Ferguson Reports Q3 Earnings Beat, Raises Guidance

Ferguson Enterprises reported Q3 net sales of $7.62 billion, up 4.3% YoY, beating consensus. Net sales growth was driven by organic revenue growth of 5.0% YoY and acquisition growth of 1.0% YoY. Gross margin expanded by 50 basis points YoY to 31%, and adjusted EBITDA rose 6.6% YoY to $770 million. The company declared a quarterly dividend and repurchased $251 million in shares. Ferguson revised its outlook for net sales growth to low-to-mid-single digits, adjusted operating margin to 8.5% – 9.0%, and capital expenditures to $300 – $350 million.

Ferguson Enterprises Inc. (FERG) reported robust third-quarter (Q3) results, exceeding analyst expectations and updating its full-year guidance. The Newport News, Virginia-based distributor of plumbing and heating supplies posted net sales of $7.62 billion, a 4.3% year-over-year (YoY) increase, beating consensus estimates of $7.42 billion [2]. This growth was driven by organic revenue growth of 5.0% YoY and acquisition growth of 1.0% YoY, partially offset by a 1.7% adverse impact from one fewer sales day and foreign exchange rates [3].

The company's gross margin expanded by 50 basis points YoY to 31%, driven by specific actions to capture customer value and maintain market share gains, as well as moderating deflation [3]. Adjusted EBITDA rose 6.6% YoY to $770 million [1]. Net income for the quarter dropped slightly to $410 million from $443 million the year prior, while cost of sales rose to $5.26 billion from $5.08 billion [1].

Ferguson's diluted earnings per share (EPS) were $2.07, down 5.0% from $2.18 the previous year, while adjusted EPS were $2.50, up 7.8% from $2.32 [2]. The company declared a quarterly dividend of $0.83, a 5% increase over the prior year, and repurchased $251 million in shares during the quarter [2].

The company's balance sheet remained strong, with a net debt to adjusted EBITDA ratio of 1.2x [2]. Ferguson also completed three acquisitions during the quarter, enhancing its market presence and supporting strategic growth initiatives [2]. Non-recurring charges of $68 million were incurred due to streamlining actions, with expected annualized savings of approximately $100 million [2].

Ferguson revised its outlook for net sales growth to low to mid-single digits, adjusted operating margin to 8.5% to 9.0%, and capital expenditures to $300 million to $350 million for the full year [1].

Chief Executive Kevin Murphy commented, "Our associates continued to take care of our customers, outperform the market and drive solid growth in the third quarter. The combination of strong volume growth, gross margin actions, moderating deflation and the early benefits of streamlining our business drove adjusted operating profit growth and adjusted operating margin expansion."

Ferguson shares jumped 13% to 14,850.00 pence each Tuesday afternoon in London [1].

References:
[1] https://www.marketscreener.com/quote/stock/FERGUSON-ENTERPRISES-INC-173538002/news/Ferguson-raises-net-sales-guidance-after-third-quarter-boost-50141804/
[2] https://www.gurufocus.com/news/2903957/ferguson-enterprises-inc-ferg-q3-earnings-eps-of-207-beats-estimate-revenue-reaches-76-billion-surpassing-expectations?mod=news_archive&r=4bf001661e6fdd88d0cd7a5659ff9748
[3] https://finance.yahoo.com/news/ferguson-reports-third-quarter-results-104500047.html