Ferguson Enterprises Inc. (FERG) FY2025 10-KT and Q2 FY2026 10-Q Summary

Business

Source: Transition Report on Form 10-KT for the period August 1 – December 31, 2025, accession 0002011641-26-000006 (Item 1 and Note 2).

Ferguson is North America's largest value-added distributor of what it calls essential water and air solutions: plumbing, heating, ventilation and air conditioning (HVAC), appliances, lighting, pipes, valves and fittings (PVF), and water and wastewater products. It sells to specialized professional contractors in residential and non-residential construction, a market it sizes at $340 billion. It earns its revenue by buying from a large, fragmented supplier base and reselling to an even larger, fragmented customer base through branches, distribution centers, counter service, showrooms, inside and outside sales teams and e-commerce. On top of the products it adds services such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation and project management. Residential and non-residential markets each account for roughly half of net sales. About two-thirds of sales go to repair, maintenance and improvement (RMI) work and about one-third to new construction. The United States produces 95% of net sales and Canada 5%.

Segments. Ferguson reports two segments, divided by geography:

• United States (95% of net sales in the transition period and in each of fiscal 2025, 2024 and 2023). It operates mainly under the Ferguson brand. At December 31, 2025 it had 1,517 branches, 9 regional distribution centers and five market distribution centers, with about 32,000 associates serving all 50 states with same-day and next-day product availability.
• Canada (5% of net sales). It operates mainly under the Wolseley brand and supplies plumbing, HVAC and refrigeration products to residential and commercial contractors, water and wastewater treatment products, and PVF to industrial customers. At December 31, 2025 it had 212 branches, one market distribution center and about 3,000 associates.

Customer groups. Ferguson reports US net sales by customer group. In the transition period the mix was: Waterworks 24%, Ferguson Home 21%, Commercial/Mechanical 15%, Residential Trade Plumbing 15%, HVAC 11%, Industrial 7%, Facilities Supply 4% and Fire & Fabrication 3%. Waterworks and Commercial/Mechanical have grown as a share of sales since fiscal 2023, when they were 21% and 12%. Ferguson Home has shrunk from 24% over the same period. No single customer accounted for more than 1% of net sales in the transition period or fiscal 2025.

Scale and supply chain. At December 31, 2025 the network comprised 1,729 branches, 9 regional distribution centers, six market distribution centers, three import centers, about 6,200 fleet vehicles and about 35,000 associates. Ferguson sells more than 1 million unique products a year from about 37,000 suppliers, and no supplier accounts for more than 5% of inventory purchases. About 95% of products sold in the US come from US-based suppliers, and about 90% of products sold in Canada come from Canada-based suppliers. Products containing large amounts of commodity-priced plastic, copper and steel can make up about 15% of annual net sales. The business is not highly seasonal, although sales volumes peak in the North American spring and summer. Besides branded goods, Ferguson sells its own private-label ("Own Brand") products.

Competitive position and strategy. Ferguson's markets are highly fragmented: a few large competitors face many small local and mid-size regional distributors, and no single distributor dominates any market. Ferguson describes itself as one of the top distributors in most of the end markets it serves: residential, commercial, civil/infrastructure and industrial. Acquisitions are a core part of the growth strategy. They include bolt-on deals that extend the branch network and deals that add capabilities. Management sees "significant opportunity" for continued consolidation.

Corporate background. The group once had businesses across Europe, Canada and the United States, and it sold its European operations after shifting its focus to North America in the early 2000s. On August 1, 2024 a merger moved the ultimate parent company to the United States: Ferguson plc became a wholly owned subsidiary of Ferguson Enterprises Inc., a Delaware corporation headquartered in Newport News, Virginia. The shares trade on the New York Stock Exchange. The secondary London listing has since been cancelled (see Subsequent events).

Risk factors

Source: Form 10-KT, accession 0002011641-26-000006, Item 1A. The June 30, 2026 Form 10-Q (accession 0002011641-26-000040) reports no material changes to these risk factors.

