Ferguson saw increased sales during the second quarter of the year but a decline in its gross margin, the plumbing and industrial supply giant said Monday.
The distributor posted net sales of $8.75 billion, an increase of 4.6% compared to the same quarter of last year, and operating profit of $893 million, which was up 6.1% over that span. Its adjusted EBITDA came in at $994 million, up 3.2% year-over-year, and earnings rose 5.3% to $3.43 per diluted share.
The company’s gross margin, however, slipped by 20 basis points to 31%, and although operating margin was up 10 basis points to 10.2%, it was down 10 basis points on an adjusted basis.
Ferguson CEO Kevin Murphy said in a statement that the company saw “another strong quarter of non-residential growth” along with a return “to growth in residential despite the challenging market backdrop.” The company’s organic revenue was up 3.8% in the quarter, while recent acquisitions contributed 1% growth. Its sales were impacted by 0.2% stemming from a divestment in Canada.
Net sales in the U.S. were up by 5% year-over-year.
Ferguson said that it completed five acquisitions during the quarter, four of which were previously announced; the company also disclosed its addition of Hamlett Environmental Technologies Company, a Michigan water and wastewater process solutions provider. It expects to complete its recently announced $1.6 billion deal for FloWorks in the current quarter.
Ferguson raised its full-year forecast from “low to mid-single digit” net sales growth to “mid-single digit growth.” Its adjusted operating margin outlook was adjusted from the earlier 9.4% to 9.8% up to between 9.5% and 9.8%.
“We expect to continue delivering market outperformance by deploying scale locally and leveraging the long-term growth drivers of water infrastructure, large capital projects, climate and comfort and aging and underbuilt housing,” Murphy said.
The earnings report followed the announcement last week that Ferguson had been named to the S&P 500 index. The company’s industrial operations ranked at no. 15 on ID’s latest Big 50 list.
