Shares of Core & Main edged higher after the company reported its fourth-quarter results, marking the second consecutive quarter of significantly better-than-expected earnings per share. However, revenue declined 6.9% year-over-year to $15.8 billion, in line with expectations, representing the first drop since the first quarter of 2023. Preliminary guidance for fiscal 2027 fell short of expectations, with projected revenue between $78.0 billion and $79.0 billion.
The revenue decline was partly due to one fewer week in the quarter compared to the same period last year. On a daily sales basis, revenue increased approximately 1%, driven by organic volume growth and favorable pricing.
The municipal market performed strongly, with volume growing in the low to mid-single digits, supported by steady repair and replacement activity and favorable funding conditions.
Non-residential markets showed mixed performance; robust demand from data centers, streets, highways, and multi-family housing was offset by weakness in traditional commercial and land development demand.
The residential sector was the weakest, with volume declining in the low double digits due to housing affordability challenges and rising mortgage rates.
Gross margin improved by 50 basis points year-over-year to 27.1%, benefiting from increased private-label penetration and disciplined procurement and pricing strategies.
Fiscal 2027 guidance assumes flat end markets and stable pricing. Management remains optimistic about long-term drivers such as municipal funding, water infrastructure, manufacturing reshoring, and infrastructure investment.
Despite mixed fourth-quarter results and a cautious fiscal 2027 outlook, Core & Main demonstrated strong margin execution supported by its private-label offerings and disciplined pricing. Strength in municipal and certain non-residential segments, such as data centers, provides demand support in high-value categories. However, the fiscal 2027 outlook suggests market conditions will remain stable, which may limit share price movement despite earnings beats. While management remains positive on long-term market drivers, the moderate guidance tempers the positive impact of earnings surprises.