Ferguson Forecasts Rising Margins As CEO Stresses Investment In Growth Areas

Ferguson Enterprises Inc. (NYSE:FERG) shares surged after it reported fourth-quarter 2024 sales of $8.5 billion, a 6.9% increase from last year, beating analyst estimates of $8.41 billion.

Adjusted earnings per share were $3.48, ahead of expectations of $2.88 and up 16.8% from the prior year. GAAP diluted EPS was $3.55, up 59.2% from $2.23.

Gross margin expanded 70 basis points to 31.7%. Reported operating profit rose 14.1% to $925 million, while adjusted operating profit increased 13.4% to $972 million. Adjusted EBITDA reached $1.03 billion.

Also Read: Ferguson Gears Up For Q4 Print; Here Are The Recent Forecast Changes From Wall Street’s Most Accurate Analysts

By segment, U.S. sales grew 7.1% in the quarter to $8.1 billion, with non-residential revenue up about 15% while residential revenue remained flat. Adjusted operating profit in the U.S. rose 14% to $962 million.

Canada posted 4.8% sales growth to $438 million and an adjusted operating profit of $24 million, up from $22 million.

For the full fiscal year ended July 31, sales rose 3.8% to $30.8 billion, with 3.2% organic growth and a 1% contribution from acquisitions, partly offset by one fewer selling day. Gross margin improved 20 basis points to 30.7%.

Reported operating profit fell 1.7% to $2.6 billion, but adjusted operating profit rose 0.6% to $2.84 billion. Reported EPS was $9.32, up 9.3%, while adjusted EPS was $9.94, a 2.6% increase. Adjusted EBITDA was $3.06 billion.

Cash generation remained strong, with $1.9 billion in operating cash flow for the year. Ferguson invested $301 million in nine acquisitions, generating about $300 million in annualized revenue.

The company repurchased $948 million of stock and declared total dividends of $3.32 per share, up 5% from last year. Net debt stood at $3.49 billion, with net debt to adjusted EBITDA of 1.1x.

Ferguson will change its fiscal year-end from July 31 to December 31, with a five-month transition period ending December 31, 2025. The company said this will align reporting with the calendar year and allow associates to focus on peak customer demand during the traditional fiscal fourth quarter.

Outlook

Ferguson expects mid-single-digit revenue growth for calendar 2025. Adjusted operating margin is projected between 9.2% and 9.6%, compared with 9.1% in calendar 2024.

Interest expense is forecast between $180 million and $200 million. Capital expenditures are planned to range from $300 million to $350 million, which is slightly lower than the prior year. The adjusted effective tax rate is expected to be around 26%.

CEO Kevin Murphy said, “Throughout the year, we invested in key growth areas to drive further organic growth, completed nine acquisitions, grew our dividend and continued to execute our share buyback program, while maintaining a strong balance sheet.”

Price Action: FERG shares were trading higher by 8.64% to $233.06 at last check Tuesday.

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