Executive Summary

This report provides a comprehensive fundamental analysis of Core & Main, Inc. (CNM), a leading specialty distributor of water, wastewater, storm drainage, and fire protection products in the United States. The company operates as a critical intermediary in a highly fragmented market, connecting thousands of suppliers with a diverse customer base of municipalities, private water companies, and professional contractors. Core & Main’s strategic position is underpinned by powerful, long-term secular tailwinds, most notably the generational need to repair and replace the nation’s aging water infrastructure.

The demand landscape is supported by staggering investment requirements identified by the Environmental Protection Agency (EPA), which estimates a combined need of over $1.25 trillion for drinking water and clean water systems over the next two decades. This structural deficit is being addressed by significant federal funding, including over $50 billion allocated through the Bipartisan Infrastructure Law, which acts as a catalyst for municipal project spending. These factors are transforming a significant portion of the company’s end-market demand from historically cyclical to increasingly non-discretionary.

Core & Main pursues a dual-pronged growth strategy. First, it acts as a disciplined consolidator in the fragmented waterworks distribution industry, systematically executing value-accretive acquisitions that expand its geographic footprint, enhance its product portfolio, and absorb critical local market expertise. Second, it drives organic growth through initiatives such as the expansion of higher-margin private label products, cross-selling new capabilities across its national network, and leveraging technology to deepen customer relationships.

Financially, the company has demonstrated a consistent track record of growth and profitability, coupled with robust operating cash flow generation. This financial strength provides the capacity to fund its strategic priorities of organic investment, M&A, and shareholder returns via a significant share repurchase program. The recent leadership transition, which saw the long-tenured CFO promoted to CEO, signals a continued focus on strategic continuity and disciplined financial execution.

However, an investment in Core & Main is not without risks. The company’s valuation reflects high market expectations for sustained growth. Key risks include potential execution missteps in its M&A strategy, continued, albeit dampened, exposure to cyclical construction activity, margin pressure from competition and input cost volatility, and the inherent operational risks of a large-scale distribution business. This report will provide a detailed, data-driven examination of each of these areas to present a balanced and objective assessment of the company.

Company Overview & Business Model

Core & Main, Inc. operates as a premier specialized distributor focused on advancing reliable infrastructure across the United States.¹ The company, formerly the Waterworks division of HD Supply, was established as an independent entity in August 2017 following its acquisition by the private equity firm Clayton, Dubilier & Rice.² Headquartered in St. Louis, Missouri, Core & Main has established a leading position in the distribution of water, wastewater, storm drainage, and fire protection products, along with related services.³

Business Operations and Role in the Supply Chain

Core & Main functions as an essential link within the complex and fragmented U.S. water infrastructure supply chain. It connects a broad and disparate supplier base, consisting of over 5,000 partners, with a highly diverse customer base of more than 60,000 entities.¹ This intermediary role is critical in an industry characterized by localized needs and specifications. The company’s value proposition extends beyond mere logistics; it provides consultative sales support, project value engineering, and jobsite support, effectively serving as a solutions provider rather than just a product distributor.¹

A fundamental aspect of Core & Main’s business model is its ability to manage complexity. The United States is served by approximately 50,000 distinct community water systems, the vast majority of which serve small populations.⁴ Each of these municipalities and water districts often has unique, legacy-driven technical specifications for pipes, valves, fittings, and other components. A contractor cannot simply procure a generic part; they require the exact product that complies with local code and integrates with existing infrastructure. Core & Main’s extensive branch network acts as a repository of this localized, and often unwritten, institutional knowledge. The company’s local teams understand the specific requirements of the regional water authorities, enabling them to provide a consultative service that deepens customer relationships and creates significant switching costs. This “local knowledge” moat is a durable competitive advantage that is difficult for new entrants, particularly those with purely digital or centralized operating models, to replicate.

Primary Revenue Streams and Product Portfolio

The company’s offerings are organized into four principal categories, positioning it as a “one-stop-shop” for its customers ¹:

• Pipes, Valves & Fittings: This category includes a comprehensive range of highly specified products that are fundamental to the distribution and flow control of water within transmission networks. Materials include ductile iron, PVC, and HDPE pipe, among others.⁶
• Storm Drainage: These products are used in the construction of stormwater management systems designed to prevent soil erosion and to retain, detain, and divert stormwater runoff.
• Fire Protection: This segment provides products and fabricated systems that are installed in commercial and residential buildings and other structures to extinguish and prevent the spread of fires.
• Meters: Core & Main distributes a range of technologies for water volume measurement and regulation. This includes advanced solutions like automated meter reading (AMR) and advanced metering infrastructure (AMI), which enable smart water management for utilities.

