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Ferguson Enterprises Inc. /DE/ (FERG)·Q3 2025 Earnings Summary

Executive Summary

  • Ferguson delivered a clean beat with revenue $7.62B vs $7.43B consensus* and adjusted EPS $2.50 vs $2.02*, driven by stronger volumes, 50 bps GM expansion to 31.0% and early benefits from streamlining; GAAP EPS was $2.07 as $68M restructuring charges weighed on reported results .
  • Management raised FY25 guidance to low-to-mid single-digit revenue growth (from low single-digit) and 8.5–9.0% adjusted operating margin (from 8.3–8.8%), and trimmed capex to $300–350M (from $325–375M) .
  • U.S. non-residential strength (≈+7% rev) and multi-year growth vectors (HVAC +10%, Waterworks +12%) offset subdued residential; pricing turned broadly flat with commodities still deflationary but improving vs expectations .
  • Likely stock catalysts: guidance raise, estimate beats on revenue/EBITDA, and credible margin setup into Q4 as suppliers move to mid-single-digit price increases and gross margins are expected to remain >30% .

What Went Well and What Went Wrong

  • What Went Well
    • Gross margin expanded 50 bps YoY to 31.0% and adjusted operating margin rose 20 bps to 9.4% on better price capture, moderating deflation, and streamlining benefits .
    • U.S. non-residential revenue grew ~7% with strong large project activity; HVAC +10% and Waterworks +12% underscored execution of multi-year investments and share gains .
    • “The combination of strong volume growth, gross margin actions, moderating deflation and the early benefits of streamlining our business drove adjusted operating profit growth and adjusted operating margin expansion.” — CEO Kevin Murphy .
  • What Went Wrong
    • Reported operating profit declined 3% YoY and GAAP EPS fell 5% due to $68M in non-recurring restructuring charges; adjusted metrics were solidly higher .
    • Residential end-markets remained subdued; U.S. residential revenue grew only ~2% and Canada net sales were down 0.3% (FX/day count headwinds) .
    • Commodity basket remained in mid-single-digit deflation (though improving), and competitive intensity persisted; management noted ongoing uncertainty around tariffs and supplier pricing .

Financial Results

MetricQ3 2024 (YoY base)Q2 2025Q3 2025
Revenue ($USD Billions)$7.31 $6.87 $7.62
Gross Margin (%)30.5% 29.7% 31.0%
Operating Margin (%) (Reported)8.6% 6.0% 8.0%
Operating Margin (%) (Adjusted)9.2% 6.5% 9.4%
GAAP Diluted EPS ($)$2.18 $1.38 $2.07
Adjusted Diluted EPS ($)$2.32 $1.52 $2.50
Adjusted EBITDA ($USD Millions)$722 $502 $770
  • Segment Performance (Q3 2025 vs Q3 2024)
SegmentNet Sales Q3 2024 ($MM)Net Sales Q3 2025 ($MM)YoY %Adj. Op. Profit Q3 2024 ($MM)Adj. Op. Profit Q3 2025 ($MM)YoY %
U.S.6,974 7,288 +4.5% 685 726 +6.0%
Canada334 333 -0.3% 6 8 +33.3%
Total7,308 7,621 +4.3% 674 715 +6.1%
  • KPI Snapshot (Q3 2025)
KPIValue
Organic revenue growth (Total/US/Canada)5.0% / 5.0% / 3.0%
Non-residential revenue growth (U.S.)~7%
Residential revenue growth (U.S.)~2%
Net debt / adj. EBITDA1.2x
Share repurchases (Q3 / YTD)$251M / $759M
Dividend (declared)$0.83; payable Aug 6, 2025; record June 20, 2025
Restructuring charge; expected annual savings$68M; ≈$100M annualized savings
  • Versus Estimates (Consensus vs Actuals)
Metric (Q3 2025)Consensus*ActualSurprise
Revenue ($MM)7,425.3*7,621 +195.7
Adjusted EPS ($) (Primary EPS)2.02*2.50 +0.48
EBITDA ($MM)642.7*770 +127.3
Metric (Q2 2025)Consensus*ActualSurprise
Revenue ($MM)6,767.2*6,872 +104.8
Adjusted EPS ($) (Primary EPS)1.60*1.52 -0.08
EBITDA ($MM)527.8*502 -25.8

