Ferguson’s acquisition push lifts 2026 outlook despite residential softness

Ferguson Enterprises Inc. (NYSE:FERG) raised its full-year 2026 guidance after delivering US$9.0 billion of third-quarter sales, as strong non-residential demand and acquisition growth outweighed a softer residential market. Sales increased 9.5% year on year to US$9.026 billion, including 7.0% organic growth, prompting the distributor to lift its full-year sales outlook to approximately 7% growth from a previous mid-single-digit target.

Non-residential demand drives Ferguson’s quarterly upgrade

The US business supplied the main engine. Revenue rose 10.2%, with non-residential sales up 15% and residential sales up 6% despite weak new construction and continued softness in repair, maintenance and improvement work. Ferguson said large capital projects remained healthy, citing higher open-order volumes and strong bidding activity, although it described its markets overall as mixed.

On a GAAP basis, operating profit rose 4.9% to US$885 million and diluted earnings per share fell 4.9% to US$3.08. The company attributed the earnings-per-share decline primarily to the timing and scale of tax benefits in the comparable period. On a non-GAAP adjusted basis, operating profit increased 8.9% to US$962 million, while adjusted diluted EPS rose 7.9% to US$3.43.

FloWorks expands the acquisition-led growth strategy

Ferguson completed three acquisitions during the quarter and another after quarter-end, taking its 2026 total to eleven. The deals carry aggregate annualised revenue of approximately US$1.5 billion. FloWorks, acquired on August 31, adds more than 60 locations and 25 service centres across the US and Canada in technical valve and flow-control solutions; Brax expands pump and repair capabilities in Southern California, while Rogers Supply adds twelve HVAC locations across Illinois and Indiana. Canyon Systems, acquired after quarter-end, establishes a water and wastewater process-solutions platform across six western states.

The acquisition programme is already visible in the numbers, contributing 2.7% to quarterly sales growth. It has also changed Ferguson’s capital profile. The company invested US$1.7 billion in acquisitions during the quarter, priced US$1.2 billion of senior unsecured notes and entered into a US$900 million term loan maturing in 2029. Net debt stood at US$5.695 billion at September 30, taking net debt to adjusted EBITDA to 1.7 times from 1.0 times a year earlier.

Higher guidance comes with margin and capital-allocation trade-offs

Ferguson lifted its full-year adjusted operating margin guidance modestly to 9.6%-9.8%, from 9.5%-9.8%, while raising expected interest expense to approximately US$235 million and capital expenditure to about US$425 million. The quarter’s gross margin fell 40 basis points to 30.9%, which the company said reflected unusually favourable timing and extent of supplier price increases in the prior-year period.

The company has temporarily paused share buybacks following the FloWorks transaction and expects to resume them as leverage moves back towards the lower end of its 1-2 times target range. That leaves the upgraded earnings outlook dependent not only on continued non-residential strength and acquisition integration, but also on the pace at which debt can be reduced without constraining investment. The next scheduled results, for the period ending December 31, are due on February 16, 2027.