Geographic Footprint and Distribution Network

Core & Main’s operational backbone is its extensive nationwide distribution network. The company operates approximately 370 branch locations across the United States, providing comprehensive geographic coverage.⁷ This physical footprint is a cornerstone of its strategic motto: “local expertise, nationwide”.⁷ The dense branch network ensures proximity to customers, facilitating timely delivery, will-call services, and responsive on-the-ground support. This localized presence is backed by a national supply chain, which provides logistical efficiencies, broad product availability, and purchasing power that smaller, regional competitors cannot match.

Customer Base and End-Market Exposure

The company serves a diverse customer base, including municipalities, private water companies, and a wide range of professional contractors. This diversity extends to its end-market exposure, which provides a degree of resilience against downturns in any single sector. For fiscal year 2023, the company’s net sales were broken down as follows ⁹:

• Municipal: Approximately 42%
• Non-Residential: Approximately 38%
• Residential: Approximately 20%

This balanced exposure allows the company to capitalize on various drivers, from public infrastructure spending and commercial construction to new residential development, while mitigating the risk of over-concentration in one area.

Industry Analysis & Dynamics

Core & Main operates within the U.S. water infrastructure market, an industry defined by immense scale, critical necessity, and a compelling, long-term investment cycle. The market is currently supported by powerful secular tailwinds driven by a confluence of aging assets, regulatory mandates, and substantial government funding initiatives.

Market Size and Growth Projections

The U.S. water infrastructure market is a large and steadily growing sector. According to Fortune Business Insights, the U.S. water and wastewater treatment market was valued at $113.76 billion in 2023 and is projected to grow to $206.64 billion by 2032, reflecting a compound annual growth rate (CAGR) of 6.9%.¹⁰ Another report from PS Market Research estimates the U.S. water infrastructure and management market at $120.2 billion in 2024, with a forecast to reach $179.6 billion by 2032, growing at a 5.3% CAGR.¹¹ These consistent mid-single-digit growth forecasts underscore a stable and expanding addressable market for distributors like Core & Main.

Secular Growth Drivers: A Generational Investment Cycle

The primary catalyst for the industry is the urgent and non-discretionary need to modernize the nation’s deteriorating water systems.

• Aging Infrastructure: The American Society of Civil Engineers has consistently assigned poor grades to the country’s drinking water and wastewater infrastructure. The underlying assets are old and failing. U.S. water systems maintain over 2.2 million miles of transmission and distribution mains, with the average age of a water pipe having increased from 25 years in 1970 to 45 years in 2020.¹² This deterioration results in an estimated 250,000 to 300,000 water main breaks each year, leading to significant water loss, service disruptions, and risks of contamination.¹²
• Massive and Quantified Funding Gap: The scale of the required investment is staggering. The EPA’s 7th Drinking Water Infrastructure Needs Survey and Assessment (DWINSA), published in 2023, identified a total investment need of $625 billion over the next 20 years to ensure the provision of safe drinking water.¹³ The largest portion of this, approximately $423 billion, is required for distribution and transmission pipeline replacement.¹⁴ Compounding this, the EPA’s 2022 Clean Watershed Needs Survey (CWNS) identified an additional
  $630.1 billion in needed investment for wastewater and stormwater infrastructure, a 73% increase from the prior survey a decade earlier.¹⁵ This combined, well-documented need of over $1.25 trillion creates a powerful, multi-decade demand backdrop for the products Core & Main distributes.
• Federal Funding as a Catalyst: The Bipartisan Infrastructure Law (BIL), signed in November 2021, acts as a significant accelerant. The law allocates over $50 billion specifically for water infrastructure projects.¹¹ This federal funding helps de-risk municipal project financing, bridges budget gaps for local governments, and accelerates the timeline for critical “shovel-ready” projects.
• Regulatory Mandates: Increasingly stringent environmental regulations are forcing action. The EPA is actively driving the replacement of an estimated 9.0 million lead service lines (LSLs) across the country, a mandate supported by dedicated funding within the BIL.¹² Furthermore, emerging regulations concerning per- and polyfluoroalkyl substances (PFAS), often called “forever chemicals,” are expected to drive another multi-billion dollar wave of investment in water treatment technologies and system upgrades.¹³

Cyclical vs. Secular Trends

Historically, municipal capital spending has exhibited procyclical behavior, with governments often postponing large infrastructure projects during economic downturns to meet balanced budget requirements.¹⁷ This has exposed companies in the value chain to the ebbs and flows of the economic cycle.