Note: Asterisks (*) denote values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net sales growthFY2025Low single-digit growth Low to mid-single-digit growth Raised
Adjusted operating marginFY20258.3%–8.8% 8.5%–9.0% Raised
Interest expenseFY2025$180–$200M $180–$200M Maintained
Adjusted effective tax rateFY2025~26% ~26% Maintained
Capital expendituresFY2025$325–$375M (cut from $400–$450M in Q1) $300–$350M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Pricing/Deflation/Gross MarginQ1: modest deflation (~2%) and 30.1% GM; Q2: deflation persisted, GM 29.7% and margin guide cut .GM 31.0% (+50 bps YoY); pricing broadly flat; commodities still deflationary but improved; gross margins expected to remain >30% into Q4 .Improving; discipline/stability returning.
Large projects/Data centersQ1: solid large project bidding and shipments .Non-res rev ~+7%; strong large capital projects; open orders growing; data center activity remains strong .Strengthening pipeline.
HVAC growth initiativeQ1: early investments, balanced end-market strategy .HVAC +10% (mostly organic); >550 counter-conversions; targeting ~650 by end of 2026 .Accelerating execution.
Waterworks diversificationQ2: Templeton/TEMSCO acquisition (water/wastewater), civil/infrastructure strength .Waterworks +12%; diversification across public works, treatment plants, meters; early-in on large projects .Broad-based outperformance.
Tariffs/supplier price actionsQ2: pressure on margins amid deflation .~2/3 of branded suppliers announced mid-single-digit increases; expect mild inflation near term; uncertainty persists .Pricing turning positive; monitor volatility.
Restructuring/cost savingsQ2: streamlining actions initiated; margin range cut .$68M charge, ~800 positions; ~$100M annualized savings; largely complete .Savings starting to accrue.
Residential demandQ1/Q2: subdued; small positive in Q2 .U.S. residential ~+2%; early signs of supportive new resi bidding in Waterworks, cautious on conversion .Gradual stabilization.

Management Commentary

  • “The combination of strong volume growth, gross margin actions, moderating deflation and the early benefits of streamlining our business drove adjusted operating profit growth and adjusted operating margin expansion.” — CEO Kevin Murphy .
  • “We would anticipate gross margins will remain above 30% as we step through Q4… pricing is moving in a positive direction… roughly two-thirds of our branded suppliers have announced some sort of increase… broadly in the mid-single-digit range.” — CFO Bill Brundage .
  • “Our unique approach to large capital projects… has been a driving force behind non-residential growth of 7% in the quarter.” — CEO Kevin Murphy .
  • “We expect the changes [restructure] to deliver approximately $100 million of annualized cost savings… work is largely complete.” — CFO Bill Brundage .

Q&A Highlights

  • Gross margin sustainability/pricing: Management expects GM >30% into Q4; early benefits from price discipline and moderating deflation; two-thirds of branded suppliers have announced mid-single-digit price increases .
  • Large project pipeline: Open orders and bidding remain strong; data center activity notable; margin profile balanced via appropriate cost-to-serve even if GM mix headwind .
  • Restructuring detail/timeline: ~$68M charge with ~$41M severance; ~800 roles reduced; actions largely complete; ~$100M annualized savings targeted .
  • HVAC growth mechanics: ~10% growth mostly organic; >550 counter-conversions completed; pathway to ~650 by end of 2026; focus on dual-trade contractor convenience and equipment line access .
  • Pull-forward buying/tariffs: Some instances noted but not material to Q3; tariff landscape dynamic (steel/aluminum); expect mild inflation into Q4 .

Estimates Context

  • Q3 2025 beats: Revenue $7.62B vs $7.43B consensus*; Primary/Adjusted EPS $2.50 vs $2.02*; EBITDA $770M vs $643M* — all meaningfully ahead. Q2 2025 had revenue above consensus but modest EPS/EBITDA misses, highlighting the Q3 inflection on margin execution .
  • Street likely to lift FY25 estimates given the raised revenue and margin ranges and improved GM trajectory into Q4; capex trimming also supports FCF optics .

Key Takeaways for Investors

  • Clear beat-and-raise quarter: revenue, adjusted EPS, and EBITDA beats with raised FY25 margin and revenue guidance — a positive setup into Q4; focus near term on pace of mild price inflation and GM >30% commitment .
  • Non-residential and large projects are the growth engine; pipeline (incl. data centers) remains strong, supporting continued share gains .
  • HVAC and Waterworks are delivering multi-year outperformance; execution on counter-conversions and network investments underpins continued above-market growth .
  • Cost actions should add durable operating leverage; ~$100M savings targeted with restructuring largely complete — watch for SG&A leverage in Q4 and FY26 .
  • Monitor tariff path and supplier pricing cadence; two-thirds of branded suppliers have moved mid-single-digit increases — constructive for price/margin but volatile .
  • Capital returns remain robust (buybacks, dividend) with leverage at 1.2x; capex trimmed, improving FCF optics .
  • Key risk checks: residential recovery cadence, commodity price swings (PVC, metals), and tariff/regulatory shifts that could affect supplier pricing and customer demand .

Estimates footnote: Values retrieved from S&P Global.