Acquisitions Are Doing More of the Work in Core & Main’s (CNM) Growth Story

Core & Main Inc. (NYSE: CNM ) announced its second-quarter results for the fiscal year 2026, on September 9. The company saw its revenue increase by 2.5% compared to the same period last year, with topline figure of $2.145 billion for the reported quarter. Adjusted EBITDA for the period clocked in at $274 million, resulting in 12.8% adjusted EBITDA margin and a 3% increment relative to Q2 FY25. Adjusted diluted EPS increased 8% to $0.94, primarily reflecting higher net income and a lower Class A share count following share repurchases. In terms of cash flow generation, Core & Main posted $62 million in cash flow from operating activities during the recent period. Based on the first-half performance, management reiterated its previous guidance for full-year fiscal 2026.

Pricing, Volume, and Acquisition Effects

Topline growth during the recent quarter was driven by a mix of factors including pricing, volumetric gains, and the company's recent acquisitions. Acquisitive growth was notable within the pipes, valves and fittings segment, with expansion in the underlying sales. In contrast, incremental effects of both pricing and volume were witnessed across the fire protection products category. The smart utility segment also benefitted from the pricing effect.

Core & Main recorded quarterly gross profit of $573 million, which equates to a 26.7% margin and 2.3% growth in comparison with Q2 FY25. Selling, general and administrative (SG&A) expenses of $301 million dropped very marginally by 0.3% compared to the same period last year. This can be attributed to a lower amount of variable compensation and some cost-cutting initiatives.

During the recent quarter, the company extended $169 million to repurchase 3.7 million of its common shares. This was followed by another buyback transaction after the quarter had closed, involving 0.3 million shares for $11 million.

Management upheld its previous full-year guidance that it shared back in March. Net sales are projected between $7.8 and $7.9 billion, while the adjusted EBITDA forecast remains at $950 to $980 million range. Management is anticipating the operating cash flow to lie between 60% and 70% of the adjusted EBITDA figure.

Beyond the impressive headline figures reported during the second quarter, Bears are looking at figures that raise some concerns. Although the second quarter revenue did jump 2.5% year-over-year, the picture looks a bit different on half-year basis. For the first six months of FY26, net sales went up by just 1.3% relative to H1 FY25, most of which was linked to the recent acquisitions. This suggests that underlying organic topline growth remained limited during the first half.