However, the current environment suggests a structural shift is underway. The convergence of a massive, documented infrastructure deficit with dedicated federal funding and legally binding regulatory mandates is transforming much of this spending from discretionary to essential. A municipality can delay repaving a road, but it cannot indefinitely ignore a consent decree to upgrade its wastewater treatment plant or a federal mandate to replace its lead service lines. While the residential and non-residential construction markets that Core & Main serves will retain their inherent cyclicality, the core municipal segment—representing 42% of sales—is now supported by a powerful secular tailwind that should dampen overall business volatility and provide a resilient baseline of demand for decades to come.⁹ Analysis from the U.S. Treasury has noted that since the passage of the BIL, state and local capital investment has “bucked the typical trend” of falling during an economic recovery and has instead rebounded sharply, lending credence to this thesis.¹⁹

Competitive Landscape and Barriers to Entry

The U.S. water utility industry is exceptionally fragmented. There are approximately 50,000 community water systems, with 90% of them serving fewer than 10,000 people each.⁴ This fragmentation at the customer level creates a complex operating environment that favors distributors with scale, a broad product portfolio, and a localized service model. The distribution market itself, while led by national players, remains fragmented, presenting a rich environment for consolidation.

Significant barriers to entry protect incumbent leaders like Core & Main. These include:

• Capital Intensity: The cost of establishing a nationwide network of ~370 distribution centers is prohibitive for new entrants.⁷
• Supplier Relationships: Building deep, trusted relationships with over 5,000 suppliers and securing access to specialized products takes decades.¹
• Local Knowledge: As previously discussed, the deep understanding of thousands of unique local product specifications is a critical, hard-to-replicate asset.
• Logistical Complexity: Managing an inventory of over 225,000 SKUs and ensuring timely, accurate jobsite delivery requires sophisticated logistics and technology platforms.¹

Competitive Position & Market Share

Core & Main holds a formidable competitive position as one of the largest and most sophisticated distributors in the North American waterworks industry.²⁰ The company’s primary national-scale competitor is the Waterworks division of Ferguson plc.²¹ While these two players lead the market, the industry remains highly fragmented, populated by numerous smaller, regional, and family-owned distributors that constitute the primary target universe for Core & Main’s consolidation strategy.²⁵

Competitive Advantages

Core & Main’s durable competitive moat is built upon a combination of scale-based advantages and a differentiated service model that creates high switching costs for its customers.

• Scale and National Supply Chain: The company’s significant scale confers substantial purchasing power with its suppliers, allowing it to procure products on favorable terms. This scale supports a vast national supply chain and an inventory of over 225,000 products, enabling Core & Main to function as a “one-stop-shop” for its customers.¹ This logistical prowess and product breadth are advantages that smaller regional players cannot easily replicate.
• Local Expertise and Customer Relationships: The “local service, nationwide” model is the cornerstone of the company’s competitive strategy.⁷ The ~370-branch network embeds Core & Main within local communities, fostering deep, long-term relationships with contractors and municipal engineers.⁷ This proximity allows for a level of service—including intimate knowledge of local project specifications, rapid response times, and on-site problem-solving—that builds significant customer loyalty and makes price a less critical factor in the purchasing decision.²⁷
• Strategic Supplier Partnerships: Core & Main is a critical channel to market for its 5,000+ suppliers.¹ This symbiotic relationship provides Core & Main with reliable access to a broad portfolio of products, including certain items with limited or exclusive distribution rights, further differentiating its offering.
• Proprietary Technology and Services: The company invests in proprietary technology solutions, such as its Online Advantage platform, to enhance the customer experience and drive operational efficiency.¹ By integrating its digital tools into the customer’s workflow for project management and procurement, Core & Main further embeds itself in their operations, increasing stickiness.

The company’s acquisition strategy is not merely a growth lever but a core component of its competitive advantage. By systematically acquiring smaller, local competitors, Core & Main not only gains revenue and market share but also absorbs the very “local expertise” that defines its moat. When the company acquires a well-established regional player like Dana Kepner or the waterworks division of Trumbull Industries, it is purchasing more than just physical assets.²⁸ It is acquiring decades of embedded customer relationships, an experienced salesforce with deep local connections, and an intimate understanding of regional product specifications. This acquired talent and knowledge is then integrated into Core & Main’s national platform, which provides the acquired entity with superior technology, a broader product catalog, and greater purchasing power. This creates a powerful virtuous cycle: M&A strengthens the local moat, which drives organic growth and cash flow, which in turn funds further value-accretive M&A.

Financial Performance & Growth History

Core & Main has demonstrated a strong and consistent track record of financial performance, characterized by sustained revenue growth, resilient profitability, and robust cash flow generation. This performance reflects both the favorable industry tailwinds and effective operational execution.

