Ferguson Overcomes Housing Challenges Thanks to High Demand for Contractors
Fiscal Results: Ferguson Enterprises reported a 5.1% year-over-year sales increase to $8.169 billion for the quarter ending October 31, 2025, surpassing estimates, with gross margin rising to 30.7% and GAAP diluted EPS increasing by 23.9% to $2.90.
Segment Performance: U.S. sales grew by 5.3%, driven by a 12% increase in non-residential revenue, while Canadian sales rose 2.2% due to acquisitions, although the market remained subdued, particularly in residential sectors.
Management Commentary: CEO Kevin Murphy expressed confidence in the company's performance for 2025, emphasizing the focus on leveraging growth in both residential and non-residential markets despite operating in an uncertain environment.
Outlook and Changes: Ferguson updated its 2025 guidance to reflect approximately 5% net sales growth and an adjusted operating margin of 9.4% to 9.6%, while also announcing a change in its fiscal year-end from July 31 to December 31, effective January 1, 2026.
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ClearBridge Appreciation Strategy Underperforms S&P 500 Despite Sector Contributions
- Sector Contribution Analysis: Despite positive contributions from six out of eleven sectors in the fourth quarter, the ClearBridge Appreciation Strategy underperformed the benchmark S&P 500 Index, indicating challenges in the market environment.
- New Investment Positions: The fund initiated new positions in companies like L3Harris Technologies, Ferguson, and Boston Scientific during the fourth quarter, suggesting a strategic shift towards industrials and healthcare to navigate market volatility.
- Exit Strategy: The fund exited positions in Canadian Pacific Kansas City and Oracle in the fourth quarter, reflecting a cautious outlook on certain sectors, which may impact future portfolio performance.
- Divergent Sector Performance: The healthcare and communication services sectors emerged as the main positive contributors, while industrials, materials, and IT were the primary detractors, highlighting the varying performance across sectors that could influence the fund's overall returns.
Analysts Update Their Predictions for Ferguson Enterprises Following Q1 Results
Fiscal Performance: Ferguson Enterprises Inc. reported a 5.1% year-over-year sales increase to $8.169 billion for the quarter ending October 31, 2025, surpassing estimates. GAAP diluted EPS rose 23.9% to $2.90, and adjusted EPS increased 15.9% to $2.84, exceeding the $2.57 estimate.
CEO's Outlook: CEO Kevin Murphy expressed confidence in the company's performance for calendar year 2025, highlighting the focus on leveraging growth in both residential and non-residential markets despite operating in an uncertain environment.
Updated Guidance: Ferguson updated its guidance for calendar 2025, projecting approximately 5% net sales growth and an adjusted operating margin of 9.4% to 9.6%, an improvement from previous estimates.
Analyst Ratings: Following the earnings announcement, analysts adjusted their price targets for Ferguson, with Baird maintaining an Outperform rating and raising the target to $265, while Barclays and UBS lowered their targets to $267 and $220, respectively.