The company's most important risks, condensed:

• Construction-cycle and macroeconomic exposure. Results depend on US residential and non-residential construction (95% of transition-period sales came from the US). Recent growth leaned on large capital projects; if those slow or are cancelled, non-residential demand would weaken. Higher interest or mortgage rates have slowed end markets before, and mortgage rates could stay high even if the Federal Reserve keeps cutting. A shortage of skilled trade workers can lead customers to delay or skip orders.
• Competition and disintermediation. Some suppliers are integrating vertically and selling direct to customers. They can often sell at lower prices and earn higher margins than Ferguson. New entrants, competitors with lower-cost or technology-led models (including generative and agentic AI) and non-traditional competitors that buy traditional distributors could take share and squeeze margins.
• Product price volatility. Commodity-linked products (plastic, copper, steel) and fuel expose margins to price swings. If inflation cannot be passed on in time, margins fall. Sustained deflation combined with rising operating costs has squeezed profit margins before.
• Tariffs and trade policy. Tariffs announced by the US in 2025, and retaliation by other countries, could raise product costs that Ferguson cannot fully pass on, and could hurt demand if customers delay projects. If tariffs are lifted, Ferguson could be left holding higher-cost inventory while prices fall. Trade measures can arrive with little notice.
• Supplier dependence and rebates. Supply agreements can generally be ended by either party at short notice. Supplier rebates tied to purchase volumes lower product costs. If Ferguson fails to qualify for them, or suppliers consolidate and cut them, gross margin and net income would suffer.
• Acquisition risk. Acquisitions are central to the growth model. They bring risks of integration problems, liabilities missed in due diligence, cybersecurity exposure from acquired systems, goodwill impairment and higher leverage if deals are funded with debt. The pending FloWorks acquisition is described under Subsequent events.
• Debt, ratings and capital access. Total debt was $4.1 billion at December 31, 2025, and part of it carries variable interest rates. The company says larger-than-planned acquisitions or shareholder payouts that raise leverage could put pressure on its credit ratings and increase borrowing costs. Refinancing at maturity could come on worse terms.
• Technology, cybersecurity and payments. Ferguson relies on older systems that it is replacing or upgrading, including its enterprise resource planning systems, and on outside service providers. Its pilot use of generative AI could add cybersecurity and data risks. Payment processing exposes it to fraud and interchange-fee costs. The business ties up a lot of working capital, and a weaker economy could make receivables harder to collect.
• People and labor costs. Hiring competition, wage and benefit pressure, slower backfilling of skilled roles and possible union organizing could raise costs or slow execution.
• Product quality, private label and safety. Ferguson does not control the quality of products made by third parties. Own Brand products add product-liability, recall, regulatory and sourcing exposure. A large truck fleet and on-site operations carry health, safety and accident liability.
• Tax. Tax authorities could challenge where certain subsidiaries are tax-resident. That could cost the company treaty benefits and raise withholding taxes on dividends and interest paid between subsidiaries. Changes in tax law and audits could also raise the tax charge.
• Pensions. The largest defined benefit plan is the closed UK plan. Its trustee has bought a bulk annuity policy, so deficit-reduction contributions are no longer expected. However, regulator or trustee action, changes in pension law, or the insurer failing to pay could force significant unplanned contributions.
• Legal and regulatory. Ferguson faces ordinary-course litigation, including product liability, asbestos and personal injury claims. Environmental rules on PFAS, extended producer responsibility and greenhouse gas reporting are changing, and the company points to wider regulatory uncertainty under the current US administration.
• Capital returns. Ferguson is a holding company that depends on its subsidiaries for cash to pay dividends. Dividends and share repurchases depend on financial performance and Board discretion.

Management's discussion, transition period (five months ended December 31, 2025)

Source: Form 10-KT, accession 0002011641-26-000006, Item 7 and Notes 2, 16 and 17. The comparison period, the five months ended December 31, 2024, is unaudited.

Results. Over the five-month transition period, net sales were $12,833 million, up 4.5% from $12,279 million. The increase came from low to mid-single-digit price inflation and a 1.0% contribution from acquisitions, and was led by growth in US non-residential markets. Gross profit rose 7.5% to $3,930 million, and gross margin widened to 30.6% from 29.8%. Management credits this to actions "to better capture the value provided to customers." SG&A rose 3.5% ($90 million), but fell as a share of sales to 20.9% from 21.1% as operating leverage offset higher performance-driven incentive costs. Operating profit rose 20.0% to $1,099 million from $916 million. Adjusted operating profit, which excludes acquired-intangible amortization and restructuring, rose 17.3% to $1,153 million from $983 million.

