Ferguson Q1 2026 Earnings Preview: Strong Fundamentals, Crowded Expectations Near the Highs

1. Market & Expectations

Ferguson (FERG) reports Q1 2026 results before the open on Tuesday, December 9, 2025, with the print covering the first quarter of its new calendar-year reporting cycle. Street consensus for the quarter clusters around EPS in the high-$2.60s to high-$2.70s and revenue near $8.1B, implying solid mid-single-digit top-line growth and low-double-digit EPS growth versus the prior-year Q1. Expectations are no longer low: the company has just delivered a very strong FY25, and the bar for the first “clean” calendar-year quarter is meaningfully higher than it was a year ago.

The stock is coming into the print near its 52-week high. As of the December 5, 2025 options snapshot, FERG trades around $249, roughly:

+43.6% year-to-date and +15.7% over the past year.
+1.9% over the last month and +4.7% over the last three months (using ~21- and ~63-day windows).
About 70% above its 52-week low (~$146) and only ~3% below its 52-week high (~$257).

This is a classic “top-of-the-range into earnings” setup. Realized volatility has been respectable but not extreme: 30-day annualized vol ~25% and 90-day ~29%. That’s notable when we turn to the options market.

On valuation, Ferguson screens as a quality industrial/distributor on a premium multiple:

Trailing EPS ~9.3 and P/E ~27x, with P/S ~1.4x and P/B ~7.5x.
Net margin is around 6%, gross margin ~31%, and returns on equity are strong (low-30s%).
The stock yields roughly 1.3% on an annual dividend of $3.32 and sits at a modest ~1.1x net debt / EBITDA.

Relative to many industrial peers, that’s not nosebleed, but it’s a clear premium to the broader distribution/industrial complex and in line with a “high-quality compounder” narrative. Analyst sentiment is broadly positive: most coverage sits at “Buy/Strong Buy”, with average 12-month targets in the mid-$240s to mid-$260s, very close to spot, while some high-conviction firms have pushed targets up toward the high-$280s. That combination—bullish ratings but limited target-price headroom—suggests a lot of good news is already in the price.

Recent earnings track record & gap behavior

Over the last four earnings events (using NYSE-listed FERG), the stock has shown large, two-sided gap behavior:

Q4 2025 (Sep 16, 2025): Gap up ~+9.6% after EPS beat ($3.48 vs ~$3.00) and revenue beat (~$8.5B vs ~$8.4B) with strong non-residential growth and improved margins.
Q3 2025 (Jun 3, 2025): Gap up ~+11.7% on EPS of $2.50 vs estimates near $2.05 and revenue modestly ahead of consensus; full-year guidance raised and margins expanded.
Q2 2025 (Mar 11, 2025): Gap down ~–5.8% after an EPS miss (~$1.52 vs $1.58) and softer growth.
Q1 2025 (Dec 10–11, 2024): Gap down ~–10.1% on a miss versus EPS expectations and more cautious tone on the near-term environment.

Across these four prints, the average absolute opening gap is ~9.3%, with an even mix of up and down moves. Importantly, the last two quarters both produced strong beats and big upside moves, which have already re-rated the stock. That recent success materially raises the bar for this Q1 print: investors have seen Ferguson deliver upside and raise guidance; merely matching a higher bar may not be enough for a third consecutive big rally.

Our starting point: fundamentals and execution are strong, but expectations and positioning are also elevated.

2. Business & Balance Sheet

Ferguson is the largest value-added distributor serving “water and air” professionals in the North American construction market, supplying plumbing, HVAC, fire protection, water/wastewater, and related infrastructure products across residential and non-residential end markets. The business is scale-driven with a wide branch network, extensive SKU breadth, and value-added services like design support, logistics, and project management.

Recent operating performance

The FY25 and Q4 2025 reports underscore a healthy, if not explosive, backdrop:

FY25 net sales ~$30.8B, up ~3.8% year-on-year, with organic revenue growth just over 3% and the rest from bolt-on M&A.
Gross margin ~30.7%, up ~20 bps YoY, reflecting improved mix and price discipline.
Adjusted operating margin roughly 9.2%, essentially flat to slightly higher YoY, despite ongoing investments and a still-mixed residential backdrop.
Q4 2025 quarterly net sales grew ~6.9%, with organic growth in the mid-single digits and strong contribution from non-residential demand and capital projects.
Adjusted EPS of $3.48 significantly beat expectations (~$3.00), with leverage from both volume and margin expansion.

The balance sheet is solid:

Net debt / adjusted EBITDA around 1.1x.
Healthy liquidity with current ratio ~1.7x, quick ratio just under 1x.
Ongoing capital returns via a rising $3.32 annual dividend and share repurchases.

Strategically, Ferguson continues to:

Consolidate a fragmented, highly technical distribution niche with bolt-on deals.
Lean into faster-growing non-residential segments (commercial, infrastructure) that are currently offsetting still-soft residential new construction.
Invest in digital tools and supply-chain efficiency to drive incremental margin expansion.

