Last Update10 Oct 25Fair value Increased 0.91%
Ferguson Enterprises' analyst price target has been raised by approximately $2 to $252. Analysts cite strong Q4 results, share gains across key markets, and the company's resilience despite ongoing headwinds in residential segments.
Analyst Commentary
Recent quarters have seen several bullish adjustments to Ferguson Enterprises’ price target by leading research firms, reflecting ongoing confidence in the company’s business model and market positioning. Analysts continue to cite a variety of operational and macro factors in their outlook for the stock.
Bullish Takeaways- Bullish analysts highlight strong organic revenue growth, with particular outperformance in non-residential markets and a resilient response to inflationary trends.
- Share gains have been noted across both residential and non-residential end-markets, indicating effective execution and a unique ability to capture large and complex projects.
- Recent results exceeded consensus estimates, particularly in revenue and operating profit. This demonstrates the company’s capacity to sustain above-market growth even amidst challenging environments.
- Ongoing solid demand for non-residential waterworks, commercial, and civil infrastructure projects is seen as supporting continued momentum.
- Bearish analysts point to ongoing weakness in new residential construction and repair, maintenance, and improvement demand. This may continue as a near-term headwind for the business.
- The HVAC segment remains a potential area of near-term volatility, with some skepticism around the stability of results in that category.
- Revised forecasts assume more conservative margin growth in future periods. This reflects caution on valuation as industry recovery timelines remain uncertain.
- Some price target upward revisions are based on expectations of an eventual market recovery out to 2026 or beyond, meaning near-term upside may be limited by macroeconomic trends.
What's in the News
- The Board amended and restated the company bylaws to align with a new fiscal year ending on December 31 each year (Key Developments).
- Ferguson Enterprises is changing its fiscal year-end from July 31 to December 31. The company will implement a five-month transition period in 2025, and begin reporting on a calendar year basis in 2026 (Key Developments).
- Updated earnings guidance for calendar year 2025 projects net sales with mid-single digit growth (Key Developments).
- Between May 1 and July 31, 2025, Ferguson repurchased 908,234 shares for $183.54 million. This completed a total buyback of over 26.7 million shares, amounting to 12.74% of shares, under the ongoing buyback program (Key Developments).
Valuation Changes
- Consensus Analyst Price Target has risen slightly to $252.16 from $249.89, reflecting a modest increase in projected fair value.
- Discount Rate has edged up marginally from 8.13% to 8.16%, signaling a minor adjustment in perceived risk or required return.
- Revenue Growth forecasts have decreased from 5.41% to 4.80%, indicating a more conservative outlook for future sales expansion.
- Net Profit Margin estimates have increased to 6.77% from 6.45%, suggesting improved expectations for profitability.
- Future P/E ratio projections have declined from 25.69x to 24.63x, pointing to a slightly less expensive valuation of forward earnings.
Key Takeaways
- Strategic investments and geographic expansion in HVAC and Waterworks segments are set to drive revenue and capture market share in a fragmented industry.
- Cost reduction, share repurchase, and digital initiatives are expected to enhance profitability, earnings per share, and customer engagement.
- Execution risks and deflation could hinder margin growth, with foreign exchange fluctuations further affecting international revenue, amid pressured residential demand and competitive pricing.
Catalysts
About Ferguson Enterprises- Distributes plumbing and heating products in the United States and Canada.
- Ferguson's strategic investments in its HVAC business, including geographic expansion and acquisitions, are expected to drive revenue growth. The focus on dual trade conversions and the private label HVAC line, Durastar, aims to capture market share in a fragmented industry and positively impact future revenue and earnings.
- Positive growth prospects in the Waterworks segment due to robust activity in public works and infrastructure projects are expected to boost revenue. Ferguson’s involvement in large capital projects positions it well for continued growth in this diversified segment, which should help improve margins as the business scales.
- The ongoing $1 billion increase in Ferguson's share repurchase authorization indicates confidence in the underlying business and shareholder value creation, suggesting potential improvements in earnings per share (EPS) as the share count decreases.
- Ferguson is focusing on cost reduction and efficiency improvements in noncustomer-facing roles to streamline operations and increase speed. These actions are expected to enhance net margins and improve overall profitability over time.
- Continued investment in digital and unified customer experiences, such as the Ferguson Home initiative, aims to enhance customer engagement and sales across residential trade plumbing and digital commerce, positively impacting future revenue growth and potentially improving margins through increased customer retention.
Ferguson Enterprises Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Ferguson Enterprises's revenue will grow by 6.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 5.3% today to 6.5% in 3 years time.
- Analysts expect earnings to reach $2.4 billion (and earnings per share of $12.65) by about September 2028, up from $1.6 billion today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.3x on those 2028 earnings, down from 28.0x today. This future PE is greater than the current PE for the GB Trade Distributors industry at 22.0x.
- Analysts expect the number of shares outstanding to decline by 1.77% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.19%, as per the Simply Wall St company report.
Ferguson Enterprises Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Persistent commodity-led deflation has negatively impacted gross margins, reducing operating margins and earnings.
- Continued weaker demand in residential end markets might impede revenue growth, particularly due to subdued new construction and repair markets.
- Execution risks linked to ongoing growth investments and market expansions, such as the HVAC counter expansions and large capital projects, could lead to increased operational costs without a guaranteed return on investment, affecting net margins.
- Competition and price pressure from deflation have driven the need to balance market share gains against profitability, potentially impacting profit margins and earnings overall.
- Foreign exchange rate fluctuations have adversely affected revenue growth, particularly in markets outside the U.S., such as Canada, which includes an observed impact on top-line growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $235.947 for Ferguson Enterprises based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $280.0, and the most bearish reporting a price target of just $180.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $36.5 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 23.3x, assuming you use a discount rate of 8.2%.
- Given the current share price of $228.23, the analyst price target of $235.95 is 3.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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