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Ferguson PLC (NYSE:FERG) shares jumped 11.76% in premarket trading after the company’s third-quarter presentation revealed stronger-than-expected results for the period ending April 30, 2025. The company reported net sales of $7.6 billion, representing a 4.3% increase year-over-year, with adjusted operating profit rising 6.1% to $715 million.
The strong quarterly performance marks a significant turnaround from Ferguson’s disappointing second-quarter results, when the company missed both earnings and revenue expectations, causing shares to drop over 4%.
Quarterly Performance Highlights
Ferguson’s third-quarter results showed broad-based improvement across key financial metrics. The company achieved organic growth of 5.0% with flat pricing, while acquisition growth contributed an additional 1.0%. These gains were partially offset by one fewer sales day and foreign exchange impacts totaling -1.7%.
"Our associates continued to take care of our customers, outperform the market and drive solid growth in the third quarter," said CEO Kevin Murphy in the closing remarks of the presentation. "Gross margin actions, moderating deflation and the early benefits of streamlining our business delivered adjusted operating profit growth and adjusted operating margin expansion."
The company reported adjusted diluted earnings per share of $2.50, representing a 7.8% increase compared to the same period last year. Adjusted operating margin expanded by 20 basis points to 9.4%.
Ferguson’s performance this quarter represents a marked improvement from its second-quarter results, when the company reported EPS of $1.52, missing the expected $1.99, and revenue of $6.9 billion, below the anticipated $7.09 billion.
Segment Performance Analysis
Ferguson’s balanced approach to end markets has proven effective, with the company reporting growth across both residential and non-residential sectors. Residential markets, which account for 51% of US net sales, grew by 2% in Q3, while non-residential markets, representing 49% of US net sales, grew by a more robust 7%.
Within the non-residential segment, Civil/Infrastructure showed the strongest performance with 11% growth, followed by Commercial at 7% and Industrial at 5%. The company noted an acceleration in large capital project activity.
Breaking down performance by customer group, Waterworks and HVAC emerged as the strongest performers with growth of 12% and 10% respectively. Commercial/Mechanical also showed strong growth at 10%. However, some segments faced challenges, with Residential Trade Plumbing, Fire & Fabrication, Facilities Supply, and Industrial all declining by 1%, while Residential Digital Commerce decreased by 4%.
The US market, which accounts for the vast majority of Ferguson’s business, saw net sales increase by 4.5% to $7,288 million, with adjusted operating profit rising 6.0% to $726 million. Meanwhile, Canada experienced a slight 0.3% decrease in net sales to $333 million, though adjusted operating profit increased by 33.3% to $8 million.
Capital Allocation & Balance Sheet Strength
Ferguson maintained a strong balance sheet with net debt to adjusted EBITDA at 1.2x, within the company’s target range of 1-2x. The company continued its balanced approach to capital allocation across four key areas: organic growth, dividends, acquisitions, and share repurchases.
During the quarter, Ferguson completed three acquisitions and maintained a healthy pipeline for future M&A activity. The company returned significant capital to shareholders through $251 million in share repurchases and $166 million in dividends. Ferguson also announced a quarterly dividend of $0.83 per share, representing a 5% increase.
Year-to-date free cash flow reached $1,152 million, demonstrating Ferguson’s continued strong cash generation capabilities. This robust cash flow has enabled the company to invest in working capital and capital expenditures while still returning substantial capital to shareholders.
"Despite the dynamic and uncertain environment, our investments and strategic focus on key growth initiatives are yielding solid results," noted Murphy in the presentation’s closing remarks.
Market Position & Growth Focus
Ferguson highlighted its leading positions across multiple market segments in North America. The company holds the #1 market position in several key sectors, including Residential Building and Remodel (14% market share), Waterworks (23% market share), Commercial/Mechanical (23% market share), and Fire & Fabrication (26% market share).
The company’s growth strategy focuses on four key areas: HVAC, Waterworks, Large Capital Projects, and Ferguson Home. In HVAC, which grew 10% in Q3, the company has completed dual-trade counter conversions. Waterworks, which saw 12% growth, has diversified its solution offerings, particularly in wastewater. The company is also leveraging a multi-customer group approach for large capital projects and combining digital solutions with expert consultative services for Ferguson Home, which launched as a brand in Q3.
Forward-Looking Statements & Guidance
Looking ahead, Ferguson maintained its fiscal year 2025 guidance, projecting low to mid-single digit net sales growth and adjusted operating margin of 8.5% to 9.0%. The company expects interest expense of $180-$200 million, an adjusted effective tax rate of approximately 26%, and capital expenditures of $300-$350 million.
"We remain confident in our markets over the medium-term and continue to invest in scale and capabilities to support the complex project needs of our specialized professional customers," said Murphy.
The strong third-quarter performance and positive market reaction suggest Ferguson has successfully navigated the challenges that affected its second-quarter results. With improving margins, continued market outperformance, and a strong balance sheet, the company appears well-positioned to execute its growth strategy in the remainder of fiscal year 2025.
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