Ferguson (FERG) Reports Strong Q4 and FY 2023 Earnings, Analyst Maintains Strong Buy

By Don Francis, Editor
September 29, 2023 12:06 PM UTC
Ferguson (FERG) Reports Strong Q4 and FY 2023 Earnings, Analyst Maintains Strong Buy

Truist Securities's Keith Hughes raised their price target on Ferguson (NYSE: FERG) by 7.8% from $167 to $180 on 2023/09/28. The analyst maintained their Strong Buy rating on the stock.

Hughes made the price target adjustment after assessing Ferguson's fourth quarter and full-year 2023 earnings, which were released on September 26, 2023. According to Hughes, management's commentary suggests that there will be further deterioration in residential repair, maintenance, and improvement (RMI) in the first half of 2024, but there will be better demand in the second half of 2024, particularly in the commercial sector.

However, the analyst cautioned that it may take a few more quarters to alleviate investors' concerns regarding Ferguson's non-residential exposure. This indicates that there may still be uncertainties surrounding the company's performance in the coming months.

In the fourth quarter of 2023, Ferguson reported earnings per share (EPS) of $2.77, surpassing the Zacks Consensus Estimate of $2.46. However, it fell short of the EPS of $2.85 reported in the fourth quarter of 2022 by 2.8%. The company also reported revenue of $7.84 billion, exceeding the Zacks Consensus Estimate of $7.54 billion, but missing the revenue of $7.97 billion recorded in the same quarter last year by 1.7%.

For the full year 2023, Ferguson reported EPS of $9.84, which was a slight increase of 0.8% compared to the EPS of $9.76 in 2022. The company's revenue for the fiscal year 2023 stood at $29.73 billion, representing a growth of 4.1% compared to the revenue of $28.57 billion in 2022.

Looking ahead to fiscal year 2024, Ferguson's management provided guidance indicating that net sales are expected to be broadly flat. They also forecasted an operating margin ranging from 9.2% to 9.8% and capital expenditures (capex) of $400 million to $450 million.

CEO Kevin Murphy expressed confidence in the company's performance, stating that Ferguson's balanced business mix has allowed them to deliver strong results and outperform the market in challenging conditions. He also highlighted the company's strong cash flow, which enables them to invest for organic growth, sustainably grow dividends, make acquisitions to consolidate fragmented markets, and return capital to shareholders. Murphy acknowledged the challenging market backdrop for the first half of fiscal year 2024 but emphasized the company's balanced end market exposure and ability to capitalize on growth opportunities.

Analysts' opinions on Ferguson are overwhelmingly positive, with 100% of top-rated analysts currently rating the stock as a Strong Buy or Buy. No analysts recommend holding the stock, and none recommend selling it.

The consensus forecast among analysts is that Ferguson's upcoming year will deliver earnings per share (EPS) of $0.92. If this forecast is accurate, it would represent a remarkable year-over-year increase of 906.6%.

Since Ferguson's latest quarterly report on September 26, 2023, the stock price has risen by 6.2%. On a year-over-year basis, the stock is up by an impressive 57.1%. These gains have outpaced the overall performance of the S&P 500, which has risen by 15.6% during the same period.

Keith Hughes, the Truist Securities analyst who raised the price target on Ferguson, is ranked among the top 3% of Wall Street analysts by WallStreetZen. With an average return of 28.6% and a win rate of 56.9%, Hughes specializes in analyzing companies in the Consumer Cyclical and Technology sectors, among others.

Ferguson plc, known as Wolseley plc until 2017, is a leading distributor of plumbing and heating products in the United States and internationally. The company's offerings include a wide range of products such as plumbing, heating, ventilation, air conditioning, refrigeration, waterworks, fire protection, pipes, valves, fittings, and industrial products. Established in 1887, the company is headquartered in Wokingham, UK.

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