Ferguson (FERG) shares are trading slightly higher in premarket trading after the company reported its fourth-quarter earnings. Despite missing the consensus revenue estimate of $7.993 billion, Ferguson achieved net sales of $7.946 billion, representing a 1.4% increase year-over-year. Organic revenue, however, dipped by 0.2% due to a combination of foreign exchange impact and price deflation.
The company faced a 2% decrease in prices stemming from weakness in certain commodity categories. This was partially offset by a 2% increase in organic volumes. Despite these challenges, Ferguson’s U.S. business saw a 1.3% increase in net sales, while its Canadian operations experienced a 2.0% growth.
On the positive side, Ferguson reported an expansion of its adjusted gross margin by 40 basis points, reaching 31.0% in the fourth quarter. Adjusted operating margin also saw a 40 basis points year-over-year increase, settling at 10.8%. Adjusted EBITDA rose 5.6% year-over-year, hitting $906 million.
Adding to the positive sentiment, Ferguson’s adjusted EPS of $2.98 exceeded the consensus estimate of $2.82. The company also declared a quarterly dividend per share of $0.79, payable on November 8 to stockholders of record as of September 27, 2024. In addition, Ferguson repurchased shares worth $213 million during the quarter. As of July-end, the company had approximately $900 million remaining under its current share repurchase program.
Looking ahead, Ferguson expects FY25 net sales growth to be in the low-single-digit range, accompanied by an adjusted operating margin of 9.0% to 9.5%. Capital expenditure is projected to fall between $400 million and $450 million. Kevin Murphy, Ferguson’s CEO, highlighted the company’s strategy for navigating the challenging market environment.
“Our fiscal 2025 guidance reflects modest full-year growth with continued market outperformance. While we anticipate an ongoing challenging near-term market environment, we will continue to invest in scale and capabilities to take advantage of multi-year structural tailwinds such as underbuilt and aging U.S. housing, non-residential large capital projects, and our opportunity with the dual-trade plumbing and HVAC contractor,” said Murphy.
For investors interested in gaining exposure to the stock, consider the Invesco Water Resources ETF (PHO) and the Global X Clean Water ETF (AQWA).
As of the last check on Tuesday, FERG shares are up 1.33% at $199.84 in premarket trading.