How this shapes Q1 risk

For Q1 2026, the fundamental setup is constructive but not obviously under-appreciated:

The macro mix is still mixed: U.S. residential remains sluggish, but non-residential and infrastructure remain healthy; Canada is steady but not booming.
Management is already guiding to mid-single-digit sales growth and high-single-digit operating margins on a calendar-year basis, which Street models have largely internalized.
After strong Q3 and Q4 beats, investors know the playbook: execution, margin discipline, and bolt-on M&A. Surprise now requires either faster-than-expected volume acceleration or a further guidance upgrade.

In other words, the downside scenario is not that fundamentals suddenly break; it’s that results are “merely good” relative to high expectations and a premium multiple, inviting profit-taking or a rotation into laggards.

3. Options & Sentiment

We now turn to the uploaded options chain as of December 5, 2025. All options data and calculations below are derived directly from that chain.

Event expiry & implied move

Spot / reference price: ~$249 (248.97).
Nearest listed expiry covering the Dec 9 BMO earnings event is Dec 19, 2025 (14 days to expiry in the chain).
The Dec 19 250 strike sits essentially at-the-money.

From the chain:

250 call mid ~9.70
250 put mid ~11.15

So the ATM straddle costs approximately:

9.70 (call) + 11.15 (put) = 20.85 of premium on a ~$249 stock.

That implies an expected absolute move of ~8.4% around earnings:

20.85 / 248.97 ≈ 0.084 → ~8.4%

Compare this to the last four earnings gaps, which averaged ~9.3% in absolute terms (roughly 5.8–11.7% per event). The current straddle is slightly cheap vs recent realized gap history, but:

It’s diluted by the extra ~1.5 weeks of time beyond the earnings window.
Realized volatility ex-earnings (25–29% annualized) is notably lower than the ~52% implied vol at the event expiry ATM line.

Net takeaway: the options market is pricing a sizable move, but not a repeat of the largest double-digit gaps we’ve just seen. On a pure history-vs-pricing basis, there is some premium, but not egregious.

Skew, open interest & flow

Looking at the Dec 19, 2025 expiration:

IV symmetry: At each strike, calls and puts carry essentially the same implied volatility, suggesting little vertical skew favoring puts or calls at a given strike. Directional bias thus comes more from positioning/flow than from price discrepancies in IV.
Open interest distribution:
- Calls: largest concentrations around 260 (~1,485 contracts) and 270 (~671), with meaningful interest at 250 (~128) and 210–240.
- Puts: largest concentrations at 195 (~904), 250 (~865), and 230 (~392), plus notable OI around 190–220.
Volume & flow (all expiries, as-of snapshot):
- Call volume ~431 vs put volume ~176, for a put/call volume ratio ~0.41 (calls >2x puts).
- Call open interest ~5,432 vs put open interest ~4,057, put/call OI ratio ~0.75—still call-leaning, but more balanced than the volume.
- “Unusual activity” highlights:
  - Heavy trading in Dec 19 250 calls (over 200 contracts of volume).
  - Sizeable activity in Dec 19 200 puts (over 100 contracts of volume).
  - Some additional flow in Jan 2026 upside calls (250 and 290 strikes), consistent with ongoing upside interest rather than pure short-term speculation.

Interpretation:

The volume skew is moderately bullish, with near-dated calls seeing more trading than puts.
The OI pattern is two-sided: upside calls clustered at 260/270 look like a potential call wall where upside may slow, while heavy 195–230 puts and a chunky 250 put line suggest meaningful downside hedging remains in place.
With implied event vol (~52% at the ATM) well above 30-day realized (~25%), there is room for a post-print vol crush if the move comes in nearer 4–6% rather than the ~8–9% implied.

In short, the options tape reads as optimistic but not euphoric: traders lean bullish into the print, but there is also real protection on the downside. That combination, plus a big run and premium valuation, raises the probability of a “good news but sell-the-event” reaction if the company doesn’t deliver another clear upside surprise.

4. Guidance, Direction & Confidence

Putting it all together:

Fundamentals: Strong business quality, solid FY25 finishing quarter, and healthy balance sheet. Calendar-year guidance implies continued mid-single-digit growth and high-single-digit margins, which looks achievable but is also already embedded in Street numbers.
Expectations: After back-to-back big beats and double-digit gap-ups, the burden of proof is on the upside. Consensus already assumes decent growth and margin resilience; a “beat and raise” is no longer a surprise by default.
Valuation & technicals: The stock sits near its 52-week high, up ~44% YTD and >70% off the lows, trading at ~27x trailing earnings. Even with quality and growth, that leaves limited multiple expansion runway on merely “good” news.
Options & sentiment: The front earnings expiry prices an ~8.4% move, with moderate call skew in flow and two-sided OI. Positioning is skewed toward upside participation but with enough protection that a downside move does not need a true “shock” to occur.

