Ferguson (FERG) Q3 2026 Earnings: Organic Growth Hits 7% on Large Projects

Ferguson (FERG) third-quarter 2026 results show organic growth accelerating to 7.0%, driven by large non-residential projects. The company released its results and 10-Q on 2026-11-09 for the quarter ended September 30, 2026; growth picked up clearly, while margins held rather than expanded [1][2]. Going into the quarter, three questions mattered: whether organic growth would beat the 3.8% second-quarter rate [3][4], whether residential sales could stop declining outside HVAC, and whether margins would hold. Organic growth reached 7.0%, US non-residential sales rose about 15%, residential sales rose about 6% with growth spreading beyond HVAC, and the adjusted operating margin was flat at 10.7% [1][2]. The growth engine is stronger than previously judged, and the new constraint is the balance sheet: the FloWorks acquisition lifted net debt to adjusted EBITDA from 1.0x to 1.7x, and share buybacks are paused [1].

Ferguson is North America's largest value-added distributor of water and air solutions. It sources, stocks, specifies, fabricates and delivers products for plumbing, HVAC and waterworks contractors [5]. The company had calendar 2025 net sales of $31.3 billion and a gross margin of 31.0% [6]. About 95% of sales come from the US, split roughly half residential and half non-residential, and branch and distribution costs run at about 20% of sales [1][2].

Large non-residential projects lift organic growth to 7%

Organic growth was 7.0% in the third quarter, up from 3.8% in the second quarter, which delivered on management's statement that the third quarter would grow faster than the second [1][3][4]. Net sales were $9.03 billion, up 9.5%, with acquisitions adding 2.7 percentage points [1]. US non-residential sales grew about 15%, compared with 8% in each of the first two quarters [2][7].

Project shipments and industrial demand drove the gain. According to the earnings call summary, the Commercial/Mechanical customer group grew 17%, and the Industrial group grew 32% organically, with large projects and routine maintenance purchasing each accounting for about half [8]. The company said open orders were growing and bidding was active, and management said the backlog covers six to nine months with no significant cancellations so far [1][8].

This conclusion has limits. Even if all of the roughly $0.22 billion of acquired sales in the quarter were non-residential, organic non-residential growth would still be about 9% on a prior-year base of roughly $3.9 billion. Price inflation was in the low to mid single digits, the split between price and volume was not disclosed [2], and the backlog has no dollar figure.

Faster non-residential growth lifted US segment adjusted operating profit 8.8% to $952 million, and the company raised full-year sales guidance from mid-single-digit growth to about 7%, including FloWorks [1]. Management also cautioned that 32% organic Industrial growth will not repeat every quarter [8].

Residential growth spreads beyond HVAC

US residential sales grew about 6% in the third quarter, compared with 2% in the second quarter [2][9]. The 10-Q attributes the growth mainly to HVAC and, to a lesser extent, to residential trade plumbing and Ferguson Home showrooms; those two groups were flat and down 1% in the second quarter [2][10].

The growth came while the residential market stayed weak. The company described weak new construction and soft repair and remodeling work [1], and in the second quarter management assumed the residential market would decline by a low-to-mid single-digit rate for the year [11]. Management credited share gains to branches that serve both plumbing and HVAC contractors and to showrooms aimed at high-end remodels [8].

The residential finding is less certain. HVAC grew 15%, including the Rogers Supply acquisition made in the quarter, and organic growth for HVAC and for residential as a whole was not disclosed [8][1]. Ferguson Home and residential trade plumbing fell from 20% and 14% of US sales to 19% and 13%, so they grew more slowly than the US business overall [2]. The CFO said pressure from new home construction is building and will have a larger effect in 2027 [8].

New focus: FloWorks raises leverage

On August 31 the company closed its $1.616 billion acquisition of FloWorks, a valve distributor with about $1 billion of 2025 revenue [1][2][12]. Funding came from $1.2 billion of bonds and an $850 million term loan, and full-year interest expense guidance rose from about $200 million to about $235 million [1][2]. FloWorks contributed only one month in the quarter and no synergies have been disclosed; the CFO said buybacks would resume in 2027 absent a large new deal [8]. Higher interest meant adjusted EPS grew 7.9%, slower than the 8.9% growth in adjusted operating profit [1].

Conclusion

The quarter strengthens the case for Ferguson's growth engine, while profit conversion only held steady. Gross margin was 30.9%, down 40 basis points, which the company attributed to a prior-year base inflated by supplier price increases; SG&A fell from 19.9% to 19.8% of sales, and the low end of full-year margin guidance rose to 9.6% [2][1]. Operating cash flow for the first nine months was $1.472 billion, down $412 million because of higher receivables and tax payments [2].

The non-residential backlog supports shipments over the next few quarters, while residential growth is the least secure. The next tests are whether organic growth stays above 5% in the fourth quarter once FloWorks is fully consolidated, whether residential sales keep growing, and whether deleveraging lets EPS growth catch up with operating profit.

Sources

[1] FERG Q3 2026 8-K filed 2026-11-09 · 2026-11-09 · 8-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000042/exhibit991pressreleasesept.htm

[2] FERG Q3 2026 10-Q filed 2026-11-09 · 2026-11-09 · 10-Q · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000044/ferg-20260930.htm

[3] FERG 8-K filed 2026-08-10 (Q2 2026 release) · Q2 2026 summary of results · 2026-08-10 · 8-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000038/exhibit991pressreleasejune.htm

[4] FERG earnings call 2026-08-10 (Q2 2026) · second-half guidance commentary · 2026-08-10 · earnings call · https://gateway.drillr.ai/mcp/private

[5] FERG 10-K filed 2025-09-26 · value-added distribution model · 2025-09-26 · 10-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164125000027/ferg-20250731.htm

[6] FERG 8-K filed 2026-02-24 (calendar 2025 results) · calendar 2025 and Q4 results · 2026-02-24 · 8-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000002/exhibit991pressreleasetran.htm

[7] FERG 8-K filed 2026-08-10 (Q2 2026 release) · Q2 2026 US end markets · 2026-08-10 · 8-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000038/exhibit991pressreleasejune.htm

[8] FERG Q3 2026 earnings call 2026-11-09 · 2026-11-09 · earnings call · https://gateway.drillr.ai/mcp/private

[9] FERG 10-Q filed 2026-08-10 (Q2 2026) · US segment net sales drivers · 2026-08-10 · 10-Q · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000040/ferg-20260630.htm

[10] FERG earnings call 2026-08-10 (Q2 2026) · US customer group growth · 2026-08-10 · earnings call · https://gateway.drillr.ai/mcp/private

[11] FERG earnings call 2026-08-10 (Q2 2026) · Q&A on guidance and market assumptions · 2026-08-10 · earnings call · https://gateway.drillr.ai/mcp/private

[12] FERG 8-K filed 2026-07-13 (FloWorks acquisition release) · deal terms · 2026-07-13 · 8-K · https://www.sec.gov/Archives/edgar/data/2011641/000201164126000035/exhibit991pressreleasedate.htm