Ferguson grew Q2 2026 sales 4.6% to $8.75B on ~8% US non-residential growth and acquisitions; GAAP EPS rose 6.9% to $3.43, adjusted operating margin slipped 0.1 pts to 10.7%, and full-year guidance was raised.
Revenue
$8.8B
+4.6% YoY
Net income
$666M
+5.0% YoY
Diluted EPS
$3.43
+6.9% YoY
Operating margin
10.2%
Overview
Ferguson, North America's largest distributor of plumbing, HVAC (heating, ventilation and air conditioning) and waterworks products to professional contractors, grew second-quarter 2026 sales 4.6% to $8.75 billion. The growth came mostly from commercial and industrial customers: US non-residential sales rose about 8%, while residential sales rose only about 2%. Profit grew a little faster than sales on a reported basis, but on the company's adjusted basis operating margin slipped 0.1 points, because gross margin gave back some of last year's unusual boost from supplier price increases.
A note on the calendar: Ferguson moved its fiscal year-end from July 31 to December 31, filing a five-month transition report (Form 10-KT) for August–December 2025. So "Q2 2026" here means the three months ended June 30, 2026, compared with April–June 2025. The company has not filed a full-year report on the old July fiscal year for 2026 and will not; its next annual report will cover calendar 2026.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$8,751M
$8,363M
+4.6%
Gross margin
31.0%
31.2%
-0.2 pts
Operating profit (GAAP)
$893M
$842M
+6.1%
Operating margin (GAAP)
10.2%
10.1%
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Organic revenue growth strips out the effect of businesses bought or sold, so it shows how the existing business grew on its own.
Where the growth came from: price, volume and deals
The 4.6% sales increase breaks down, per the earnings release, into 3.8% organic growth plus 1.0% from acquisitions, minus 0.2% from a Canadian divestment. Management describes price inflation (suppliers and Ferguson charging more for the same products) as "low single digits", and the 10-Q says sales also benefited from "higher volume". Ferguson doesn't give an exact split, but with organic growth of 3.8% and price inflation in the low single digits, volume growth was modest. That matters because the first half as a whole looks different: for January–June, the 10-Q says sales rose 4.2% on "low to mid-single digit price inflation" and acquisitions, partially offset by lower sales volume. In other words, Q1 volumes were down, and Q2 was the quarter volume turned positive again. Price was doing most of the work until then.
End markets and customer groups
Ferguson splits its US business (95% of sales) roughly half residential, half non-residential:
Non-residential: about +8%. The 10-Q credits commercial/mechanical, industrial and waterworks customers, "including large capital project activity". The release adds that open orders for large capital projects grew and bidding stayed strong. The filing does not break out data centers or name any single project type, so there's no separate figure for them.
Residential: about +2%. The release says new residential construction "has been weak" and repair, maintenance and improvement (RMI) work "remains soft". The 10-Q attributes the growth to HVAC. For the first half, residential was up only 1%.
The customer-group breakdown in the 10-Q (share of US sales) shows the mix moving toward commercial and HVAC:
US customer group
Q2 2026 share
Q2 2025 share
Waterworks
24%
24%
Ferguson Home (showrooms, builders, remodelers)
20%
21%
Commercial/Mechanical
16%
15%
Residential Trade Plumbing
14%
15%
HVAC
13%
12%
Industrial
7%
6%
Facilities Supply
4%
4%
Fire & Fabrication
2%
3%
HVAC's share rose a point while total US sales grew 5.0%, so HVAC grew faster than the business overall. Part of that is bought rather than organic: two of the quarter's five acquisitions were HVAC distributors (Carrier Great Lakes, 7 locations in Michigan and Ohio, and Dealers Supply Company, 17 locations in the Southeast). The share figures are rounded to whole percentages, so an exact HVAC growth rate can't be worked out from them.
Canada (5% of sales) shrank 1.9% to $408M. Organic growth of 1.7% was more than cancelled out by 3.6% from selling a non-core business. Adjusted operating profit there was $22M, $1M lower, on weaker gross margins.
