Ferguson Enterprises (Ferguson Enterprises (FERG)) reported its fiscal first-quarter results for the period ended March 31, and the numbers were solid — but the market isn't cheering. Shares were down about 3% on Tuesday, reflecting ongoing concerns about the U.S. housing market.

Sales came in at $7.50 billion, up 3.6% from a year ago and ahead of the $7.4 billion analysts were looking for. Adjusted earnings per share rose 9.1% to $2.28, also beating the $2.19 consensus. The plumbing and HVAC distributor said the revenue growth was driven by 2.8% organic growth and 0.8% from acquisitions.

Gross margins improved by 30 basis points to 31.0%, and adjusted operating profit climbed 8.4% to $647 million, with margins expanding 40 basis points to 8.7%. Adjusted EBITDA hit $711 million, up 9.2% year over year.

But the headline numbers mask a split story. Residential markets — which account for about half of U.S. revenue — remain under pressure. Sales in that segment fell 1%, as new construction stays soft and homeowners aren't rushing into remodeling projects. That's a headwind that isn't going away quickly.

On the flip side, non-residential demand was a bright spot, with revenue up 8%. Ferguson is winning market share through its scale, multi-customer relationships, and value-added services. Large project activity is steady, order volumes are improving, and bidding momentum looks healthy.

In Canada, net sales rose 5.5%, helped by a 5.8% boost from acquisitions, though market conditions there remain soft, especially in residential.

CEO Kevin Murphy struck a cautiously optimistic tone: "While the economic environment remains uncertain, we expect to continue to outperform the market by deploying scale locally while leveraging the long-term growth drivers of water infrastructure, large capital projects, climate and comfort and aging and underbuilt housing."

For the full fiscal year 2026, Ferguson is sticking with its forecast for low-to-mid single-digit sales growth and an adjusted operating margin between 9.4% and 9.8%. That's a vote of confidence that the company can navigate the choppy housing market.

Still, investors are focused on the near-term headwinds. With interest rates staying elevated and housing demand sluggish, Ferguson's residential exposure is a drag. The stock's 2.93% drop on Tuesday suggests the market wants to see more concrete signs of a rebound before getting excited.