Water and fire protection solutions company Core & Main (NYSE: CNM) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 6.6% year on year to $2.09 billion. The company’s full-year revenue guidance of $7.65 billion at the midpoint came in 1.7% below analysts’ estimates. Its non-GAAP profit of $0.87 per share was 10.2% above analysts’ consensus estimates.
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Core & Main (CNM) Q2 CY2025 Highlights:
- Revenue: $2.09 billion vs analyst estimates of $2.11 billion (6.6% year-on-year growth, 1% miss)
- Adjusted EPS: $0.87 vs analyst estimates of $0.79 (10.2% beat)
- Adjusted EBITDA: $266 million vs analyst estimates of $285.5 million (12.7% margin, 6.8% miss)
- The company dropped its revenue guidance for the full year to $7.65 billion at the midpoint from $7.7 billion, a 0.6% decrease
- EBITDA guidance for the full year is $930 million at the midpoint, below analyst estimates of $980 million
- Operating Margin: 10.2%, in line with the same quarter last year
- Free Cash Flow Margin: 1.1%, similar to the same quarter last year
- Market Capitalization: $12.63 billion
“I am proud of our associates’ dedication to supporting customers in delivering critical infrastructure projects,” 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.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Core & Main grew its sales at an incredible 17.3% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.
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 annualized revenue growth of 8.1% over the last two years is below its five-year trend, but we still think the results were respectable. 
This quarter, Core & Main’s revenue grew by 6.6% year on year to $2.09 billion, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates 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 managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 9.9%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Core & Main’s operating margin rose by 3.2 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Core & Main generated an operating margin profit margin of 10.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Core & Main’s EPS grew at an astounding 24.9% compounded annual growth rate over the last two years, higher than its 8.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand during this time.
Diving into the nuances of Core & Main’s earnings can give us a better understanding of its performance. A two-year view shows that Core & Main has repurchased its stock, shrinking its share count by 13.4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
In Q2, Core & Main reported adjusted EPS of $0.87, up from $0.61 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Core & Main’s full-year EPS of $2.43 to grow 7%.
Key Takeaways from Core & Main’s Q2 Results
It was good to see Core & Main beat analysts’ EPS expectations this quarter. On the other hand, its full-year EBITDA guidance missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 16.3% to $55.69 immediately following the results.
Core & Main may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
