undrawn debt facilities (Receivables Facility and Revolving Credit Facility). Total debt remained stable at approximately $4.1 billion.
Risks and Contingencies:
- Market Conditions: Risks include weakness in the economy, inflation, labor pressures, and trade restrictions (tariffs).
- Operational: Supply chain disruptions, inventory management challenges, and cybersecurity threats.
- Legal: The Company is involved in routine legal proceedings but does not expect a material adverse effect.
Investor Verification Checklist
- Verify the sustainability of the 3.6% sales growth given the offsetting decline in volume.
- Monitor the impact of weak residential construction activity on the U.S. segment's future performance.
- Review the $2 billion new share repurchase authorization and its execution pace relative to cash flow generation.
- Assess working capital trends, specifically the increase in receivables and inventory, to ensure they align with sales growth.
- Confirm the status of the $150 million private placement notes maturing in November 2026.