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On Wednesday, Truist Securities analyst Keith Hughes adjusted the price target on Ferguson Plc (NYSE:FERG) shares to $200 from the previous $230, while retaining a Buy rating on the stock. The revision follows Ferguson’s intraday stock dip of 5%, which contrasted with a 1% decline in the S&P 500, prompted by the company’s second-quarter fiscal year 2025 earnings before interest and taxes (EBIT) margin falling short of market expectations. Hughes noted that commodity deflation, persistent for the last 18 months, has exerted a greater impact on the company’s financial performance than in previous periods, compounded by a negative product mix.
Despite these challenges, Ferguson reported a solid increase in volume, with organic growth up 4%, and an improvement in results as the quarter advanced. The company maintains strong fundamentals with a healthy current ratio of 1.68 and generated $2.91 billion in EBITDA over the last twelve months. The company’s non-residential segment has withstood the broader macroeconomic pressures, with some verticals experiencing growth. Hughes’s continued endorsement of the stock with a Buy rating is based on the expectation that steel tariffs will soon mitigate the ongoing deflation.
Hughes pointed out that Ferguson’s resilience is evident in its non-residential business, which has remained robust despite the economic headwinds, with certain sectors even showing expansion. This performance has contributed to the analyst’s positive outlook on the stock.
Truist Securities has revised the price target for Ferguson due to the ongoing uncertainty surrounding macroeconomic demand, which has been exerting downward pressure on stocks. Hughes’s commentary underscores the belief that the near-term outlook will see an end to deflationary trends, particularly with the anticipated impact of steel tariffs. Despite the lowered price target, the firm’s stance on Ferguson remains optimistic, as reflected in the maintained Buy rating. InvestingPro analysis reveals 8 additional key insights about Ferguson’s financial health and market position. Subscribers can access the comprehensive Pro Research Report, which provides detailed analysis of this prominent player in the Trading Companies & Distributors industry.
In other recent news, Ferguson PLC reported its second-quarter earnings for fiscal year 2025, revealing a shortfall in both earnings per share (EPS) and revenue expectations. The company posted an EPS of $1.52, missing the forecasted $1.99, while revenue reached $6.9 billion, falling short of the anticipated $7.09 billion. Despite a 3% year-over-year increase in net sales, Ferguson’s adjusted operating profit declined, impacting margins, with the operating margin falling to 6.5%. Additionally, UBS analyst John Lovallo adjusted the price target for Ferguson to $173 from $193, maintaining a Neutral rating, reflecting a revised valuation based on lower earnings projections for fiscal years 2025 to 2027. The tempered EPS forecasts are attributed to conservative margin expectations amid uneven demand and deflationary pressures on commodities. Ferguson continues to expand in the HVAC and Waterworks sectors, although market conditions present ongoing challenges. The company remains focused on disciplined cost management and expects full-year sales growth in the low single-digit range, with an adjusted operating margin between 8.3% and 8.8%.
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