Margins: a gross-margin giveback, with costs held in check
Gross margin (the share of sales left after paying for the products sold) fell to 31.0% from 31.2%. The 10-Q attributes this to "the timing and extent of supplier price increases in the prior year". A year ago, suppliers were raising prices, and Ferguson was selling inventory it had bought at the old, lower cost at the new, higher price, which temporarily inflated margins. That effect didn't repeat. For the first half, gross margin was flat at 31.0%, which suggests Q2's decline is a one-quarter comparison issue rather than a pricing problem.
Overheads (selling, general and administrative costs) rose 4.1% to $1,718M, slightly slower than sales, and fell to 19.6% of sales from 19.7%. The 10-Q says that mainly reflects last year's timing of incentive-pay accruals.
Adjusted operating margin, the company's preferred profit measure (operating profit before restructuring costs and amortization of intangible assets from acquisitions), was 10.7%, down 0.1 points. US adjusted operating profit rose 2.9% to $925M on sales up 5.0%, so the US margin narrowed to about 11.1% from about 11.3%. The 10-Q says higher gross profit was "partially offset by higher variable operating costs".
Why GAAP profit grew faster than adjusted profit: GAAP operating profit rose 6.1%, twice the adjusted rate, mostly because Q2 2025 included $21M of business restructuring charges (streamlining actions) that didn't recur. Restructuring fell to $2M from $25M. On EPS, the gap runs the other way: adjusted EPS ($3.39) is below GAAP EPS ($3.43) because GAAP net income included a $38M benefit from discrete tax items, mainly releasing reserves for uncertain tax positions after the statute of limitations lapsed. The adjusted figure removes that benefit. Even so, the effective tax rate rose to 21.3% from 19.7%.
Takeaway: Ferguson's growth is coming almost entirely from non-residential customers (US non-residential +8% vs residential +2%) and from acquisitions. Q2 was also the first quarter this year in which sales volumes grew instead of shrinking. The adjusted margin dipping 0.1 points is mainly a hard comparison against last year's supplier-price windfall, since first-half gross margin was flat.
Capital allocation: acquisitions, buybacks, and more debt
Acquisitions: five deals closed in Q2 for $573M, seven in the first half. After the quarter, Ferguson agreed to buy FWI Holdings ("FloWorks"), a distributor of technical valves and flow-control equipment, for about $1.6 billion, expected to close in Q3. The eight deals announced this year add about $1.4 billion of annual revenue. In August, Ferguson issued new senior notes due 2029 and 2036 and signed term-loan and bridge-loan agreements to fund FloWorks.
Buybacks: $202M of shares repurchased in Q2 ($438M year to date). In April, the board approved a new $2 billion buyback program after $4.7 billion had been spent under the prior $5 billion one. Diluted share count fell to 194.0M from 197.5M, a 1.8% drop that helps explain why EPS grew faster than net income.
Dividend: quarterly dividend of $0.89 declared, payable October 7.
Balance sheet and cash: total debt rose to $4.9 billion from $4.1 billion at December 31, with $525M drawn on the receivables facility and $250M on the revolver. Net debt was 1.3x adjusted EBITDA (earnings before interest, tax, depreciation and amortization), up from 1.2x. First-half operating cash flow fell to $716M from $1,123M. The 10-Q blames more money tied up in working capital (receivables and inventory) and tax and incentive payments that the calendar-year switch moved into the first half. Leverage will rise further once FloWorks is paid for.
Outlook
Ferguson raised its calendar-2026 guidance, which excludes FloWorks:
2026 guidance item
Prior
Updated
Net sales growth
Low to mid-single digit
Mid-single digit
Adjusted operating margin
9.4%–9.8%
9.5%–9.8%
Interest expense
~$200M
~$200M
Capital expenditures
$350M–$400M
$375M–$425M
Adjusted effective tax rate
~26%
~26%
The first-half adjusted operating margin was 9.7%, already inside the new range, and Q2 is seasonally strong (10.7%). So the guidance implies the second half lands roughly in line with the first rather than improving. The main risks are the ones management names itself: residential construction and RMI stay weak, and price inflation, which drove most of the first half's growth, could fade. On the positive side, large-project orders are still growing, the HVAC and industrial acquisitions are adding revenue, and FloWorks (not in guidance) would add sales on top of the stated range once it closes. The trade-off is more debt and more amortization of acquired intangibles.