Restructuring was a small net credit. A $20 million gain on selling a US distribution center closed in the fiscal 2025 restructuring more than offset $14 million of charges for branch closures and other streamlining in Canada. There was also $3 million of corporate restructuring cost related to the US redomicile. The effective tax rate fell to 21.6% from 24.5%, helped by the release of uncertain tax positions as statutes of limitations lapsed. Net income rose 23.6% to $786 million. Diluted EPS was $4.01, up 26.5% from $3.17, and adjusted diluted EPS was also $4.01, up 18.6% from $3.38. Share repurchases added to EPS growth.

Segments. US net sales rose 4.6% to $12,200 million, including 0.8% from acquisitions. US non-residential sales, roughly half the segment, grew about 11%, driven by waterworks and commercial/mechanical work, including large capital projects. Residential sales fell about 1% amid weak housing starts and permits and soft RMI work. US adjusted operating profit rose 19.0% to $1,160 million from $975 million. Canada net sales rose 2.6% to $633 million. Acquisitions added 4.8%, while lower volume, a non-core divestment (2.4%) and currency (0.7%) offset part of that. Canada adjusted operating profit fell to $18 million from $30 million because of higher operating costs.

Cash flow and capital. Operating cash flow in the transition period was $859 million. Ferguson spent $185 million on capital projects (new market distribution centers, branches and technology) and $21 million on acquisitions. It paid $326 million in dividends and repurchased $407 million of shares. In September 2025 it issued $750 million of 4.35% senior notes due March 2031 (net proceeds $747 million). It also repaid $400 million of private placement notes at maturity and a net $375 million under its receivables facility. At December 31, 2025, cash was $557 million, total debt was $4.1 billion and undrawn facilities provided $2.4 billion of liquidity. By that date Ferguson had completed about $4.4 billion of a $5.0 billion repurchase authorization. Management names inventory valuation, specifically reserves for slow-moving, obsolete and damaged stock, as its most critical accounting estimate.

Longer view: the July fiscal years. The 10-KT does not discuss fiscal 2025 against fiscal 2024, but its statements of earnings show the trajectory. Net sales were $29,734 million in fiscal 2023, $29,635 million in fiscal 2024 and $30,762 million in fiscal 2025 (each a year ended July 31). Over the same years operating profit was $2,659 million, $2,652 million and $2,606 million, and diluted EPS was $9.12, $8.53 and $9.32. Fiscal 2025 operating profit was held back by $73 million of business restructuring, mostly in the US: $45 million of severance and $15 million of non-cash branch and facility costs. Fiscal 2023 included a $107 million impairment of previously capitalized software.

Calendar 2025. Ferguson now gives guidance and comparisons on a calendar-year basis. In its February 24, 2026 earnings release (Form 8-K, accession 0002011641-26-000002), it reported unaudited calendar 2025 net sales of $31.3 billion, up 5.0%, with diluted EPS of $10.16, up 24.2%. Adjusted diluted EPS was $10.58, up 13.4%. During that year it bought eight businesses for $276 million, with combined annual revenue above $300 million.

Current quarter, second quarter of 2026 (three months ended June 30, 2026)

Sources: Form 10-Q for the quarter ended June 30, 2026, accession 0002011641-26-000040 (Part I, Items 1 and 2); earnings release furnished on Form 8-K on August 10, 2026, accession 0002011641-26-000038 (guidance, named acquisitions, dividend, leverage ratio); first-quarter earnings release on Form 8-K, accession 0002011641-26-000028 (first-quarter acquisitions).

What changed this quarter. Growth continued to come from non-residential markets, and residential returned to growth on HVAC. Margins stayed close to the prior-year quarter's, which had been temporarily lifted by supplier price increases.

