Ferguson plc ((FERG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Ferguson plc’s recent earnings call painted a picture of strong performance, particularly in the nonresidential market and key growth areas such as HVAC and Waterworks. Despite these successes, the company faces challenges in the residential market, where revenue remains flat and certain segments are declining. Positive strategic initiatives and capital returns to shareholders were highlighted, yet the residential market’s weakness and HVAC revenue decline pose ongoing challenges.
Strong Fourth Quarter Performance
Ferguson reported a robust fourth quarter with sales reaching $8.5 billion, marking a 6.9% increase over the previous year. This growth was driven by a combination of 5.8% organic growth and 1.1% acquisition growth. The company also achieved a gross margin of 31.7%, which is a 70 basis point improvement from the prior year.
Nonresidential Market Resilience
The nonresidential market showed significant resilience, with net sales increasing by 7.1%. Notably, nonresidential revenue grew approximately 15%, with commercial mechanical revenue up by 21% and Waterworks revenues increasing by 15%.
Capital Returns to Shareholders
Ferguson demonstrated a commitment to returning capital to shareholders, distributing $354 million through share repurchases and dividends. Over the year, the company executed $948 million in share repurchases.
Successful Execution of Key Growth Areas
Ferguson’s focus on key growth areas paid off, with HVAC revenue increasing by 8% for the year and Waterworks revenue growing by 10%. Additionally, Ferguson Home saw a 3% growth in the fourth quarter.
Residential Market Weakness
The residential market continues to be a weak spot for Ferguson, with end market revenue remaining flat for the quarter. Residential trade plumbing revenues decreased by 2%, affected by challenges in new construction and ongoing PVC price deflation.
HVAC Revenue Decline
Despite overall growth in HVAC, the revenue was slightly down due to softer market conditions. This decline was influenced by the industry’s transition to new efficiency standards and weak new residential construction activity.
Forward-Looking Guidance
Looking ahead, Ferguson outlined expectations for the 2025 calendar year, anticipating mid-single-digit revenue growth and an operating margin between 9.2% and 9.6%. The company also plans to continue investing in growth areas like HVAC expansion and Waterworks diversification, maintaining a strong balance sheet with a net debt-to-EBITDA ratio of 1.1x.
In summary, Ferguson plc’s earnings call highlighted a strong performance in the fourth quarter, driven by nonresidential market resilience and strategic growth initiatives. While the company faces challenges in the residential market and HVAC sector, its commitment to shareholder returns and forward-looking growth strategies positions it well for future success.