Ferguson plc

Second-quarter net sales were $8.8 billion, up 4.6% year over year, driven by 3.8% organic growth and 1% acquisition growth, partially offset by a 0.2% divestment impact in Canada. Gross margin was 31%, down 20 basis points year over year, operating profit increased 2.9% to $932 million, operating margin was 10.7%, and diluted EPS was $3.39, up 5.3%. For the first half, net sales were $16.2 billion, up 4.2%; gross margin was 31%, flat year over year; operating profit grew 5.1% to $1.6 billion; and diluted EPS rose 7% to $5.67. Full-year 2026 guidance was raised to mid-single-digit net sales growth and an operating margin of 9.5%-9.8%; interest expense was held at about $200 million, CapEx was raised to $375 million-$425 million, and the effective tax rate is expected to be about 26%. The FloWorks deal is valued at about $1.6 billion enterprise value, at roughly 10x EBITDA including expected synergies of about $45 million, and leverage is expected to rise from 1.3x to about 1.8x net debt-to-EBITDA upon closing.

Kevin Murphy framed the quarter as evidence that Ferguson is outperforming in a mixed market, with strength in large capital projects, HVAC, water infrastructure, and industrial end markets. He emphasized the company’s balanced business mix, multi-customer-group model, and early engagement in large projects as key competitive advantages. His tone was upbeat and confident, especially around FloWorks, which he said expands Ferguson’s technical depth and addressable market.

Bill Brundage highlighted that second-quarter sales of $8.8 billion were up 4.6%, gross margin was 31% and down 20 basis points year over year, operating profit rose 2.9% to $932 million, and EPS increased to $3.39. He noted first-half operating cash flow of $716 million was down about $400 million because of working-capital investment and tax timing, while CapEx was $234 million and free cash flow was about $500 million. On capital allocation, he reiterated the 1x-2x leverage target, said FloWorks would lift leverage to about 1.8x, and said buybacks would resume when leverage moves back toward the lower end of the range.

Analysts focused on the sustainability of large capital project growth, the second-half organic growth shape, inflation trends, tariffs, inventory, HVAC momentum, and the rationale for FloWorks. Management said backlog and open orders remain strong across commercial mechanical, industrial, and waterworks, and that large capital projects are a tailwind over the next couple of years even though timing is lumpy. On pricing and tariffs, Bill Brundage said inflation eased from mid-single-digits to the upper part of low-single-digits, commodities were about flat, PVC remained in deflation, and tariff refunds have been modest and not material. Management also said inventory is elevated in HVAC and large projects but should normalize in HVAC by year-end, while FloWorks was described as adding both customer relationships and capabilities in valves, automation, pumps, and flow control.