Water and fire protection solutions company Core & Main (NYSE:CNM) reported Q1 CY2025 results beating Wall Street’s revenue expectations , with sales up 9.8% year on year to $1.91 billion. On the other hand, the company’s full-year revenue guidance of $7.7 billion at the midpoint came in 0.6% below analysts’ estimates. Its GAAP profit of $0.52 per share was in line with analysts’ consensus estimates.
Revenue: $1.91 billion vs analyst estimates of $1.85 billion (9.8% year-on-year growth, 3.5% beat)
EPS (GAAP): $0.52 vs analyst estimates of $0.51 (in line)
Adjusted EBITDA: $224 million vs analyst estimates of $225 million (11.7% margin, in line)
The company reconfirmed its revenue guidance for the full year of $7.7 billion at the midpoint
EBITDA guidance for the full year is $975 million at the midpoint, below analyst estimates of $982.9 million
Operating Margin: 8.9%, in line with the same quarter last year
Free Cash Flow Margin: 3.3%, similar to the same quarter last year
Market Capitalization: $11.24 billion
“We are proud to report another quarter of record performance that showcases the resilience of our end markets and the strength of our business model,” said Mark Witkowski, CEO of Core & Main.
Company Overview
Formerly a division of industrial distributor HD Supply, Core & Main (NYSE:CNM) is a provider of water, wastewater, and fire protection products and services.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Core & Main’s sales grew at an incredible 17.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.
Core & Main Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Core & Main’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 7.2% over the last two years was well below its five-year trend.
Core & Main Year-On-Year Revenue Growth
This quarter, Core & Main reported year-on-year revenue growth of 9.8%, and its $1.91 billion of revenue exceeded Wall Street’s estimates by 3.5%.
Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Core & Main has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.8%, higher than the broader industrials sector.
Looking at the trend in its profitability, Core & Main’s operating margin rose by 3.8 percentage points over the last five years, as its sales growth gave it operating leverage.
Core & Main Trailing 12-Month Operating Margin (GAAP)
In Q1, Core & Main generated an operating margin profit margin of 8.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Core & Main’s EPS grew at an astounding 72.9% compounded annual growth rate over the last five years, higher than its 17.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Core & Main Trailing 12-Month EPS (GAAP)
Diving into Core & Main’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Core & Main’s operating margin was flat this quarter but expanded by 3.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Core & Main, its two-year annual EPS growth of 18.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q1, Core & Main reported EPS at $0.52, up from $0.47 in the same quarter last year. This print beat analysts’ estimates by 1.3%. Over the next 12 months, Wall Street expects Core & Main’s full-year EPS of $2.09 to grow 18.2%.
Key Takeaways from Core & Main’s Q1 Results
We were impressed by how significantly Core & Main blew past analysts’ revenue expectations this quarter. On the other hand, its full-year revenue and EBITDA guidance slightly missed Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $59 immediately after reporting.