Revenue Growth Trends

The company has achieved 15 consecutive years of sales growth, a testament to its resilient business model and successful growth strategy.²⁷ Recent performance highlights this trend:

• In fiscal 2023 (ended January 28, 2024), Core & Main delivered record net sales of over $6.7 billion.⁹
• In fiscal 2024 (ended February 2, 2025), net sales grew to approximately $7.4 billion. For the fourth quarter of fiscal 2024, net sales increased 17.9% year-over-year to $1.70 billion, driven by a combination of acquisitions, higher volumes, and the benefit of an extra selling week, which was partially offset by slightly lower selling prices.³⁰
• For the first quarter of fiscal 2025 (ended May 4, 2025), net sales grew 9.8% year-over-year to $1.91 billion, primarily driven by higher volumes and the contribution from acquisitions.³¹

Profitability Metrics

Core & Main has maintained strong profitability, even as it has navigated periods of inflation and supply chain normalization.

• Gross Margin: The company’s gross profit margin has remained stable and robust, reported at 26.6% in Q4 fiscal 2024 and 26.7% in Q1 fiscal 2025.³⁰ While these figures represent a slight moderation from the prior-year periods (26.7% and 26.9%, respectively), management has indicated that the impact of higher average inventory costs has been largely offset by the successful execution of gross margin initiatives and the integration of accretive acquisitions.³¹
• Adjusted EBITDA Margin: Profitability has normalized from the post-pandemic peak but remains healthy. The Adjusted EBITDA margin was approximately 13.6% in fiscal 2023 ($910 million on $6.7 billion in sales) and approximately 12.6% in fiscal 2024 ($930 million on ~$7.4 billion in sales).⁹ For fiscal 2025, the company has guided for an Adjusted EBITDA margin in the range of 12.5% to 12.8%, indicating a stabilization of profitability at a strong level.³⁰

Cash Flow Generation and Returns

The business model is highly cash-generative, providing the fuel for its capital allocation priorities.

• Operating Cash Flow: The company generated a record $1.1 billion in operating cash flow in fiscal 2023, followed by a strong $621 million in fiscal 2024.⁹
• Return on Capital: Core & Main has delivered impressive returns, indicative of efficient capital deployment. As of mid-2025, the trailing-twelve-month Return on Equity (ROE) stood at 25.3%, and Return on Invested Capital (ROIC) was 10.4%.³² These strong returns highlight management’s effectiveness in allocating capital to both organic initiatives and acquisitions.

The table below summarizes the company’s recent financial performance and forward-looking guidance. Note that detailed financial data for fiscal years prior to 2023 was not available in the provided source materials.

Financial Metric	FY 2023 (Actual)	FY 2024 (Actual)	FY 2025 (Guidance Midpoint)
Net Sales	$6,716 M	~$7,400 M (Est.)	$7,700 M
YoY Growth	N/A	~10.2%	~4.1%
Gross Profit	N/A	N/A	N/A
Gross Margin %	N/A	~26.6%	N/A
Adjusted EBITDA	$910 M	$930 M	$975 M
Adj. EBITDA Margin %	13.6%	12.6%	12.7%
Net Income	N/A	$411 M	N/A
Operating Cash Flow	$1,099 M	$621 M	$610 M

Sources:.⁹ FY 2024 Net Sales is an estimate based on reported growth and quarterly results. FY 2024 Net Income is derived from the Q4 press release. FY 2023 and FY 2024 Gross Profit and Gross Margin figures for the full year were not available in the provided materials.

Growth Opportunities & Strategy

Core & Main’s growth strategy is built on a robust, dual-pronged approach that combines disciplined, programmatic acquisitions with a multi-faceted plan for organic expansion. This strategy is designed to capitalize on the fragmented nature of its market while simultaneously enhancing profitability and deepening its competitive moat.

Acquisition-Driven Growth

Mergers and acquisitions (M&A) are a core pillar of the company’s value creation strategy.⁸ The highly fragmented nature of the waterworks distribution market provides a long runway for consolidation. Core & Main has established itself as a disciplined and preferred acquirer, targeting well-run, culturally aligned companies that either expand its geographic footprint, add key talent and local expertise, or broaden its product and service capabilities.⁸

The company’s track record is prolific. It completed 13 transactions in the four years following its separation from HD Supply in 2017 ³³ and has accelerated its pace, acquiring ten new companies in fiscal 2023 alone, deploying $780 million in capital.⁹ Recent acquisitions demonstrate the strategic rationale:

• The acquisition of Dana Kepner Company expanded Core & Main’s presence in the high-growth states of Arizona, Colorado, and Nevada, while also adding a foothold in the Northeast.²⁹
• The purchase of Geothermal Supply Company added specialized capabilities in the fabrication and distribution of high-density polyethylene (HDPE) pipe, a key product for geothermal and water applications.³⁴
• The acquisition of L & M Bag & Supply brought new expertise in erosion control and geotextile products, which can be cross-sold across the company’s national network.³³

Organic Growth Initiatives

Complementing its M&A strategy, Core & Main is pursuing several initiatives to drive organic growth and enhance profitability.

