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Ferguson Enterprises: Initiation Of Coverage – Why Own-Brand Products Are Becoming A Hidden Driver For Margin Expansion!

Ferguson, a leading distributor serving specialized water and air professionals, reported first quarter fiscal 2026 sales of $7.5 billion, reflecting a 3.6% increase over the prior year. This growth was driven by 2.8% organic expansion alongside 0.8% contribution from acquisitions, amid a challenging and uncertain economic environment. Gross margin improved by 30 basis points to 31%, supported by strong execution, pricing strategies, and growth in own-brand products, now representing just over 10% of total revenue. Operating profit increased 8.4% to $647 million, lifting operating margin by 40 basis points to 8.7%, which helped drive a 9.1% rise in diluted earnings per share to $2.28. Ferguson continued to prioritize capital allocation through acquisition activity—including three closed deals in the quarter and three more in process—capital expenditures of $92 million, and returning $410 million to shareholders via dividends and share repurchases. The company’s net debt to EBITDA ratio remained low at 1.