FERG Q2 2026 - Post-Call Earnings Update

Event: Quartr Q2 2026 event Retrieved: 2026-08-11T12:20:00Z Comparison mode: maximal Scorecard contract: v1

Consensus scorecard

• Consensus scorecard, bulleted equivalent (carried forward unchanged from the preliminary report for this event):
  • Revenue / consolidated net sales: Quartr actual $8,751m against API Ninjas consensus $8,676.667m - Beat +$74.333m, +0.9%.
  • EPS / adjusted diluted: Quartr actual $3.39 against API Ninjas consensus $3.30 - Beat +$0.09, +2.7%.

Management and Q&A

• THE GUIDANCE RAISE IS ABOUT FERGUSON, NOT THE MARKET. Asked by John Lovallo (UBS) whether the raise was a function of year-to-date results or completed M&A, the CFO said the market view is essentially unchanged from the start of the year: markets broadly flat, residential down low- to mid-single digits, non-residential up low- to mid-single digits. What changed is that first-half performance ran ahead of the company's own expectations. This directly answers the preliminary's question about what drives the implied second-half acceleration: management points to first-half outperformance plus building open orders, not a changed market call.
• The second-half shape was quantified in relative terms. The CFO told Ryan Merkel (William Blair) that growth strengthened during the quarter, that July was "a touch better than Q2," and that he expects the third-quarter growth rate to be a bit stronger than the second-quarter rate with second-half revenue stronger than the first half. He confirmed the low end of the operating margin guide was raised and reiterated the 9.5% to 9.8% full-year range against last year's step-up from 9.1% to 9.6%.
• LARGE CAPITAL PROJECTS SIZED AND THE BACKLOG DIRECTION GIVEN. Management stated that large capital projects represent a mid- to high-single-digit percentage of total Ferguson revenue and continue to trend up within that range. Commercial mechanical grew 15% on a 20% prior-year comparable and industrial grew 18% on a 6% comparable. Backlogs and open orders continue to build across commercial mechanical, industrial and waterworks, and are running above the growth rates delivered in the quarter. Management expects the category to be a tailwind over the next couple of years but cautioned that the long gestation period makes revenue timing in any single quarter hard to predict. Waterworks was described as having had a lumpier quarter.
• The non-residential strength is broadening beyond data centers, which management named as still the strongest area. Growth is also coming from power generation, chemical, food and beverage, general manufacturing, mining and minerals, and water and wastewater treatment. Traditional core non-residential activity, specifically office, warehouse, education and hospitality, has NOT shown a tremendous amount of improvement. Management attributes its win rate to early engagement in the project supply chain, and says labor availability and supply chain pressure make that early engagement more valuable.
• INFLATION DECOMPOSED, WHICH THE RELEASE DID NOT DO. The preliminary flagged that the release described price inflation only as low single digits without a volume-versus-price split. The CFO broke it down: inflation ticked down from mid-single digits to the upper portion of low-single digits in the quarter. On branded and finished goods, prior-year increases are rolling over as expected and inflation there is now low-single-digit. On commodities, the PVC price increases flagged last quarter "struggled a bit to stick in the marketplace," PVC was still down roughly double digits in the quarter, and the commodity basket was about flat. He also sized commodities at about 15% of overall revenue and guided the full calendar year and the back half to the low-single-digit range.
• TARIFF EXPOSURE ADDRESSED FOR THE FIRST TIME. Asked by Phil Ng (Jefferies) about vendors receiving tariff refunds, the CFO said over 90% of Ferguson's purchases are from branded manufacturers, that Ferguson has received no tariff refunds from those suppliers and does not expect to, and that very few branded supplier price increases cited tariffs as the reason. Ferguson is the importer of record for a small portion of its own-brand products, has sought refunds where appropriate, and has received a modest amount that is not material at the full-year level.
• GROSS MARGIN PATH GIVEN, WHICH RESOLVES THE PRELIMINARY'S QUESTION ON PERSISTENCE. The CFO placed the current gross margin in a 30% to 31% range and said the quarter delivered at the top end of it, crediting pricing tools and technology, product strategy and own-brand growth, with a touch of expected seasonal underlying compression. Looking forward he flagged that the third quarter laps last year's strongest gross margin of 31.3% and said to expect to be "a bit down on that." His framing for the year is a touch of gross margin compression after an outsized prior year, offset by SG&A leverage.
• SG&A AND THE LAPSED COST PROGRAM. SG&A growth stepped up to just over 4% in the second quarter, as management had flagged, and the company still delivered 10 basis points of operating leverage. For the second half the CFO expects similar growth rates, possibly a touch higher on continued investment, citing a summer trainee class of 200 associates and more trainees in September. He still expects overall operating leverage for the year.
• Contribution margin was raised by Baird as approximately 7% in the second quarter against a targeted 11% to 14% rate. The CFO attributed the gap to the slight gross margin compression against outsized prior-year second- and third-quarter gross margins and said the third quarter could be similar, while reiterating the 9.5% to 9.8% full-year operating margin range.
• HVAC AND THE RESIDENTIAL PICTURE. HVAC grew 11% in the quarter on a prior-year growth rate of 1%. Management said residential remains in a challenged spot but is improving slightly through the year as expected, and that the improvement is principally HVAC-driven and will offset continued weak residential market conditions in the second half. The 650-counter rollout is complete; future growth comes from expanding locations in blended plumbing and HVAC formats, plus M&A including Dealers Supply and Carrier Great Lakes.
• A useful correction on dual trade. Asked by Keith Hughes (Truist) to size the dual-trade opportunity, management first said roughly two-thirds of the market is engaged in dual trade, then clarified under follow-up that it is about ONE-THIRD of Ferguson's own customer base doing dual trade today, expected to grow. Management acknowledged it does not measure this at individual-customer granularity and that crossover at one- to two-truck operators is not captured accurately.
• INVENTORY BUILD EXPLAINED. Asked by Sam Reid (Wells Fargo) about inventory days being up year over year and any pre-buy activity, the CFO said the build is deliberate in two areas: HVAC, leaned into seasonally to support dual-trade and organic growth initiatives, which he expects to normalize by year end; and large capital projects inventory, which will continue to build and which he said carries quite good returns on capital. No pre-buy or one-time driver was cited.
• FLOWORKS RATIONALE, BUT STILL NO PRICE. Management described FloWorks as a strong cultural fit whose value is customer relationships plus capabilities: pipe flange and fittings, valve and valve automation, rotating equipment and pumps, and flow control valve repair, layered with MRO capability for a growing installed base. Named end markets are power generation, chip manufacturing, chemical, downstream oil and gas, general manufacturing, mining, data centers, water, and pharma and biotechnology. Asked directly by Ryan Merkel whether the real advantage was customer relationships given product overlap, management confirmed it is the relationships and the capabilities. Neither purchase price, financing, leverage effect, nor expected revenue contribution was disclosed.

