Ferguson Enterprises Inc (FERG.N): HVAC, Industrial & Commercial More than Offset Weaker Resi

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11 Aug 2026 06:41:17 ET │ 10 pages

Ferguson Enterprises Inc (FERG.N)

HVAC, Industrial & Commercial More than Offset Weaker Resi

CITI'S TAKE

We raise FY ’26 EBITDA est. +1% to reflect strong non-res demand and ~3

months of FloWorks contribution; applying a 17.0x NTM EBITDA multiple

(raised from 16.5x reflecting an enhanced portfolio in growth markets) our

target moves to $285, and we remain Neutral on roughly fair valuation.

FERG’s 2Q beat and FY ’26 sales guidance raise (+MSD% vs +LSD/MSD%

prior) was driven by strength in large capital projects (~MSD/HSD% of FERG

sales), including data centers, education, and healthcare which offset softer

activity in more traditional non-res categories. Overall, non-res sales

remained strong (+8% Y/Y in 2Q) while resi remains muted (+2%, still

outperforming a weak market). Commercial/Mechanical, Industrial & HVAC

(cumulative 36% of sales) all grew +DD% in 2Q. Lapping tariff impacts drove

price deceleration (+LSD% vs +MSD% in 1Q), although we expect

stabilization in 2H to hit the higher end of the +LSD% ’26 guide.

FloWorks boosts Industrial exposure — While FERG’s FY ’26 guide doesn’t include

any impacts from the FloWorks acquisition, mgmt. expects the deal to be completed

towards the end of 3Q, providing a modest tailwind to 4Q; we model 4Q sales

climbing +6.8% Y/Y with ~2% of M&A contribution. FloWorks generated ~$1B in FY

’25 sales with ~$115mm EBITDA, indicating a higher margin than standalone FERG

(11.5% vs FERG 10.4% FY ’26 FactSet cons). The deal represents a ~10x LTM EBITDA

multiple with $45mm in expected synergies (~14x LTM EBITDA excluding synergies,

close to FERG’s NTM EBITDA trading multiple). Synergies are expected to be more

sales-driven, as the deal will allow FERG to scale up its valves & flow control

solutions. FERG sees the deal expanding its TAM by $60B to $400B, with the

Industrial TAM moving from $40B to $100B; FloWorks ~$1B in sales will complement

FERG’s ~$2B in Industrial sales, growing the Industrial category by ~50%. Industrial

has recently been one of the fastest growing categories for FERG, with 2Q sales

+18% Y/Y vs. total US sales +5%.

n

Neutral

Price (10 Aug 26 16:00)

US$263.78

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