Core & Main, Inc. (CNM) Earnings & Analysis

Latest quarter

Core & Main reported Q2 FY2027 revenue of $2.1 billion, beating the consensus by 0.17%. Its adjusted earnings per share of $0.94 also beat the consensus estimate of $0.93. Revenue increased 2.48% from a year earlier, although both periods rounded to $2.1 billion.

The filing attributed the sales increase to contributions from volume, pricing and acquisitions. It said acquisitions lifted sales of pipes, valves and fittings, while fire protection sales rose on higher volumes and selling prices. Smart utility sales increased primarily because of higher prices, and storm drainage sales were essentially flat.

Core & Main reported gross margin of 26.7%, compared with 26.8% a year earlier. The filing said operating income rose primarily because of higher gross profit, while cost actions and lower variable compensation helped reduce selling, general and administrative expenses as a share of sales. Diluted earnings per share rose to $0.77 from $0.70; the filing attributed the increase to higher net income and a lower share count following repurchases. Free cash flow increased to $44.0 million from $24.0 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Mark Witkowski said municipal demand continued to support the business, as communities invest in water infrastructure repairs, treatment capacity and technology. He said treatment plant projects had become a mid-single-digit share of sales and that Core & Main was expanding its specialty products and project support to participate in more of that work.

Witkowski said fire protection sales increased 14.0%, helped by higher volumes, share gains and steel pricing. He added that data center projects were contributing across water, wastewater, storm drainage and fire protection, with their overall contribution nearly doubling year over year. CFO Robyn Bradbury said data center construction led non-residential activity, offset by softness in light commercial and retail. She said residential lot development remained challenged against a tougher prior-year comparison.

On pricing, Bradbury said increases across much of the portfolio more than offset lower PVC prices. She said private-label and sourcing initiatives supported gross margin, but their benefits were offset by changes in project mix and stabilizing prices in some categories. Cost management and savings initiatives, she added, offset inflation while the company invested in new locations and other growth efforts.

Asked about fire protection, Witkowski said new locations in previously underserved areas had helped the company gain share. On acquisitions, he said activity had picked up and several opportunities had advanced through the letter-of-intent stage. He also said Core & Main acquired Hawaii storm drainage provider Walker Industries after quarter-end.

Asked about municipal smart-meter projects, Witkowski said multiple factors can affect when large implementations reach full speed. He expected some smart-meter work to be released in the second half and said residential comparisons would become easier, although he did not expect a substantial improvement in residential activity. Bradbury said the company typically generates most of its operating cash flow in the second half.

Guidance

Bradbury said Core & Main reaffirmed its full-year outlook for net sales, adjusted EBITDA and operating cash flow conversion, rather than changing those expectations on the call.