Ferguson leans into HVAC with bet on dual-trade contractors 

Ferguson on Tuesday reported better-than-expected earnings, driven particularly by growth in its HVAC business, with executives commenting on tariffs and the A2L transition — and signaling future acquisitions. 

The big picture: The company has been expanding its HVAC capabilities to leverage the “growing trend” of dual-trade contractors, it notes. The moves come as Lennox announced last week it’ll launch water heaters in the U.S. starting next year. 

• Ferguson holds an 18 percent share of the North American plumbing market but just five percent of HVAC, according to a presentation. 

What’s happening: Ferguson’s HVAC revenue grew 10 percent year-over-year during its fiscal third quarter, which ended April 30, CEO Kevin Murphy told analysts on Tuesday. 

• “We’ve completed more than 550 counter conversions to serve our dual-trade contractors… giving them one place to shop,” he added. 
• By comparison, its residential plumbing revenue declined by one percent during the quarter.

On tariffs: “[T]here is no singular response to how a vendor is going to be approaching both the tariff landscape as well as the overall pricing landscape,” Murphy said. “[I]f we look forward, we still believe that pricing across the industry will be positive. But it is difficult, if not impossible, to predict what that level is going to look like.”

• Zoom in: “To date, roughly two-thirds of our branded suppliers have announced some sort of increase,” added CFO Bill Brundage. “[O]n average, those have been broadly in the mid-single digit range. It is hard to say, to Kevin’s point, where that’s going to settle.”

When asked about the A2L transition, Murphy echoed Lennox CEO Alok Maskara’s comments in April, noting, “There’s still some 410A inventory that’s left out in the system. [But] I think that’ll largely play through as we get into the middle of the fourth quarter of our fiscal year, [ending July 31].”

Looking ahead: Ferguson’s HVAC plans, according to Murphy, include additional counter conversions, building on its existing capabilities — “[A]dding associates with great HVAC knowledge,” Murphy explained — and expanding into new markets where it hasn’t previously had an HVAC presence. 

• “We’ll gain access to leading equipment lines either through negotiations and working with our suppliers or through acquisitions,” Murphy added. “And so, it’ll be a balanced approach.”