EPS decreased 4.3% Y/Y to $0.66, missing the consensus of $0.68.

Gross profit was flat at $501 million, with a gross margin of 26.9%. The operating margin contracted by 60 bps to 12.1%.

Operating cash flow for six months ended July 31, 2023, totaled $402 million, compared to cash used of $(60) million in 2Q22. The improvement was driven by reduced inventory due to more predictable product lead times in FY23.

At the end of Q2, inventories were $896 million, down from $1.05 billion in Q1.

Adjusted EBITDA decreased 2.5% Y/Y to $270 million, and the margin declined by 40 bps to 14.5%.

Net Debt Leverage was 1.7x, an improvement of 0.2x from July 31, 2022.

CNM executed a $141 million share repurchase, reducing diluted shares outstanding by 5 million.

"We expanded our network and operating capabilities during the quarter after adding ten new locations from the Foster Supply and Dangelo Co. acquisitions. Both of these businesses offer expansion into new geographies, access to new product lines and the addition of key talent, while aligning with our strategy of advancing reliable infrastructure," commented Steve LeClair, chief executive officer of Core & Main.

"Pricing and margins are sustaining against improving supply chains, but we are beginning to see pockets of softness for new non-residential project starts in select markets," LeClair continued.

FY23 Outlook: The company narrowed its outlook and now sees net sales of $6.6 billion-$6.8 billion (prior $6.6 billion -$6.9 billion) vs. the $6.76 billion estimate.

It sees adjusted EBITDA of $850 million-$880 million (prior $820 million-$880 million).

The company expects operating cash flow conversion to be in the range of 90% to 110% of Adjusted EBITDA.

Price Action: CNM shares are trading lower by 4.81% at $30.07 on the last check Wednesday.