Ferguson Enterprises Inc. continued to pursue growth through acquisition during its fiscal second quarter ended June 30, capping a Q2 that preceded its latest $1.6 billion deal to acquire FloWorks.
The North American plumbing and heating, ventilation and air conditioning (HVAC) distributor grew its sales by 4.6% year over year to $8.8 billion in Q2. The results came as both the non-residential and residential sides of Ferguson’s business recorded gains.
The company’s top executive conceded that its residential successes came against the backdrop of larger headwinds.
Where Ferguson Enterprises saw sales growth in Q2
“We delivered another strong quarter of non-residential growth and we returned to growth in residential despite the challenging market backdrop,” said Kevin Murphy, CEO at Ferguson.
Ferguson credited residential end markets for about half of its total revenue. Nevertheless, the company referred to residential construction activity as “weak,” with repair, maintenance and improvement work as “soft.” Still, Q2 residential revenue increased by 2% year over year.
Meanwhile, non-residential revenue grew by 8% from a year ago. Ferguson characterized large capital project activity as “healthy,” as open order volumes went up and bidding activity remained “strong.”
The distributor recorded a 3.8% rise in organic revenue year over year. It noted in its earnings announcement that acquisition-associated growth was about 1.0% over the same period. However, it also reported that divestment in Canada was responsible for offsetting those increases by 0.2%.
How Ferguson benefited from recent acquisitions
“We completed five acquisitions and signed a definitive purchase agreement to acquire FloWorks, a leading distributor of highly technical valves and flow control solutions,” Murphy stated. “Our scale-advantaged business model and consistent cash generation enable us to invest in organic growth, consolidate our markets through acquisitions and return capital to shareholders, all while maintaining a strong balance sheet.”
Speaking to investors, Murphy said Ferguson had “now announced eight acquisitions year-to-date,” including the five that closed in Q2. He said those deals were made possible through investments totaling “nearly $600 million.”
Ferguson’s recent acquisitions have included:
- Technology Sales Associates
- Chesapeake Environmental Equipment
- Carrier Great Lakes
- Dealers Supply Company
- New England Applied Products
Bill Brundage, chief financial officer at Ferguson, touted benefits the company would see from these and other deals across its business segments.
“In our Waterworks customer group, we acquired Hamlett Environmental Technologies Company, which strengthens our water and wastewater process equipment expertise in Michigan,” he stated.
Ferguson sees the locations and expertise it has added through acquisitions as important for expanding its customer base.
“We continue to expand capabilities within our commercial mechanical customer group, acquiring New England Applied Products,” Brundage said. “As a manufacturer’s representative of commercial HVAC systems, New England Applied Products supports a variety of traditional and large capital projects, including data centers, education and health care systems.”
These M&A efforts extend to Ferguson’s industrial projects, as well.
“And within our industrial customer group, the acquisition of PRD Technologies Group further strengthens our product portfolio with highly technical valves, flow control and process equipment with 10 locations across the United States,” he shared.
In the meantime, Murphy voiced optimism for the year ahead, despite macro challenges.
“While the economic environment remains uncertain, our performance year-to-date enables the upward revision of our full year guidance,” Murphy said. “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.”
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