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.