Guidance and KPI clarification

• Guidance and KPIs, bulleted equivalent: full-year net sales growth guidance stands at mid-single digit, raised from low-to-mid single digit, against 4.2% delivered in the first half. The full-year adjusted operating margin range is 9.5% to 9.8%, with the low end raised from 9.4%, against a prior year in which operating margin stepped up from 9.1% to 9.6%. Third-quarter organic growth is expected to be a bit stronger than the second quarter, supported by a July exit rate a touch better than Q2. Price inflation is guided to the low-single-digit range for the full calendar year and the back half, having ticked down to the upper portion of low-single digits in the second quarter. Third-quarter gross margin is expected to be a bit below the 31.3% prior-year comparable, within a working range management puts at 30% to 31%. Second-half SG&A growth is expected to be similar to the just-over-4% delivered in Q2, possibly a touch higher on investment including a 200-associate summer trainee class and more trainees in September, with overall operating leverage still expected for the year. The market backdrop is unchanged from the start of the year. FloWorks remains excluded from guidance with no purchase price, financing or contribution disclosed.
• Segment growth rates stated on the call: commercial mechanical +15% on a 20% prior-year comparable, industrial +18% on a 6% comparable, HVAC +11% on a 1% comparable. Waterworks was described as lumpier without a growth rate attached in the Q&A.
• Structural sizing given on the call: large capital projects are a mid- to high-single-digit percentage of total revenue and trending up; commodities are about 15% of revenue; over 90% of purchases are from branded manufacturers; about one-third of Ferguson's customer base is dual trade today.

