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Ferguson PLC FERG

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Morningstar’s Analysis

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Ferguson Boasts Strong Growth and Margin Expansion, but Tough Comps Are on the Horizon

Analyst Note

| Brian Bernard, CFA, CPA |

Ferguson enjoyed a strong fiscal 2021 campaign (ended July 31) that featured double-digit adjusted revenue and earnings growth (14% and 36%, respectively) despite the ongoing pandemic and growing inflationary headwinds. The narrow moat-rated distributor of plumbing and heating, ventilation, air-conditioning products is well positioned in markets that have been very strong throughout the pandemic, namely the United States residential construction and repair and remodel markets. Indeed, management estimates these markets grew 14% year over year, and Ferguson realized 500 basis points of outperformance. Ferguson's investment in inventory (fiscal year-end balance was up 19% year over year) has paid off, which has supported its relatively high order fulfillment rates (mid-90s) even with supply chain disruptions. We believe Ferguson has leveraged its strong product availability to increase its market share.

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Company Profile

Business Description

Ferguson distributes plumbing and HVAC products primarily to repair, maintenance, and improvement, new construction, and civil infrastructure markets. It serves over 1 million customers and sources products from over 45,000 suppliers. Ferguson engages customers through more than 2,200 branches globally (approximately 1,500 in the U.S.), over the phone, online, and in residential showrooms. In 2020, Ferguson derived over 86% of its $21 billion of sales in the U.S. According to Modern Distribution Management, Ferguson is the largest industrial and construction distributor in North America. The firm sold its U.K. business in 2021 and is now solely focused on the North American market.

1020 Eskdale Road, Winnersh Triangle
Wokingham, Berkshire, RG41 5TS, United Kingdom
T +44 1189273800
Sector Industrials
Industry Industrial Distribution
Most Recent Earnings
Fiscal Year End Jul 31, 2022
Stock Type
Employees 31,000