• Sales. Net sales were $8,751 million, up 4.6% from $8,363 million, from low single-digit price inflation, higher volume and 1.0% from acquisitions. The earnings release puts organic growth at 3.8%, partly offset by 0.2% from a Canadian divestment.
• United States. US net sales rose 5.0% to $8,343 million. Non-residential sales grew about 8%, led by commercial/mechanical, industrial and waterworks, including large capital projects. The company reports growth in open order volumes and strong bidding activity. Residential sales rose about 2% on HVAC, even though new residential construction stayed weak and RMI work stayed soft. US adjusted operating profit rose 2.9% to $925 million.
• Canada. Canadian net sales fell 1.9% to $408 million. Divesting non-core businesses cost 3.6% and volume was lower, partly offset by price. Canada adjusted operating profit was $22 million, down from $23 million.
• Margins and costs. Gross margin was 31.0%, down from 31.2%. The company says the prior-year quarter was temporarily lifted by the timing and extent of supplier price increases. SG&A rose 4.1% to $1,718 million but fell slightly as a share of sales, to 19.6% from 19.7%. Restructuring cost $2 million, against $25 million a year earlier, when the prior-year streamlining program was under way.
• Profit. Operating profit rose 6.1% to $893 million (a 10.2% operating margin). Adjusted operating profit rose 2.9% to $932 million (a 10.7% margin). The effective tax rate rose to 21.3% from 19.7% because of adjustments related to prior-year tax positions. Net income rose 5.0% to $666 million. Diluted EPS was $3.43, up 6.9% from $3.21, and adjusted diluted EPS was $3.39, up 5.3% from $3.22. Share repurchases helped lift EPS.
• Customer mix (US, quarter). Waterworks 24%, Ferguson Home 20%, Commercial/Mechanical 16%, Residential Trade Plumbing 14%, HVAC 13%, Industrial 7%, Facilities Supply 4%, Fire & Fabrication 2%.

First half of 2026. For the six months, net sales rose 4.2% to $16,223 million and operating profit rose to $1,505 million from $1,349 million. Net income rose 10.3% to $1,080 million. Diluted EPS was $5.56 against $4.94, and adjusted diluted EPS $5.67 against $5.30. The first half of 2025 carried $72 million of business restructuring charges, of which $45 million was severance and $27 million non-cash branch and facility costs.

Cash flow and working capital. Operating cash flow fell to $716 million in the first half from $1,123 million. The company attributes the $407 million drop mainly to more cash tied up in working capital and to the timing of income-tax and cash incentive payments after the switch to a calendar year-end. Higher receivables, from both higher sales and the timing of collections, and heavier inventory buying were partly offset by the timing of vendor payments. Capital expenditure rose to $234 million from $141 million.

Acquisitions. Ferguson bought seven businesses in the first half for total consideration of $638 million. Of that, $621 million was paid in cash, or $583 million net of cash acquired. The deals added $288 million of customer-relationship intangibles and $251 million of goodwill, all of the goodwill attributed to the US. In the first quarter it bought Technology Sales Associates, Inc. and Chesapeake Environmental Equipment, LLC (Waterworks). The five second-quarter deals were:

• Carrier Great Lakes (HVAC; seven locations in Michigan and Ohio)
• Dealers Supply Company (HVAC; seventeen locations in the Southeast)
• New England Applied Products (Commercial/Mechanical; a manufacturer's representative and engineering firm specializing in commercial HVAC)
• Hamlett Environmental Technologies Company (Waterworks; water and wastewater process solutions in Michigan)
• PRD Technologies Group (Industrial; specialty valves, flow control and process equipment, ten locations)

Prices for the individual deals were not disclosed. Including FloWorks, the eight acquisitions announced so far in 2026 carry about $1.4 billion of combined annual revenue.

Capital returns and balance sheet. Ferguson paid $347 million in dividends and repurchased $438 million of shares in the first half, including $202 million in the second quarter. On April 30, 2026 the Board approved a new repurchase program of up to $2 billion. It replaced the September 2021 program, under which $4.7 billion of the $5.0 billion authorized had been used. By June 30, $136 million had been repurchased under the new program. Ferguson borrowed a net $775 million in the half: $525 million under the receivables facility and $250 million under the revolving facility. At June 30, 2026, cash was $437 million, total debt was $4.9 billion, undrawn facilities provided $1.6 billion of liquidity, and net debt was 1.3 times adjusted EBITDA. On April 2, 2026 the revolving facility's maturity was extended to April 2, 2031. Upcoming debt maturities are $150 million of private placement notes in November 2026 and $300 million of senior notes in April 2027.