• Private Label Expansion: A key strategic focus is the expansion of the company’s private label product offerings. Management has stated that these products typically yield gross margins that are 1.5 to 2.0 times higher than those of traditional branded products.⁹ In fiscal 2023, private label products represented over 2% of the company’s cost of goods sold, and management has articulated a long-term goal for this figure to exceed 10%.⁹ This initiative represents a significant and controllable lever for margin enhancement. It also transforms Core & Main from being purely a distributor into a brand owner, affording it greater control over its supply chain, product specifications, and profitability. This is a proactive strategy to combat potential long-term margin pressure in the distribution industry and is indicative of a sophisticated management approach.
• New Product and Service Penetration: The company actively works to accelerate the adoption of new technologies and products within the industry, such as smart metering solutions (AMI) and advanced treatment products. By leveraging its consultative sales approach and deep customer relationships, Core & Main can introduce these higher-value solutions to its municipal and contractor customers.
• Digital Transformation and E-Commerce: Core & Main continues to invest in its digital capabilities to improve the customer experience and create stickier relationships. Its proprietary “Online Advantage” platform and other digital tools are designed to streamline project management, simplify procurement, and provide customers with greater visibility and control, thereby embedding Core & Main more deeply into their daily operations.¹
• Greenfield Branch Openings: In addition to acquisitions, the company selectively opens new “greenfield” branches in underserved or high-growth markets. The company has opened nearly 20 new locations in recent years, which provide an additional avenue for organic growth as they mature and gain local market share.⁹

Capital Allocation & Financial Management

Core & Main’s capital allocation strategy is disciplined and clearly defined, enabled by its strong and consistent generation of operating cash flow. The framework prioritizes reinvestment in the business to drive growth, both organically and through acquisitions, followed by returning capital to shareholders.

Approach to M&A and Investments

The primary use of capital is to fund the company’s growth strategy. In fiscal 2023, the company deployed approximately $780 million to acquire ten new companies.⁹ This demonstrates a clear priority to consolidate the fragmented market when attractive opportunities are available. Beyond M&A, the company also invests in organic growth initiatives, such as expanding its distribution capacity and developing its private label product lines.⁹

Capital Structure and Debt Management

Core & Main maintains a prudent capital structure designed to provide financial flexibility. As of February 2, 2025, the company’s net debt stood at $2,275 million.³⁰ The debt structure primarily consists of a Senior Term Loan Facility, with $1,233 million outstanding, and a Senior Asset-Based Lending (ABL) Credit Facility, which provides up to $1.25 billion in borrowing capacity and had $93 million drawn.³⁵

The company actively manages its interest rate risk. The Senior Term Loan carries a floating interest rate, and to mitigate this exposure, Core & Main has entered into interest rate swap agreements. As of early 2025, a swap with a notional amount of $800 million was in place, effectively converting a portion of its floating-rate debt to a fixed rate.³⁵ A second, forward-starting swap was executed to manage interest rate risk further into the future, demonstrating a proactive approach to treasury management.³⁵

Shareholder Return Strategies

After funding its growth initiatives, Core & Main is committed to returning excess capital to shareholders.

• Dividend Policy: The company does not currently pay a regular cash dividend.³⁶ Its credit agreements contain covenants that include restrictions on the ability to pay dividends, which is common for companies prioritizing growth and M&A.³⁵
• Share Repurchase Program: The company utilizes share repurchases as its primary method of returning capital. In June 2024, the Board of Directors authorized a share repurchase program for up to $500 million of its Class A common stock.³⁵ The company has been actively executing on this authorization:

• In fiscal 2024, it repurchased 4.0 million shares for a total of $176 million.³⁰
• In the first quarter of fiscal 2025, it repurchased an additional $39 million of shares.³¹
  
  This active repurchase program signals management’s confidence in the business’s prospects and its belief that the stock represents an attractive use of capital.

Recent Challenges & Headwinds (2022-2024)

Over the past several years, Core & Main has navigated a dynamic and challenging macroeconomic environment marked by supply chain disruptions, significant inflation, and rising interest rates. Management’s ability to execute through these headwinds provides insight into the resilience of the business model.

Inflation, Pricing, and Margin Dynamics

The period from 2022 to 2024 was characterized by significant inflation in input costs for products like PVC pipe and ductile iron. In response, Core & Main demonstrated pricing discipline to pass through these higher costs, which contributed to revenue growth during the period. As supply chains have normalized and inflationary pressures have subsided, the company has faced a more complex pricing environment.