Base case

Our base case is:

Results come in roughly in line with consensus on both EPS and revenue, perhaps with a small beat but not enough to materially reset the narrative.
Guidance is reiterated or modestly fine-tuned rather than meaningfully raised again; the tone remains constructive but not incrementally euphoric.
Market reaction reflects the combination of high expectations, premium valuation, and a rich but not outrageous implied move, leading to profit-taking and a downside gap that is smaller than the straddle-implied move.

In practical terms, we expect Ferguson to gap down on earnings by about 5% versus the pre-earnings close, with realized volatility coming in below the ~8–9% implied by the Dec 19 at-the-money straddle. In probability terms, we are roughly assigning:

Around 59% odds that the opening move is down.
Roughly 25–30% odds of an up gap, mainly if Ferguson delivers another clear beat with a more assertive 2026 outlook.
The remaining probability in flat or noisy outcomes, where the opening move lands within the usual flat band.

We frame the earnings outcome versus consensus as effectively inline, allowing for a small beat but not a result that dramatically exceeds what the Street is already modeling. On guidance, we also expect an inline outcome: steady, confidence-reinforcing commentary but no major reset higher in the outlook.

This stance is intentionally a bit more cautious than the mild upside sentiment implied by the options flow. In terms of what is driving the call, we are informally weighting:

Fundamentals and estimate revisions (~0.4) as modestly positive.
Valuation and technicals (~0.3) as a negative pull given the run and premium multiple.
Options and crowd positioning (~0.3) as slightly positive but with a meaningful risk of a “sell-the-event” reaction.

The valuation, run-up, and positioning package wins out by a modest margin over otherwise strong business quality, pulling us toward a moderate-confidence downside gap call rather than a reflexive upside bet.

5. Trade Framework (for experienced options traders)

The following structures are illustrative only and assume sophisticated options risk management. They are designed to line up with a base case of a modest downside move and realized volatility below the implied ~8–9%.

A. Short-vol, slightly bearish iron condor (Dec 19)

View expressed: FERG stays roughly in a $235–$265 range into and after earnings, with a modest downside bias and vol crush.

Use Dec 19, 2025 expiry.
Example structure:
- Sell the 250 call and 250 put (short at-the-money straddle).
- Buy a lower-strike put (e.g., 230) and a higher-strike call (e.g., 270) to cap risk.

Rationale:

You’re selling the ~8.4% implied move while the base case assumes ~4–5% realized, and you’re capping tail risk with wings.
Two-sided open interest around 230–270 and a history of big moves mean this is not a low-risk trade—but with decent wings, it fits a thesis that the options market is slightly overpaying for the event relative to best-guess realized volatility.

Key risks:

Another double-digit surprise (up or down) blows through the wings and realizes something closer to the historical 9–12% range.
A structural bid for FERG volatility could keep implieds elevated even after earnings.

B. Moderately bearish put spread (Dec 19)

View expressed: FERG moves down ~5–10%, but not a disaster; you want limited-risk downside exposure.

Buy Dec 19 250 put.
Sell a lower-strike put such as 230 or 225 in the same expiry.

Rationale:

Captures downside if the stock trades into the $225–$235 zone on a “good but not great” outcome, consistent with a 5–10% gap and some follow-through.
Limits premium outlay versus a naked at-the-money put, taking advantage of the two-sided put open interest (including heavy open interest at 230 and below).

Key risks:

A small move (~3% or less) may not be enough to offset time decay on the spread.
A very large downside surprise that trades through the short strike leaves gains capped.

C. Hedge overlay for long stock

For investors already long FERG who agree with the “strong business, stretched setup” framing but don’t want to trim shares:

Consider a collar-style hedge into earnings using Dec 19 options:
- Buy a slightly out-of-the-money put (e.g., 240 or 245).
- Partially or fully finance it by selling an out-of-the-money call (e.g., 270), near the area of heavy call open interest.

This structure:

Protects against a moderate downside surprise while leaving room to participate in upside up to the call strike.
Aligns with the notion that big incremental upside above the recent high-$250s may be harder to achieve without a major guidance upgrade.

As always, liquidity, spreads, and personal risk constraints matter; these examples are conceptual, not recommendations.

6. TL;DR

Ferguson comes into its Dec 9 Q1 2026 print with strong recent execution, a robust balance sheet, and healthy non-residential demand, but also a big year-to-date run, a premium multiple, and an options market pricing an ~8–9% move. We think the most likely outcome is an essentially in-line quarter and steady guidance, which is good but not good enough to justify another big leg higher at these levels.

Our base case is a modest downside gap of about 5% versus the pre-earnings close, with roughly 59% probability that the opening move is down and realized volatility coming in below the straddle-implied move. Upside risk is concentrated in another guidance surprise or a more aggressive capital-return message that convinces the market to pay an even higher multiple for this already re-rated industrial compounder.

Earnings Prediction