Updated neutral analysis

• What the call resolved from the preliminary: the driver of the second-half acceleration (own outperformance and open orders, not a changed market view); the price-versus-commodity composition of inflation; whether the gross margin decline persists (yes into Q3 against a 31.3% comp, within a 30%-31% working range); the FloWorks strategic rationale; the inventory build; and the SG&A trajectory after the lapsed cost program.
• What the call did not resolve: the FloWorks purchase price, financing and leverage effect against the stated one-to-two-times target, which was asked around but never disclosed; how much of the roughly $1.4bn of annualized revenue from the eight year-to-date acquisitions is already in the reported run rate; the forward run rate of the restructuring line, which fell to $2m over the rolling twelve months from $84m; and any leading indicator for residential beyond the HVAC growth rate and the July exit-rate comment.
• The quality of the quarter reads better after the call than from the release alone. The revenue beat was 0.9% and the adjusted EPS beat 2.7%, both narrow, but the call establishes that growth strengthened through the quarter, that July was better again, that backlogs exceed delivered growth rates in three of the project-facing businesses, and that the guidance raise came from execution rather than a friendlier market.
• The main tension is margin. Management is guiding gross margin down against a tough third-quarter comp while SG&A growth steps up on deliberate investment, and the second-quarter contribution margin of roughly 7% sat well below the 11% to 14% target. The full-year operating margin range of 9.5% to 9.8% therefore depends on SG&A leverage carrying a gross margin headwind, which is what management explicitly said the year's shape would be.
• The residential exposure remains the weakest-visibility part of the business. Management reiterates residential markets down low- to mid-single digits with only slight improvement, and the offset is HVAC share gain rather than market recovery. Roughly one-third dual-trade penetration of Ferguson's own customer base is a lower figure than the two-thirds market statistic that was initially given, and management was candid that it cannot measure it precisely.
• Nothing on the call changed the consensus scorecard. Both rows are carried forward from the preliminary report unchanged. Nothing on the call resolved the preliminary's disclosed Quartr text-layer digit defect either, which is why no release line items are restated here.

Market context and limitations

• SCOPE OF TRANSCRIPT READ: the transcript for Quartr event 664852 is complete and not live. Only the Q&A section was read, in full, across all 64 paragraphs, covering questions from Matthew Bouley, John Lovallo (UBS), Phil Ng (Jefferies), Sam Reid (Wells Fargo), Ryan Merkel (William Blair), Inara for David Manthey (Baird) and Keith Hughes (Truist), plus the CEO's closing remarks. THE PREPARED REMARKS SECTION WAS NOT READ. Any figure or announcement made only in the prepared remarks and not repeated in the Q&A is therefore absent from this update.
• Speaker attribution note: the Quartr transcript payload for the Q&A did not carry speaker names on the paragraph records read here. Management responses are attributed to "the CFO" where the speaker self-identified as Bill in the text or the answer concerned financial detail, and to "management" otherwise. Analyst names come from the operator's introductions in the transcript.
• API Ninjas price snapshot for FERG returned $263.78 on NYSE with volume of 2,113,060. That price and volume are identical to the snapshot recorded in the preliminary report at 2026-08-10T20:57:57Z, before this retrieval, so the provider is re-serving a stale quote and it carries no information about any post-call reaction. No market reaction to the call is characterized here.
• Every figure in the consensus scorecard is carried forward from the preliminary report for this event and was not recalculated. The preliminary's disclosed limitation stands: the Quartr text layer for earnings release 3687669 systematically drops the digit six, which is why quarterly net sales of $8,751m was placed by footing rather than read directly, and why release line items are not reproduced in this update.
• The preliminary's EPS basis caveat also stands unchanged. Adjusted diluted EPS was selected because the provider's Q1 2026 actual matched the Quartr standardized diluted-excluding-extraordinary figure; on GAAP diluted EPS of $3.43 the beat would be larger at +3.9%, so the basis choice does not change the direction of the result. Nothing on the call bore on that choice.
• Percentages attributed to management in this report are as spoken on the call and were not recomputed from the release.