• In the fourth quarter of fiscal 2024, the company noted “slightly lower selling prices” as a partial offset to volume and acquisition growth, reflecting the normalization of commodity prices from their peaks.³⁰
• In the first quarter of fiscal 2025, the company’s gross margin was modestly impacted by a “higher average cost of inventory” compared to the prior year, a lagging effect of selling through higher-cost inventory purchased during the inflationary period.³¹
• On the expense side, Selling, General, and Administrative (SG&A) costs have increased due to both the integration of acquired businesses and broad “inflationary cost impacts” on wages, freight, and other operating expenses.³¹ This has been a headwind to operating margin expansion.

Impact of Interest Rate Changes

The sharp rise in interest rates since 2022 has had a multifaceted impact.

• Municipal Finance: Higher interest rates increase the cost of borrowing for municipalities, which can potentially delay the approval and funding of new, large-scale infrastructure projects. While the secular drivers remain strong, the pace of project starts can be influenced by the financing environment.
• Company Interest Expense: As a portion of Core & Main’s debt is subject to floating interest rates, the rise in benchmark rates has increased its interest expense. The company’s use of interest rate swaps helps to mitigate this impact but does not eliminate it entirely.³⁵
• End-Market Demand: Higher interest rates have had a direct negative impact on the residential construction market, a key end market for the company. Management has maintained a “cautious stance on the residential market recovery” in its public commentary.²⁷ In the first quarter of fiscal 2025, the company also cited “lower end-market volumes” for its decline in fire protection product sales, an area sensitive to non-residential construction activity, which is also impacted by interest rates.³¹

Overall, management has demonstrated an ability to navigate these headwinds effectively, maintaining strong gross margins and generating significant cash flow. However, these factors continue to shape the operating environment and present ongoing challenges to profitability and growth.

Management & Corporate Governance

The quality of a company’s leadership and the soundness of its governance practices are critical determinants of long-term value creation. Core & Main is led by an experienced management team with a strong track record, operating under a governance framework that includes independent oversight.

Management Team and Track Record

In March 2025, Core & Main executed a planned leadership transition. Stephen O. LeClair, who had served as CEO since the company’s separation from HD Supply in 2017, transitioned to the role of Executive Chair of the Board. Mark R. Witkowski, who had served as CFO since 2016, was promoted to CEO.³⁷ This transition ensures continuity, as Mr. Witkowski has been integral to the company’s strategy and financial management for many years. Robyn L. Bradbury, another long-tenured finance leader at the company, was promoted to CFO.³⁷

The executive team has a deep well of experience within the company and the broader industrial distribution sector. This leadership group has presided over a period of exceptional performance, including 15 consecutive years of sales growth and the successful execution of a highly active M&A program.²⁷ The promotion of the CFO to the CEO role suggests a continued emphasis on disciplined financial execution and a commitment to the existing, successful strategy of combining organic growth with programmatic M&A.

Insider Ownership and Alignment

As of April 2025, the executive officers and directors as a group beneficially owned approximately 3.5% of the company’s combined voting power.³⁷ A significant portion of executive compensation is tied to equity, including Class B common stock which represents a direct economic interest in the underlying operating partnership (Holdings).³⁷ This ownership structure serves to align the financial interests of the management team and board directly with the performance of the business and the returns delivered to public shareholders. The company also maintains stock ownership guidelines for its executives and directors to ensure a meaningful equity stake is maintained.³⁷

Corporate Governance Practices

Core & Main has established a governance framework designed to provide effective oversight and accountability.

• Board Structure and Independence: The Board of Directors is divided into three classes, with directors serving staggered three-year terms.³⁷ While this classified board structure can sometimes be viewed as an anti-takeover measure, the board maintains a majority of independent directors. To ensure robust independent oversight, especially with the former CEO serving as Executive Chair, the Board has appointed an independent director, James G. Castellano, to serve as Lead Independent Director.³⁷ The Lead Independent Director has a well-defined set of responsibilities, including chairing executive sessions of independent directors and acting as a liaison between the independent directors and the Chair.
• Board Committees: The Board’s key committees—Audit, Talent and Compensation, and Nominating and Governance—are composed entirely of independent directors.³⁷ This ensures that critical functions such as financial reporting oversight, executive compensation, and director nominations are managed without undue influence from management.
• Shareholder Rights and Policies: The company has implemented several shareholder-friendly policies. These include a “clawback” policy that allows for the recovery of incentive-based compensation in the event of an accounting restatement and a strict insider trading policy that prohibits executives and directors from hedging or pledging their company stock.³⁷

Valuation Analysis

Core & Main’s valuation reflects the market’s positive outlook on its strategic position and the strong secular tailwinds supporting its industry. An analysis of its valuation metrics relative to its primary competitor and historical ranges provides context for its current market price.

