Aug 10, 2026 earnings call — Announces FloWorks acquisition and raises guidance
Announced acquisition of FloWorks at an enterprise value of approximately $1.6 billion.
Revenue $8.8B (est $8.7B) · EPS $3.39 (est $3.31)
Key quotes
"Founded in 1961 in Houston, Texas, FloWorks has more than 65 years of history as a leading flow control distributor with approximately $1 billion in revenue in 2025 and more than 60 locations, including 25 service and repair centers across the United States and Canada."
"We're also raising the lower-end of our operating margin guidance, which we now expect to be in the range of 9.5%-9.8%."
"If we take a step back, large capital projects represent somewhere in the mid-to high-single-digit percentage of our total overall Ferguson revenue, and we continue to trend up within that range."
Analyst Q&A 7
Large project backlog and impact
Q (Matthew Bouley · Barclays): He asked about open order volumes and backlog for large capital projects and how that business is included in the full-year guide.
A: Large capital projects are a mid-to-high-single-digit percentage of Ferguson revenue and are trending up. Backlogs and open orders are building across commercial mechanical, industrial, and waterworks, but timing of revenue is hard to predict.
"The backlogs, the open orders continue to build, both if you look at commercial mechanical and industrial and even waterworks, which had a bit of a lumpier quarter this quarter." — Bill Brundage (CFO)
Why raise revenue and margin outlook
Q (John Lovallo · UBS): He asked whether the raised revenue outlook and higher margin midpoint reflect stronger year-to-date results or completed M&A, and how organic growth may look in the second half versus Q2.
A: The company said the market view has not changed, but first half performance was a bit better than expected. They expect second-half revenue to be a touch stronger, supported by open orders, and they raised the low-end of operating margin guidance while expecting a solid second half.
"What has changed, to your point, is our performance for the first half has been a bit better than our expectations." — Bill Brundage (CFO)
Drivers: non-res vs resi and end-markets
Q (Phil Ng · Jefferies): He asked whether back-half growth is mainly non-residential or residential and which non-res end-markets are standing out. He also asked about tariffs and pricing in the back half.
A: Non-res growth strength is expected to continue and residential is improving slightly, led by HVAC (11% growth in the quarter). End-markets are broadening beyond data centers to areas like power generation, chemical, food and beverage, manufacturing, mining, and water; pricing is expected in the low-single-digit range, commodities are about 15% of revenue, and branded suppliers (over 90% of purchases) have not provided tariff refunds.
"Data center construction activity continues to be the strength of that sector." — Kevin Murphy (CEO)
Inventory levels and HVAC desk rollout
Q (Sam Reid · Wells Fargo): He asked why inventory days were up, whether there was any pre-buying or one-time items, and if there are more HVAC desk rollouts to expand the dual-trade strategy.
A: They invested in inventory for HVAC to support dual-trade growth and for large capital projects. HVAC inventory was leaned into seasonally and should normalize by year end, while large capital project inventory will stay elevated; they completed a 650 counter rollout and will keep growing locations to serve plumbing and HVAC contractors.
"We have invested in inventory, as we said in our opening comments, particularly in a couple of areas." — Kevin Murphy (CEO)
Back-half growth and FloWorks synergies
Q (Ryan Merkel · William Blair): He asked whether organic growth can be similar in Q3 to Q2 and asked for more detail on revenue synergies from the FloWorks acquisition.
A: July exit rates were slightly better than Q2, so they expect Q3 growth to be a bit stronger and the second half stronger than the first. FloWorks brings complementary capabilities in pipe, flange, fittings, valve automation and relationships in power generation and chip manufacturing, plus MRO skills, which should create revenue synergies.
"Yeah. If you look at the FloWorks acquisition, I'll start off with saying it is a fantastic associate base and a very strong cultural fit to our organization." — Kevin Murphy (CEO)
OpEx, operating leverage, contribution margin
Q (Inara Khan · Baird): She asked how OpEx should behave in the back half now that the prior cost program lapsed, whether margin progression is seasonal or from price/cost/productivity, and if contribution margin should improve in the back half.
A: They took cost actions last year and saw SG&A step up to just over 4% growth in Q2, but still delivered 10 basis points of operating leverage. They expect similar or slightly higher SG&A growth in the second half as they invest (including a trainee class of 200 associates), expect to generate operating leverage for the year, and see second-quarter contribution margin compression driven mostly by gross margin comparables with possible similar dynamics in Q3 while targeting a full-year operating margin around 9.5%-9.8%.
"We did, however, still deliver 10 basis points of operating leverage in the quarter." — Bill Brundage (CFO)
Share of customers doing both trades
Q (Keith Hughes · Truist): He asked how many residential customers do both HVAC and plumbing and whether two-thirds means some overlap or true dual-trade contractors. He also asked if FloWorks' value is customer relationships.
A: They clarified that about one-third of their overall customer base is doing dual trade today and they expect that to grow over time; they do not track every customer's exact mix. FloWorks adds customer relationships and capabilities like valve automation, rotating equipment, pump capability and flow control valve repair, which accelerates competition in sectors like chemical and power generation.
"I'm sorry. It's about one-third of our overall customer base is doing dual trade today, and we expect that to grow over time." — Kevin Murphy (CEO)