Margin Expansion and Solid Cash Flow Drive Core & Main’s Growth Strategy in Q3 Fiscal 2025
Disciplined Execution Delivers Higher Margins Amid Modest Top-Line Growth
Core & Main (NYSE:CNM) posted a third quarter marked by resilience and operational discipline, reporting net sales of $2,062 million—up 1.2% over the prior year despite headwinds from soft residential demand. More notable was the company’s 3.3% gain in gross profit, bringing margins to 27.2%, a 60 basis-point improvement versus the year-ago quarter. This reflects successful pricing initiatives, acquisition integration, and improved product mix.
While operating income dipped 1.3% to $220 million, higher gross profit and strict cost management kept net income rising by 2.1% to $143 million. Earnings per share reached $0.72 (up 4.3%), further supported by ongoing share repurchases. Adjusted diluted EPS increased 3.5% to $0.89, emphasizing underlying operational strength.
Margin Expansion Offsets Higher Expenses and Underpins Cash Flow Strength
Even as SG&A expenses rose 7.7% year-over-year to $295 million—largely due to acquisition-related costs and higher personnel and distribution expenses—gross margin initiatives allowed Core & Main to protect profitability. The company’s adjusted EBITDA was essentially stable at $274 million (down just 1.1% from $277 million), and operating cash flow remained robust at $271 million for the quarter.
| Key Q3 Financials | Nov 2, 2025 | Oct 27, 2024 | % Change |
|---|---|---|---|
| Net Sales ($M) | 2,062 | 2,038 | +1.2% |
| Gross Profit ($M) | 561 | 543 | +3.3% |
| Gross Margin | 27.2% | 26.6% | +0.6 pts |
| Net Income ($M) | 143 | 140 | +2.1% |
| Diluted EPS ($) | 0.72 | 0.69 | +4.3% |
| Adjusted EBITDA ($M) | 274 | 277 | -1.1% |
Strategic Expansion and Acquisitions Propel Future Growth
Core & Main continued to build its growth platform through targeted acquisitions—completing its purchase of Canada Waterworks in September 2025—and opening new branches in Houston and Denver. These steps support geographic expansion and product mix diversification, especially in fast-growing areas such as fusible HDPE, treatment plant solutions, and geosynthetics, all of which posted double-digit sales growth. Metering products returned to high single-digit growth as demand for water infrastructure solutions accelerates.
The company also repurchased $50 million in shares and increased its buyback authorization by another $500 million after the quarter, a sign of management’s confidence in its balance sheet and future prospects.
Balance Sheet Flexibility Supports Expansion and Shareholder Returns
As of quarter-end, Core & Main had net debt of $2,083 million—down from $2,420 million the prior year—supported by steady operating cash flow. With $1,226 million in available borrowing capacity on its revolver, the company retains significant flexibility to pursue additional M&A or invest in organic initiatives.
| Balance Sheet Snapshot | Nov 2, 2025 | Oct 27, 2024 |
|---|---|---|
| Net Debt ($M) | 2,083 | 2,420 |
| Operating Cash Flow YTD ($M) | 382 | 386 |
| Share Repurchases ($M, Q3 only) | 50 | N/A |
| Available Borrowing Capacity ($M) | 1,226 | N/A |
Fiscal 2025 Outlook Reaffirmed: Moderate Growth with Strong Margins
Looking ahead, Core & Main reaffirmed its full-year outlook, expecting net sales between $7,600 and $7,700 million (up 2-3% year-over-year), adjusted EBITDA of $920 to $940 million, and operating cash flow between $550 and $610 million. Management points to a healthy pipeline in complex infrastructure projects and continued gains from sales initiatives and geographic reach as reasons for optimism.
Key Takeaway for Investors
While growth rates remain measured given a challenging macro backdrop, Core & Main’s continued margin improvement, prudent cost controls, and active capital allocation position it to outperform as infrastructure spending rebounds. With substantial liquidity, expansion momentum, and management focused on both profitability and long-term shareholder value, the company stands out as a steady player with upside tied to U.S. infrastructure modernization.
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