Key Valuation Metrics

As of mid-2025, Core & Main traded at the following approximate valuation multiples based on trailing-twelve-month (TTM) data:

• Price / Earnings (P/E) Ratio: 30.0x ³²
• Enterprise Value / EBITDA (EV/EBITDA) Ratio: 16.9x ³²
• Price / Sales (P/S) Ratio: 1.65x ³²
• Price / Book (P/B) Ratio: 7.1x ³²

These multiples are notably higher than the median for the broader industrial sector, indicating that investors are pricing in a superior growth profile and business quality for Core & Main.³⁹

Comparable Company Analysis

A direct comparison to Ferguson plc (FERG), the other leading national distributor in the waterworks space, is essential for contextualizing Core & Main’s valuation. While Ferguson is a larger and more diversified company, its Waterworks division is the most direct competitor to Core & Main.

Metric	Core & Main (CNM)	Ferguson plc (FERG)
Market Capitalization	~$12.6 Billion	~$45.2 Billion
Enterprise Value	~$15.5 Billion	~$48.8 Billion
LTM Revenue	~$7.8 Billion	$29.6 Billion
LTM Adjusted EBITDA	~$918 Million	$2,987 Million
P/E Ratio (TTM)	~30.0x	~26.3x
EV/EBITDA Ratio (TTM)	~16.9x	~16.3x
P/S Ratio (TTM)	~1.65x	~1.53x
Return on Equity (ROE) (TTM)	25.3%	29.1%

Sources:.³² Data as of mid-2025. LTM figures are based on the most recently available full-year or trailing-twelve-month data.

The analysis shows that Core & Main trades at a slight premium to Ferguson on P/E, EV/EBITDA, and P/S multiples. This premium could be attributed to several factors. Investors may perceive Core & Main as a purer-play on the U.S. water infrastructure theme, whereas Ferguson has a more diversified business mix. Additionally, Core & Main’s more aggressive M&A strategy in a fragmented market may lead to expectations of a higher long-term growth rate compared to its larger peer.

Valuation Assessment

The current valuation of Core & Main is elevated, reflecting significant optimism about its future prospects. The premium multiples suggest that the market has already priced in a substantial portion of the expected growth from the secular infrastructure investment cycle and the company’s consolidation strategy. A discounted cash flow (DCF) analysis would be highly sensitive to assumptions regarding long-term growth rates and the sustainability of current profit margins. The central question for an investor is whether the company’s execution and the durability of the industry’s tailwinds can support these high expectations over the long term.

Risk Factors

A thorough investment analysis requires a clear-eyed assessment of the potential risks that could negatively impact the company’s performance and valuation. For Core & Main, these risks span business, industry, and financial categories.

Business and Operational Risks

• M&A Execution and Integration Risk: The company’s growth strategy is heavily dependent on its ability to successfully identify, acquire, and integrate smaller competitors. A failure to execute this strategy effectively—by overpaying for assets, failing to achieve projected synergies, or disrupting the culture of acquired companies—could lead to the destruction of shareholder value.
• Dependence on Key Personnel: The company’s success, particularly at the local level, relies on the expertise and relationships of its associates. The loss of key sales personnel or branch managers to competitors could disrupt customer relationships and negatively impact sales in specific regions.
• IT System and Cybersecurity Risks: As a large-scale distributor, Core & Main is highly reliant on its information technology systems for inventory management, logistics, procurement, and sales. A significant system failure or a cybersecurity breach could disrupt operations, compromise sensitive data, and result in financial losses and reputational damage.³⁵
• Supply Chain and Inventory Management Risk: The business is exposed to risks related to its supply chain, including supplier concentration for certain products and volatility in the price and availability of raw materials (e.g., PVC resins, ductile iron). Inefficient inventory management could lead to stockouts or excess inventory, both of which can negatively impact profitability.

Industry and Market Risks

• Cyclicality in Construction and Municipal Spending: Despite the strong secular tailwinds in water infrastructure, a significant portion of the company’s business remains tied to the health of the broader construction industry and the fiscal condition of municipalities. A severe or prolonged economic downturn could lead to delays or cancellations of projects, particularly in the non-residential and residential segments, and could pressure municipal budgets, slowing the pace of infrastructure spending.
• Competitive Pressures: The company faces intense competition from Ferguson, a larger and well-capitalized global competitor, as well as from a host of smaller, nimble regional distributors. This competition could lead to pricing pressure, which could compress gross margins and erode market share if not managed effectively.
• Changes in Government Funding and Regulation: The business benefits significantly from federal funding initiatives like the BIL and from environmental regulations. A shift in political priorities that leads to a reduction in infrastructure funding or a relaxation of environmental standards could reduce the long-term demand for the company’s products and services.

