Ferguson Lifts Outlook After Double-Digit Profit Growth and Strong Non-Residential Performance
Earnings Beat Backed by Higher Margins and Resilient Revenue
Ferguson’s latest quarter showed clear evidence of strong operational execution, even in the face of ongoing uncertainty in the broader construction market. For the quarter ended October 31, 2025, net sales rose 5.1% to $8.17 billion, underpinned by 4.2% organic growth and further bolstered by acquisitions. Notably, non-residential revenue in the U.S. surged 12%, more than offsetting softness in residential activity, where sales dipped only 1%.
The company’s gross margin climbed to 30.7%, a 60 basis-point improvement, as disciplined cost control helped drive operating leverage. Operating profit reached $771 million (up 15.9% year-over-year), with adjusted operating profit up 14.4%. Diluted earnings per share jumped to $2.90—a robust 23.9% increase—supported by share buybacks and margin gains.
| Key Financial Metrics | Q4 2025 | Q4 2024 | Change |
|---|---|---|---|
| Net Sales ($B) | 8.17 | 7.77 | +5.1% |
| Gross Margin | 30.7% | 30.1% | +60 bps |
| Operating Margin | 9.4% (9.9% adj.) | 8.6% (9.1% adj.) | +80 bps |
| EPS (Diluted) | 2.90 (2.84 adj.) | 2.34 (2.45 adj.) | +23.9% (+15.9% adj.) |
Non-Residential Momentum Offsets Housing Headwinds
Half of Ferguson’s U.S. business now comes from non-residential customers, where revenue jumped by double digits thanks to large project activity, waterworks demand, and consistent bidding opportunities. By contrast, residential markets remained challenging, with weak new housing starts and sluggish repair and maintenance spending. However, Ferguson managed to limit residential revenue declines, demonstrating market share gains even as overall market volumes fell.
Canada showed slower progress, with net sales rising just 2.2%, mostly from acquisitions, while core profit softened due to ongoing market sluggishness and a non-core divestment.
| Regional Highlights | US | Canada |
|---|---|---|
| Net Sales Growth | +5.3% | +2.2% |
| Adjusted Operating Profit Change | +15.6% | -30.4% |
| Organic Revenue Growth | +4.4% | +0.7% |
Guidance Raised Amid Improved Profitability
On the strength of its latest results, Ferguson nudged up its calendar 2025 guidance. Management now projects approximately 5% net sales growth and a slightly improved adjusted operating margin range of 9.4–9.6%. This signals cautious optimism as the company looks to benefit from multi-year tailwinds in both residential and non-residential markets.
| Updated 2025 Guidance | Current | Prior |
|---|---|---|
| Net Sales Growth | ~5% | Mid-single digit |
| Adjusted Operating Margin | 9.4% - 9.6% | 9.2% - 9.6% |
| Capital Expenditures | ~$350M | $300-350M |
| Interest Expense | ~$190M | $180-200M |
Financial Strength Fuels Shareholder Returns
Ferguson continues to return capital to shareholders through share repurchases ($208 million during the quarter) and a 7% increase in the quarterly dividend to $0.89 per share. Net debt to adjusted EBITDA now stands at just 1.1x, reflecting prudent financial management and a commitment to investment-grade credit metrics.
Key Takeaway for Investors
Ferguson’s performance this quarter showcases its ability to drive margin and profit growth—even as market conditions remain uneven. Non-residential strength, strategic acquisitions, and cost discipline provide resilience. While risks tied to economic uncertainty persist, the raised guidance and balance sheet strength offer a constructive backdrop for continued outperformance. Investors will want to monitor how the non-residential trend develops and whether residential markets stabilize as the year progresses.
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