Ferguson Enterprises (FERG, A-, Halal) is the largest U.S.-based value-added distributor of plumbing, HVAC, waterworks, fire protection, and industrial products (pipes, valves, fittings) for professional contractors and builders. The company provides various products and services, including plumbing, pipes, valves, and fittings; heating, ventilation, and air conditioning; appliances; lighting; and water and wastewater solutions to residential and non-residential customers. The company's current market capitalization is $49.37 billion, with a stock price of $246.64.

Business Analysis

The company's main revenue comes from distributing plumbing, HVAC, and waterworks products across North America. According to the company's latest 2025 financial report, the company maintains a nearly 50/50 split between residential and non-residential markets. The residential market is split into two main activities: repair, maintenance & improvement, and new construction.

Including its final Ferguson Q4 2025 results, Ferguson reported total net sales of $30,762 million for fiscal year 2025, up 5% from 2024. Of this recorded revenue, the residential segment accounted for $14,598 million, while the non-residential segment brought $14,671 million to the company in the same year. When it comes to geographic distribution, the company generated 95% of its total revenue in the United States, with 5% from Canada. Revenue increased by 5% YoY compared to FY 2024 due to several factors such as organic revenue growth, acquisitions, price inflation, and others.

In 2025, the company completed eight acquisitions, including companies like Moore Supply Company, which added over $300 million in revenue (Intellectia). In addition, although residential housing starts were weak, the non-residential business surged, with Commercial/Mechanical revenue up 18% and Waterworks up 13% for FY 2025 (Ferguson).

Financial Analysis

In its 2025 FERG earnings release, Ferguson reported revenue growth, while the previous fiscal year saw revenue, net income, and EBITDA remain nearly unchanged or slightly decline, owing to a combination of market headwinds and internal restructuring. There are several reasons why flat financials occurred in 2024. One reason is that the company witnessed commodity price deflation of about 2% in some products, such as PVC pipe, which suppressed top-line revenue growth even as sales remained unchanged (Yahoo Finance). In addition, higher interest rates led to lower demand in the U.S. residential market, which accounts for about half of the company’s revenue. However, the company’s 2025 revenue increase of about 5% to $30.7 billion was mainly driven by strong outperformance in non-residential markets, which covered weakness in the residential sector.

Even though net income and EBITDA remained flat, this trend ended in FY 2025, when Ferguson reported a 21.5% increase in net income ($2.01 billion) and an 11.6% increase in adjusted EBITDA ($3.24 billion). This was primarily due to a 70-basis-point expansion in gross margins and steady Ferguson non-residential growth in non-residential infrastructure projects (Ferguson).

The company is also expected to see the following financial results for fiscal year 2026 (Ferguson).

Earnings History

The company recently reported its annual results on February 24, 2026. It shifted its fiscal year-end from July 31 to December 31, which means the most recent reported data includes the full 12 months ending December 31, 2025.

The company experienced earnings misses in the first half of 2025 because of commodity price deflation and subdued demand in its core residential markets. As mentioned above, there was a 2% decrease in prices for materials such as PVC, steel, and copper, which directly impacted margins. This led to an EPS miss in Q1 2025. Because of a fiscal year transition, Q3 2025 is shown as having no EPS for that quarter. However, for Q3 2025 (April 30), the company’s EPS beat the market at $2.50 compared to market expectations of $2.01 per share( Yahoo Finance).

Whilst the residential market stayed weak, the non-residential sector rose by 10% in the fourth quarter. This increase was supported by data center construction and the company's large capital projects (Seeking Alpha). In addition, the company demonstrated strong operational efficiency, allowing more revenue to flow through to the bottom line.

Valuation analysis

Although the company generates significant cash, it intentionally deploys it as it is generated. Executing its FERG dividend and buybacks strategy, Ferguson returned $1.6 billion to shareholders through $902 million in share repurchases and $656 million in dividends in 2025. It also spent $276 million to acquire eight businesses in 2025. Likewise, about $354 million was invested in 2025 for technology and physical infrastructure (Seeking Alpha). As a result of these actions and strategies, the company’s cash ratio was lower over the period. Generally, this is not considered a risk, as the company generates a large amount of cash from operations, providing a stable stream of liquidity.

When it comes to the D/E ratio, this ratio is generally considered healthy and not high for a large-sector distributor. Even though the ratio is below the market average, Ferguson’s EBIT covers its interest payments 14.2 to 15.2 times. This means that the company can easily afford its cost of debt. In addition, the company’s net debt to adjusted EBITDA on December 31, 2025, was 1.1x, which is considered very safe for a company of this size, as most lenders consider anything under 2.0x to be safe.

In 2024, the company’s P/E ratio was higher than in other years because its stock price grew significantly faster than its earnings. The stock price rose from about $161 in 2023 to over $260 by early 2026, as a result of which the stock price outpaced EPS growth, naturally inflating the P/E multiple. In 2025, high P/E ratios were supported by the company’s growth in waterworks and commercial infrastructure, indicating to the market that Ferguson could maintain profitability despite a sluggish housing market.

Risks

There are several risks related to the company's business and operations that should be considered when deciding on this company.

1. The residential sector accounted for about 50% of total revenue. Continuing high mortgage rates suppress new housing starts, which management expects to remain in the low single digits in 2026.

2 . Ferguson also makes significant profit from products like PVC pipes, copper, and steel. When the market prices of these products decrease, the company tends to lower its selling prices, which can lead to inventory losses.

3. In addition, there is strong competition in the U.S. market from Home Depot and Lowe’s. Increased competition among them can lead to pricing wars, which erode gross margins (Yahoo Finance).

Conclusion

Ferguson Enterprises depicts solid financial performance supported by balanced exposure to residential and non-residential markets, strong cash generation, and well-managed capital allocation. Despite temporary pressure from product price deflation and a weak housing market, the company achieved revenue and profit growth in 2025. While there are risks related to housing demand, commodity price volatility, and market competition, Ferguson’s leverage position and operational efficiency suggest long-term stability and growth potential.

Sources

1. Musaffa- Ferguson Enterprises Inc
2. Intellectia- Ferguson Enterprises Reports Strong Q4 2025 Earnings with Strategic Outlook
3. Ferguson-Ferguson Reports Strong Calendar 2025 Results and Issues 2026 Guidance
4. Yahoo Finance- Ferguson Enterprises Inc Q1 FY2025 earnings call transcript
5. Yahoo Finance- Ferguson Reports Third Quarter Results
6. Seeking Alpha- Ferguson Enterprises slips on soft residential outlook, muted 2026 guidance
7. Seeking Alpha- Ferguson Enterprises Inc. (FERG) Q4 2025 Earnings Call Transcript
8. Yahoo Finance-Home Depot and Lowe's quietly gain new rival

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