Guidance (calendar 2026, raised August 10, 2026). Ferguson raised its 2026 sales outlook and narrowed its margin range. The updated guidance does not include FloWorks:

• Net sales: mid-single-digit growth (previously low to mid-single-digit growth)
• Adjusted operating margin: 9.5%–9.8% (previously 9.4%–9.8%)
• Interest expense: about $200 million (unchanged)
• Capital expenditures: $375–$425 million (previously $350–$400 million)
• Adjusted effective tax rate: about 26% (unchanged)

The Board declared a quarterly dividend of $0.89 per share, payable October 7, 2026 to stockholders of record on August 21, 2026.

Subsequent events

Sources: Form 10-Q, accession 0002011641-26-000040, Note 14 (Subsequent event) and Liquidity and Capital Resources; Form 8-K of July 13, 2026, accession 0002011641-26-000035 (acquisition announcement); Form 8-K of August 11, 2026, accession 0001552781-26-000433 (acquisition credit facilities); Form 8-K filed August 14, 2026, accession 0001140361-26-033163 (senior notes); earnings release of August 10, 2026, accession 0002011641-26-000038 (London listing).

• Agreement to acquire FloWorks (FWI Holdings, Inc.) for about $1.6 billion. On July 13, 2026, Ferguson announced that it had entered into a definitive agreement to buy FWI Holdings, Inc. ("FloWorks") from Wynnchurch Capital, L.P. in an all-cash deal that values FloWorks at an enterprise value of about $1.6 billion. FloWorks is a Houston-based industrial distributor and service provider of highly technical valves and flow control solutions, founded in 1961. It had about $1 billion of revenue in 2025, more than 60 locations in the United States and Canada (mainly along the Gulf Coast and across the southern US), more than 1,000 associates, 25 service and repair centers and 15 brands. It serves chemicals, refining, power generation, semiconductors, pharmaceuticals and datacenters. Ferguson says the price is about 10 times FloWorks' trailing-twelve-month adjusted EBITDA including about $45 million of expected synergies. It expects the deal to add to adjusted EPS immediately, before one-off transaction and integration costs, and expects to stay within its 1–2x net debt to adjusted EBITDA target after closing. The deal will be paid for with available cash and committed borrowings, with committed financing from JPMorgan Chase Bank, N.A. Closing was expected in the third quarter of 2026, subject to customary conditions and regulatory approvals. Ferguson's SEC filings through mid-October 2026 do not report the closing. Its next results, for the period ending September 30, 2026, are scheduled for November 9, 2026.
• Acquisition financing facilities (August 11, 2026). Ferguson signed two unsecured credit agreements with JPMorgan Chase Bank, N.A. as administrative agent, guaranteed by Ferguson UK Holdings Limited:
  • A bridge facility of up to $700 million, maturing 364 days after funding. It is available only if other bank or capital-markets financing is not in place by the time the acquisition completes.
  • A term loan of up to $900 million, maturing three years after funding.

Both can fund only when the FloWorks acquisition completes, at the same time. Both bear interest at Term SOFR plus 0.750%–1.250% (or base rate plus 0.000%–0.250%), depending on Ferguson's senior unsecured debt rating. Both cap consolidated net leverage at 3.50 times, rising temporarily to 4.00 times for the four quarters after certain material acquisitions.

• $1.2 billion senior notes offering (August 14, 2026). Ferguson Enterprises Inc. issued $700 million of 4.800% senior notes due August 14, 2029 and $500 million of 5.600% senior notes due August 14, 2036. The notes were priced on August 11, 2026 at 99.903% and 99.743% of par and are fully and unconditionally guaranteed by Ferguson UK Holdings Limited. The 8-K does not state how the proceeds will be used; it refers to the prospectus supplement.
• London listing cancelled. On June 16, 2026 Ferguson announced it would cancel its secondary listing on the London Stock Exchange, and the cancellation took effect on July 20, 2026. The shares remain listed on the New York Stock Exchange.