Where next for Ferguson Plc after today’s interim management statement?

Does Ferguson Plc (LON:FERG) (FERG.L) offer investment potential for the long term?


The share price of Ferguson Plc (LON:FERG) (FERG.L) has fallen by around 3% today after the company released an interim management statement for the three months to 31 October 2018. In my view, it continues to deliver on its strategy and could enjoy improving performance in the long run.

Ongoing revenue was 8.5% ahead of the same period from the previous year, with organic growth of 6.7%. The company’s performance in the US was relatively strong, with organic growth rising by 9.6% in supportive markets. Growth in the US was widespread across all regions and major business units. Although Canada had difficult previous year comparatives, it still delivered growth. There was also modest growth in the UK on a like-for-like basis.

The company’s trading profit increased by 9.9%, with gross margin of the ongoing business being 50 basis points up on the previous year at 29.6%. During the period, the company invested $284 million in acquisitions.

Ferguson’s performance since the end of the quarter has been strong. It has seen further growth in the US, with it anticipating further improvements in future months. It therefore expects trading profit for the full year to be in line with market expectations.

In my opinion, the company has a sound strategy. Its focus on delivering improving customer service levels and remaining disciplined on costs could help it to generate improving financial performance.

With the US economy continuing to offer high growth potential in my view, I feel that Ferguson’s share price could move higher over the medium term. The stock currently has a P/E ratio of around 12.5, which suggests to me that it may offer good value for money.

Therefore, after a significant drop in market value in recent weeks, I believe that the company could offer the potential for a successful turnaround over the long run.

About Robert Stephens 5151 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page