Ferguson's impressive fiscal fourth-quarter earnings have outperformed market estimates, showcasing the resilience of the plumbing and heating products company amidst challenging conditions in the residential end markets in the United States. For the quarter that concluded on July 31, Ferguson reported adjusted earnings of $2.98 per share, a notable increase from $2.77 during the same period last year.
Analysts had anticipated a normalized earnings per share (EPS) of $2.86 according to consensus estimates compiled by Capital IQ. Although Ferguson’s sales saw a modest increase of 1.4% year over year, reaching $7.95 billion, this still fell short of analysts' expectations, which were set at $8.02 billion.
The company attributed this discrepancy to a marked weakness in certain commodity categories, leading to an overall price deflation of approximately 2%. Specifically, on an organic basis, revenue experienced a slight decline of 0.2%, albeit with volume rising by nearly 2%. In addressing the results, Chief Executive Kevin Murphy commented, "Despite market headwinds and deflation during the year, we continued to outperform our markets, returned to volume growth, expanded gross margins, and delivered solid operating margin performance." Murphy's insight highlights how the company has managed to navigate through a volatile market while still achieving positive operational metrics.
The revenue landscape within the United States improved, with sales rising to $7.53 billion from $7.43 billion recorded in the same quarter of 2023. This improvement was bolstered by a 3% increase in non-residential revenue. However, the residential revenue segment remained stagnant, reflecting a downturn in housing starts and permit activities during the latter half of the fiscal year.
Additionally, the company noted a continued softness in repair, maintenance, and improvement work. Ferguson’s sales in Canada also experienced a rise of 2% year-over-year, amounting to $418 million. Looking ahead to fiscal 2025, Ferguson is forecasting modest sales growth within the low single digits, a projection that aligns with the Street's expectation of approximately $31.08 billion in revenue.
This outlook indicates a cautious approach, taking into account anticipated market declines in similar low single-digit percentages, alongside expectations for pricing to be "slightly down" throughout the year. In fiscal 2024, Ferguson's sales had already contracted by 0.3%, finishing at $29.64 billion.
As Murphy elaborated on the company’s guidance for the coming fiscal year, he expressed, "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." This statement indicates Ferguson's strategic intent to maintain growth through investment, despite prevailing economic challenges.
Furthermore, the adjusted operating margin for the ongoing fiscal year is targeted between 9% and 9.5%, compared to the 9.5% recorded in fiscal 2024. The company has outlined capital expenditures expected to fall within the range of $400 million to $450 million, underscoring its commitment to strategic growth through investment in initiatives that bolster its operations and market position. As of the latest trading information, Ferguson's stock price stands at $198.01, reflecting a change of +0.79 or a percent change of +0.40..