Ferguson plc (FERG) - Earnings Preview & Outlook

by MarketNewsData

Upcoming Report Date: September 16, 2025 (Q4 & full fiscal year 2025)
Recent Price Action: Shares have fallen for four straight sessions, down ~6% and closing at $211.6 after breaking below the 50-day SMA (~$226).

📉 Recent Stock Performance & Technicals

  • Shares trending lower with heavy selling volume.
  • Support: $210 (short-term), $200 (psychological), $193 (200-day SMA).
  • Resistance: $225–227 (prior support + 50-day SMA).
  • Short-term momentum is bearish; a sustained move above $225 is needed to shift sentiment positive.

🧾 Q3 (April 30, 2025) 10-Q Highlights

  • Revenue: $7.62B (+4.3% YoY).
  • Net Income: $410M (−7.4% YoY).
  • GAAP EPS: $2.07 (−5%).
  • Adjusted EPS: $2.50 (+7.8%), lifted by $70M restructuring add-backsferg 10Q.
  • Gross Margin: 31% (up from 30.5%).
  • SG&A: +5.2% YoY, outpacing revenue growth.
  • Tax Rate: 26.4% vs. 23.8% YoY.
  • Operating Cash Flow: $1.37B YTD vs. $1.51B last year.
    👉 Takeaway: Sales growth solid, but GAAP earnings pressured by restructuring, higher costs, and tax headwinds.

📞 Key Earnings Call Insights (Q3, June 3, 2025)

  • Growth Drivers:
    • HVAC revenue +10% and Waterworks +12%, boosted by infrastructure investment.
    • Early signs of recovery in U.S. residential construction.
  • Restructuring: $68M charge expected to yield ~$100M in annualized cost savings; actions intended to simplify operations and improve efficiency.
  • Guidance:
    • Revenue outlook raised to low-to-mid single-digit growth (from low single-digit).
    • Operating margin guided to 8.5%–9.0%.
  • CEO Kevin Murphy: Emphasized success in capturing value and supporting complex project needs across both residential and non-residential markets.
  • CFO Bill Brundage: Highlighted disciplined cost control despite inflation, confident in sustaining gross margins.
  • Risks discussed: Commodity deflation, tariff volatility, inflation in labor/logistics.

🏗️ Revenue Mix

  • United States: 96% of revenue.
    • Residential: 49%.
    • Non-residential: 51% (Commercial 34%, Civil 9%, Industrial 7%).
  • Canada: 4%.
    👉 Balanced between residential & non-residential, with non-residential now slightly larger.

🏢 Competitive Landscape

  • Core & Main (CNM): Direct rival in waterworks/infrastructure.
  • Watsco (WSO): HVAC leader.
  • Builders FirstSource (BLDR): Residential building materials.
  • Beacon Roofing (BECN): Roofing products.
  • Fastenal (FAST), MSC (MSM): Broader industrial distribution.
    👉 Ferguson’s competitive edge: scale, breadth, diversification. Risks: CNM gaining share in infrastructure; WSO dominates HVAC.

📈 Expectations for Q4 Earnings (Sep 16, 2025)

Consensus:

  • Revenue: $8.39B (+5.6% YoY).
  • EPS: $3.01 (+1% YoY).

What Investors Will Watch Closely:

  1. Guidance for FY26: Must reassure despite macro uncertainty.
  2. Margins: Need to stay above 30% amid cost inflation.
  3. Non-residential growth: Commercial & infrastructure strength to offset residential softness.
  4. Cash flow: Investors want stability after recent decline.
  5. Restructuring: Clarity if $68–70M charges were truly one-off.

🔄 Recent Analyst Rating Changes — Ferguson plc (FERG)

  • Sep 4, 2025 — JPMorgan (Patrick Baumann): Target price raised $220 → $225, rating Overweight (maintained).
  • Jul 8, 2025 — Wells Fargo (Sam Reid): Target price raised $230 → $250, rating Overweight (maintained).
  • Jun 18, 2025 — Goldman Sachs: Initiated coverage with Buy, target price $280.
  • Jun 9, 2025 — Morgan Stanley (Annelies Vermeulen): Target price raised $195 → $220, rating Overweight (maintained).
  • Jun 4, 2025 — Oppenheimer: Target price raised $189 → $235, rating Outperform (maintained).
  • Jun 4, 2025 — RBC Capital: Target price raised $189 → $231, rating Outperform (maintained).
  • Jun 4, 2025 — UBS: Target price raised $173 → $204, rating Neutral (maintained).
  • Jun 5, 2025 — Berenberg: Downgrade from Strong Buy → Hold, target price around $215.

Consensus: Overall “Moderate Buy”, with average price target around $221–222.

⚖️ Risk vs. Reward

  • Bull case:
    • EPS & revenue beat, gross margin >30%.
    • Strong infrastructure/commercial growth continues.
    • Confident FY26 guidance.
    • Stock rebounds toward $225–230.
  • Bear case:
    • Miss on EPS or cautious guidance.
    • Persistent SG&A inflation and tax headwinds.
    • Stock tests $200–193.

🎯 Final Take

  • Short-term view: Cautious. The 4-day selloff shows investors are de-risking ahead of earnings. Technical breakdown reinforces near-term pressure.
  • Medium-term: Still a solid operator with scale advantage, but must prove consistent GAAP EPS growth beyond adjustments.
  • Actionable stance:
    • Traders: Avoid chasing; better entry closer to $200–193 support.
    • Investors: Long-term fundamentals remain attractive, but safer to reassess after Q4 earnings clarity.

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