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Ferguson: Ferguson's Q1 Results: Strong Execution Amidst Challenging Market Environment

Ferguson reported sales of $8.2 billion, a 5% increase over the prior year, driven by 4% organic growth and 1% acquisition growth. Gross margin expanded 60 basis points to 30.7%, and operating profit grew 14% to $808 million. Diluted earnings per share increased nearly 16% to $2.84. The company's expert associates delivered strong results, executing their growth strategy in a challenging market environment, as noted by CEO Kevin Murphy.

FERG.L

GBp 16900

-1.23%

A-Score: 3.9/10

Publication date: December 9, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Sales Growth: $8.2 billion net sales, +5.1% YoY (organic +4.2%, acquisitions +1%).
  • Margin Expansion: Gross margin rose 60 bps to 30.7%, driving $808 million operating profit (+14.4% YoY).
  • Shareholder Returns: $372 million returned via buybacks/dividends; dividend increased 7% to 89¢ per share.
  • Guidance Update: 2025 revenue growth target of ~5%, operating margin of 9.4-9.6% despite near-term HVAC headwinds.
  • Segment Performance: Commercial Mechanical +21%, Waterworks +14% growth, supported by large projects and strategic investments.

Segment Performance

In the US, net sales grew 5.3%, with nonresidential end markets performing better, up 12% during the quarter. The company's customer groups, including Waterworks, Ferguson Home, and Commercial Mechanical, saw growth during the quarter. Waterworks and Commercial Mechanical delivered 14% and 21% growth, respectively, indicating the success of the company's investments in key growth areas.

Guidance and Outlook

The company updated its guidance for calendar 2025, expecting approximately 5% revenue growth and an operating margin range of 9.4% to 9.6%. Despite near-term uncertainties, Ferguson remains confident in its markets over the medium term. The company expects incremental margins to run ahead of the targeted 11-13% rate due to positive pricing. Analysts estimate next year's revenue growth at 4.9%.

Valuation and Dividend

With a P/E Ratio of 22.96 and EV/EBITDA of 19.24, the market appears to have priced in a significant portion of Ferguson's growth prospects. However, the company's dividend yield of 1.45% and free cash flow yield of 3.71% provide a reasonable return to shareholders. The company declared a 7% increase to their quarterly dividend to 89¢ per share and returned $372 million to shareholders via share repurchases and dividends.

Operational Highlights

Ferguson continues to invest in key growth areas, including waterworks diversification, large capital projects, and value-added services. The company has made investments in trainees, HVAC counter expansion, and large project teams, with 250-300 trainees added this year. They have also completed 650 counter conversions, yielding real results.

Ferguson's A-Score