Ferguson (FERG) Q3:26: The Non-Resi growth we've all been waiting for

Ferguson Q3:26 results beat on both the top and adjusted bottom line, with revenue of $9.026bn and adjusted EPS of $3.43 versus Street at $8.70bn and $3.30. Total sales grew 9.5%, with Non-Residential up 15% (7.5ppt of contribution) versus 8% in Q2:26, Residential up 6%, and organic growth of 7.0%. Gross margins were in line with the Street despite dilution from large capital projects. Adjusted EBIT of $962m beat by 3.8%. Backlog growth continued to outpace the Industrial and Commercial/Mechanical segment, a tailwind to Non-Resi, while Residential growth likely peaked on a weaker end market and fewer permits. Management raised FY26 sales growth guidance to ~7% from MSD and narrowed adjusted operating margin guidance to 9.6%-9.8%, and lifted capex guidance to ~$425m. We rate Ferguson Outperform and maintain our $325 target price, lowering our EV/EBITDA multiple to 17.0x from 18.0x and P/E multiple to 23.0x from 24.5x to reflect end market growth.