Ferguson Enterprises (NYSE: FERG) reported second-quarter net sales of $8.8 billion, a 4.6% increase year-over-year driven by 3.8% organic growth and 1% acquisition growth. The company raised its full-year guidance, citing strong performance in non-residential markets and HVAC.

Financial Performance

Operating profit rose 2.9% to $932 million, delivering an operating margin of 10.7%, which was 10 basis points below the prior year. Diluted earnings per share (EPS) increased 5.3% to $3.39. Gross margin remained strong at 31%, down just 20 basis points against a tough comparison due to supplier price increases in the prior period.

What the Numbers Show

The divergence between revenue growth and margin movement highlights disciplined cost management. While gross margin contracted slightly by 20 basis points due to prior-year pricing lags, the company delivered 10 basis points of operating leverage. This indicates that operational efficiency gains offset the gross margin pressure, allowing operating profit to grow nearly in line with revenue despite the tougher comparison base.

Segment and Market Highlights

In the United States, non-residential performance grew 8% on top of a 13% prior-year comparable. Large capital projects drove meaningful share gains, offsetting softer traditional non-residential work. Residential markets returned to growth, up 2% despite headwinds in new construction.

• Waterworks revenue grew 3% against a 15% prior-year comparable.
• Commercial Mechanical grew 15% on a 20% prior-year comparable, driven by data centers and manufacturing projects.
• Industrial customer group grew 18% on a 6% prior-year comparable.
• HVAC revenue accelerated 11%, driven by organic performance and M&A contributions.

Canada net sales decreased 1.9%, with organic growth of 1.7% fully offset by a 3.6% divestment of non-core business.

Acquisition and Guidance

Ferguson announced the acquisition of FlowWorks for an enterprise value of approximately $1.6 billion, expected to be immediately accretive to adjusted EPS. The deal adds technical depth in valves and flow control solutions. Management expects net debt to EBITDA to increase from 1.3x to approximately 1.8x upon closing, remaining within the target range of 1x to 2x.

Full-year 2026 guidance was raised:

• Net sales growth is now expected to be mid-single digits, up from low- to mid-single digits.
• Operating margin guidance was raised to a range of 9.5% to 9.8%.
• Capital expenditure estimate updated to $375 million to $425 million.

The company returned $375 million to shareholders through dividends and share repurchases in the quarter. Free cash flow for the first half was approximately $500 million.

Ferguson Enterprises Inc. (NYSE: FERG) priced a $1.2 billion public offering of senior unsecured notes on August 11, 2026, securing critical funding for its previously announced acquisition of FWI Holdings, Inc. The capital raise signals strong investor confidence in Ferguson’s balance sheet as it moves forward with integrating one of North America’s largest water and air solutions distributors. The transaction underscores the company’s strategic commitment to expanding its market share in the $340 billion residential and non-residential construction sector.

The offering consists of two tranches: $700 million in aggregate principal amount of 4.800% senior unsecured notes due 2029, and $500 million in aggregate principal amount of 5.600% senior unsecured notes due 2036. Ferguson UK Holdings Limited, an indirect subsidiary of Ferguson, has provided full and unconditional guarantees for the obligations under both series of notes. This structure ensures that the debt is backed by significant assets within the group, mitigating risk for investors while optimizing the cost of capital for the parent entity.

Offering Details

J.P. Morgan Securities LLC and BofA Securities, Inc. acted as joint book-running managers for the notes offering. Ferguson expects the closing of the transaction to occur on August 14, 2026, subject to the satisfaction of customary closing conditions. The timely execution of this financing round demonstrates the company’s ability to access deep capital markets efficiently, a key competency for large-scale industrial consolidations.

Use of Proceeds

Ferguson intends to use the net proceeds from the notes offering, combined with funds from its delayed draw term loan facility, to pay the consideration and related fees and expenses associated with the acquisition of FWI Holdings, Inc. Any remaining proceeds will be allocated to general corporate purposes, which may include repaying existing indebtedness. If the acquisition does not close, Ferguson has stated it will use the net proceeds for general corporate purposes, including potential debt repayment, ensuring flexibility in capital allocation regardless of the acquisition’s outcome.

Regulatory Filings

The notes offering and the related guarantee were made pursuant to an effective shelf registration statement filed with the U.S. Securities and Exchange Commission (SEC). The filing includes File Nos. 333-282398 and 333-282398-01. Investors may access the prospectus and preliminary prospectus supplement free of charge via EDGAR on the SEC website or by contacting the underwriters directly. This regulatory compliance ensures transparency and adherence to federal securities laws governing public debt offerings.

What the Numbers Show

The pricing of the 2029 notes at 4.800% and the 2036 notes at 5.600% reflects a modest yield curve steepening, consistent with current market conditions for investment-grade industrial debt. By splitting the issuance into near-term (2029) and long-term (2036) maturities, Ferguson diversifies its refinancing risk, avoiding a large bullet maturity date that could strain liquidity in a single future year. This balanced approach supports financial stability while funding aggressive growth through the FWI acquisition.