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On Wednesday, RBC Capital Markets adjusted its outlook on Ferguson Plc (NYSE:FERG), a leading distributor of plumbing and heating products with annual revenue of $29.7 billion, by revising its price target downward to $189.00 from the previous $211.00. The stock, currently trading at $155.89, has declined over 21% in the past year, according to InvestingPro data. Despite the reduction, RBC Capital maintained its Outperform rating on the company’s stock.
The decision came after a detailed analysis by RBC Capital’s analyst Mike Dahl, who noted a downward revision in the forecast for Ferguson’s adjusted operating profit for the fiscal year 2025. Dahl’s revised estimates now stand at $2.54 billion, which is a 6% decrease from the company’s new implied guidance range of $2.48 to $2.67 billion. For context, Ferguson currently generates $2.91 billion in EBITDA, maintaining a healthy gross profit margin of 30.5%.
For fiscal year 2026, Dahl anticipates a 9% decline in estimates, citing a softer margin and macroeconomic outlook. However, he pointed out that Ferguson’s volumes have remained solid, bolstered by market share gains. Dahl also mentioned the potential for increased tariff pricing later in the year, which is not currently included in the company’s guidance but could potentially improve pricing dynamics.
Despite the precarious macro backdrop, Dahl believes that deflation, which has been a concern, could be reaching its peak. He remains optimistic about Ferguson’s long-term value creation opportunities and considers the company to be relatively well-positioned to navigate near-term market volatility. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.68, indicating solid liquidity. Discover more insights and 10+ additional ProTips about Ferguson’s market position and future prospects with an InvestingPro subscription, including exclusive access to comprehensive Pro Research Reports covering 1,400+ top stocks.
In his commentary, Dahl expressed continued support for Ferguson, stating, "We continue to like FERG’s LT value creation opp. and believe it remains relatively well positioned to navigate NT choppiness." This sentiment underscores RBC Capital’s decision to maintain the Outperform rating even as they adjust the price target to reflect current market conditions and company forecasts.
In other recent news, Ferguson PLC reported its second-quarter earnings for fiscal year 2025, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $1.52, falling short of the expected $1.99, and revenue came in at $6.9 billion, below the anticipated $7.09 billion. Despite these challenges, Ferguson experienced a 3% year-over-year increase in net sales, reaching $6.9 billion. Analysts from Truist Securities and UBS have adjusted their price targets for Ferguson, with Truist lowering it to $200 while maintaining a Buy rating, and UBS reducing it to $173 with a Neutral rating. Truist’s Keith Hughes noted that commodity deflation has significantly impacted Ferguson’s financial performance, while UBS’s John Lovallo highlighted reduced earnings multiples and a tempered margin outlook. Ferguson’s expansion in the HVAC and Waterworks sectors continues, and the company remains focused on disciplined cost management. Despite the earnings miss, Ferguson projects full-year sales growth in the low single-digit range and anticipates improved pricing dynamics in the second half of the fiscal year.
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