Truist maintains Buy on Ferguson stock with $200 target

On Friday, Truist Securities maintained its Buy rating on Ferguson Plc (NYSE:FERG) with a steadfast $200.00 price target. The decision comes amidst observations of weakened demand within residential markets, which account for half of the company’s demand. Truist Securities noted a downturn in these markets across their coverage area. According to InvestingPro data, Ferguson, a prominent player in the Trading Companies & Distributors industry, currently trades near $178 with a P/E ratio of 22, and investors should note that the company’s next earnings report is due on June 3rd.

Keith Hughes from Truist Securities highlighted the impact of softening demand on Ferguson’s fiscal year 2025 (ending in July) forecasts. Despite the current challenges, Hughes anticipates a potential halt to the deflation of commodity products that has been negatively affecting margins in recent years. This change is expected due to persistent product inflation from tariffs, which could start reflecting in fiscal year 2026. The company maintains strong fundamentals with a healthy gross profit margin of 30.35% and operates with moderate debt levels, as revealed in InvestingPro’s comprehensive analysis, which includes over 30 additional key metrics and insights.

The analyst’s commentary underscores the resilience of Ferguson’s commercial and industrial markets, which continue to exhibit growth. This strength is contrasted with the residential sector’s downturn, yet the firm’s outlook remains optimistic about Ferguson’s performance. Based on InvestingPro’s Fair Value analysis, Ferguson appears to be trading near its fair value, with analyst targets ranging from $168 to $258.

Truist Securities’ stance is buoyed by the expectation that Ferguson could lead its peer group in terms of growth rate once all its markets are on an upward trajectory. This perspective takes into account the anticipated reversal of deflationary pressures and the company’s solid footing in markets that are still expanding.

In summary, despite the immediate challenges presented by weak residential demand, Truist Securities reaffirms its confidence in Ferguson’s long-term growth potential, reflected in its unchanged Buy rating and $200.00 price target.

In other recent news, Ferguson Enterprises, Inc. has completed the acquisitions of Independent (LON:IOG) Pipe & Supply Corp. and National Fire Equipment Ltd., enhancing its commercial plumbing and fire & fabrication services in North America. These strategic moves aim to strengthen Ferguson’s presence in the Northeast U.S. and Canada, with National Fire being integrated into its Canadian subsidiary, Wolseley (LON:FERG) Canada. Ferguson reported sales of $29.6 billion for fiscal year 2024, continuing its growth strategy through acquisitions. Meanwhile, several financial firms have updated their outlooks on Ferguson. Morgan Stanley (NYSE:MS) reduced its price target to $195, citing a revised fiscal year 2025 guidance but maintained an Overweight rating, indicating confidence in the stock’s potential. RBC Capital Markets also lowered its price target to $189, while keeping an Outperform rating, reflecting a positive long-term view despite a softer margin outlook. Truist Securities adjusted its price target to $200, retaining a Buy rating due to anticipated mitigation of deflationary trends. UBS revised its price target to $173, maintaining a Neutral rating based on a more conservative margin outlook and adjusted earnings projections through 2027. These developments highlight Ferguson’s ongoing efforts to expand and adapt in a challenging market environment.

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