Financial Risks

• Leverage and Interest Rate Risk: The company maintains a notable amount of debt on its balance sheet. While its leverage is managed within stated targets, an increase in interest rates on its floating-rate debt could significantly increase interest expense and reduce net income. A downturn in the business could also pressure its ability to service its debt obligations.
• Valuation Risk: As discussed, the company’s stock trades at a premium valuation. If the company fails to meet the market’s high growth expectations, or if there is a broader market de-rating of growth stocks, the stock price could experience a significant correction.

Key Questions to Address

This concluding section synthesizes the preceding analysis to directly address the key strategic questions facing Core & Main.

1. How sustainable is CNM’s competitive moat in an increasingly digital world?

The company’s competitive moat appears highly sustainable. It is rooted not just in scale, but in the management of logistical and informational complexity. The core of the business involves the physical distribution of heavy, bulky products and, critically, the application of deep, localized knowledge of thousands of unique municipal specifications. While digitalization and e-commerce are important tools that Core & Main is leveraging to enhance customer service and efficiency, they do not eliminate the fundamental need for a physical branch network, local inventory, jobsite delivery, and consultative expertise. Digitalization is more likely to be a tool that strengthens the moat of incumbents like Core & Main—by making them easier to do business with—rather than a disruptive force that dismantles it.

2. What is the realistic long-term growth potential given infrastructure replacement cycles?

The realistic long-term growth potential is likely in the mid-to-high single-digit range annually. This can be deconstructed into two primary components. First, the underlying market for water infrastructure is projected to grow at a steady 5% to 7% CAGR, driven by the multi-decade secular replacement cycle and regulatory mandates.10 This provides a solid baseline of organic growth. Second, Core & Main’s disciplined M&A strategy in a highly fragmented market can be expected to contribute an additional 2% to 4% of growth annually over the long term. The combination of these two factors creates a pathway for sustained, above-market growth.

3. How effectively has management navigated recent macro headwinds?

Management has demonstrated considerable effectiveness in navigating the challenging macroeconomic environment of the past few years. During the inflationary surge, the company successfully implemented pricing strategies to protect its gross margins. As supply chains have normalized, it has adeptly managed inventory and pricing to maintain profitability, albeit with some margin moderation from peak levels.30 The company has also proactively managed its balance sheet, using interest rate swaps to mitigate the impact of rising rates.35 Most importantly, management has continued to execute its long-term growth strategy, generating strong cash flow to fund both a record pace of acquisitions and a significant share repurchase program.9

4. Is the current valuation justified by the business quality and growth prospects?

The current valuation is demanding and reflects a high degree of optimism from the market. Multiples such as a P/E ratio of ~30x and an EV/EBITDA ratio of ~17x are at a premium to the broader market and historical averages.32 The justification for this valuation hinges on an investor’s conviction in two key tenets of the investment thesis: (1) the longevity and scale of the secular water infrastructure supercycle, and (2) management’s ability to continue executing its value-accretive M&A playbook to consolidate the market and compound growth. If these conditions hold true for the next decade, the current valuation may prove to be reasonable in hindsight. However, it leaves little room for error. Any significant slowdown in municipal spending, a major M&A integration failure, or sustained margin compression would make the current valuation difficult to support.

5. What are the key catalysts that could drive outperformance or underperformance?

• Potential Catalysts for Outperformance:

• Accelerated BIL Funding: A faster-than-expected deployment of Bipartisan Infrastructure Law funds into shovel-ready projects would directly benefit volumes.
• New Federal Legislation: The passage of a major new water infrastructure bill, particularly one focused on funding the remediation of PFAS or other emerging contaminants, could significantly expand the addressable market.
• A Large, Accretive Acquisition: The acquisition of a large regional competitor or a company with a unique, high-margin technology could be a significant value-creation event.
• Potential Catalysts for Underperformance:

• Severe Economic Downturn: A deep recession that severely constrains municipal budgets could override the secular tailwinds in the short-to-medium term, causing a sharp decline in project activity.
• M&A Misstep: A large acquisition that fails to integrate properly or for which the company overpaid could lead to significant write-downs and a loss of investor confidence.
• Sustained Margin Compression: Increased competitive intensity from Ferguson or other players, coupled with an inability to pass on rising operating costs, could lead to a structural decline in profitability and a de-rating of the company’s valuation multiple.

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