"HVAC market is large, fragmented and highly attractive. We're taking a three-pronged approach to growth with a combination of dual trade counter product conversions, geographic expansion of our HVAC network and strategic acquisitions."
— Kevin Murphy
03Detailed Report
FERG
Company FERG
Period
Q2 2025
CurrencyUSD
Report TypeQuarterly Earnings
GeneratedMay 15, 2026
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Executive Summary
Ferguson’s QQ2 2025 results reflect continued top-line momentum in a deflationary environment, with net sales of $6.872 billion, up 3% year over year. The quarter featured meaningful growth in HVAC (+17% in the U.S.) and Waterworks (+10%), underscored by the company’s multi-pronged growth strategy: accelerate dual-trade counter conversions, expand HVAC geography, and pursue selective acquisitions. While volume-driven revenue growth persisted for a fourth consecutive quarter, gross margin contracted to 29.7% primarily due to persistent commodity deflation and mix effects from HVAC and Waterworks growth. Adjusted operating profit declined by $71 million to $449 million, yielding an adjusted operating margin of 6.5%. The company continues to outgrow its markets, with capital deployment totaling about $500 million in the quarter and an increased share-repurchase authorization. Management projects a low single-digit sales increase for fiscal 2025 and targets an adjusted operating margin of 8.3%–8.8% for the year, supported by ongoing cost-management actions and efficiency initiatives. The guidance remains cautious on margin progression given deflation persistence, tariff-related pricing dynamics, and timing of acquisitions, but Ferguson expects improvement in the second half as price realization and mix stabilizes, with fundamental demand drivers in residential and non-residential end-markets still intact.
Key Performance Indicators
Revenue
Increasing
6.87B
QoQ: -11.58% | YoY: 2.98%
Gross Profit
Increasing
2.04B
29.71% margin
QoQ: -12.74% | YoY: 0.64%
Operating Income
Decreasing
410.00M
QoQ: -38.35% | YoY: -14.05%
Net Income
Decreasing
276.00M
QoQ: -41.28% | YoY: -14.29%
EPS
Decreasing
1.38
QoQ: -41.03% | YoY: -12.66%
Revenue Trend
Margin Analysis
Financial Highlights
Revenue and profitability:
- Net sales: $6.872 billion in QQ2 2025, up 3% YoY; organic growth 2.1% plus 1.2% from acquisitions; total volume up 5% offset by ~2% commodity-led deflation.
- Gross margin: 29.7% in QQ2 2025, down 70 bps YoY due to weak end-market demand, persistent deflation, and sales-mix impact from HVAC/Waterworks growth.
- Operating profit: Adjusted operating profit $449 million, down $71 million YoY; adjusted operating margin 6.5% (vs. prior year).
- Net income and earnings: Net income $276 million; net income margin 4.02%; adjusted diluted EPS $1.52, down 12.6% YoY; GAAP EPS $1.38.
- Cash flow: Net cash provided by operating activities $340 million in the quarter; six-month operating cash flow $685 million; capex $158 million in H1; free cash flow $545 million in H1; cash and equivalents $764 million; net debt to adjusted EBITDA 1.2x.
- Balance sheet and liquidity: Total assets $16.53B; total liabilities $11.041B; total stockholders’ equity $5.489B; long-term debt $5.205B; total debt $6.021B; cash and cash equivalents $764M; working capital investment +$200M in H1.
- Shareholder returns: Dividends declared $0.83 per share; share repurchases in H1 approximate $508M; total outstanding share repurchase program ~ $1.4B remaining.
- Guidance (FY2025): Low single-digit total sales growth; adjusted OPM 8.3%–8.8%; interest expense $180–$200M; adjusted tax rate ~26%; Capex guidance $325–$375M; continued deleveraging or strategic actions to improve efficiency and simplify structure.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.87B
2.98%
-11.58%
Gross Profit
2.04B
0.64%
-12.74%
Operating Income
410.00M
-14.05%
-38.35%
Net Income
276.00M
-14.29%
-41.28%
EPS
1.38
-12.66%
-41.03%
Key Financial Ratios
Gross Profit Margin
Fair
29.70%
Gross profit margin is moderate, room for improvement in cost management
Operating Profit Margin
Fair
5.97%
Operating margin is moderate, room for improvement in cost management
Net Profit Margin
Fair
4.02%
Net profit margin is moderate, room for improvement in cost management
Return on Assets
Weak
1.67%
Return on assets suggests inefficient capital allocation
Return on Equity
Fair
5.03%
Return on equity is acceptable but below top-tier companies
Current Ratio
Healthy
1.82
Current ratio shows adequate liquidity to meet short-term obligations
Debt to Equity
High Risk
1.10
Debt-to-equity indicates high leverage and elevated financial risk
P/E Ratio
Growth
32.75x
Elevated P/E suggests growth expectations or premium valuation
Price to Book
High Premium
6.59x
Very high premium suggests asset-light business model or lofty expectations
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