On September 17, 2024, Ferguson Enterprises Inc (FERG, Financial) released its 8-K filing detailing its fourth quarter and full year financial results for fiscal 2024. Despite facing market headwinds and deflation, the company demonstrated resilient performance, although it fell short of some analyst estimates.
Company Overview
Ferguson Enterprises Inc (FERG, Financial) is a leading distributor of plumbing and HVAC products, primarily serving the repair, maintenance, and improvement, new construction, and civil infrastructure markets. The company operates approximately 1,700 branches across North America, engaging over 1 million customers and sourcing products from 37,000 suppliers. In fiscal 2023, Ferguson derived 95% of its nearly $30 billion in sales from the United States, making it the largest industrial and construction distributor in North America.
Fourth Quarter Highlights
Ferguson reported fourth-quarter sales of $7.9 billion, a 1.4% increase despite a 2% deflation in prices. The company's operating margin improved to 10.2%, up 20 basis points from the previous year. Adjusted diluted earnings per share (EPS) came in at $2.98, surpassing the reported EPS of $2.23 due to one-time, non-cash deferred tax charges. The company declared a quarterly dividend of $0.79 per share and completed four acquisitions during the quarter, contributing to its growth strategy.
Full Year Performance
For the full fiscal year, Ferguson's sales were $29.6 billion, a slight decrease of 0.3% from the previous year. The gross margin improved by 10 basis points to 30.5%, while the operating margin remained flat at 8.9%. Adjusted operating profit was $2.8 billion, down 3.2% from the prior year. The company generated strong cash flow, with $1.9 billion in net cash provided by operating activities, and declared total dividends of $3.16 per share, a 5% increase from the previous year.
Financial Metrics and Achievements
Ferguson's balance sheet remains robust, with a net debt to adjusted EBITDA ratio of 1.1x. The company invested $260 million in ten acquisitions, generating annualized revenue of approximately $400 million. Share repurchases totaled $634 million for the year, with an outstanding balance of approximately $900 million remaining under the current share repurchase program as of July 31, 2024.
| Metric | Q4 2024 | Q4 2023 | Change |
|---|---|---|---|
| Net Sales | $7.9 billion | $7.8 billion | +1.4% |
| Gross Margin | 31.0% | 30.6% | +40 bps |
| Operating Profit | $811 million | $782 million | +3.7% |
| Diluted EPS | $2.23 | $2.85 | -21.8% |
Challenges and Market Outlook
Ferguson faced several challenges, including deflation in commodity-related categories and a muted residential market. Despite these hurdles, the company managed to achieve volume growth and expand its gross margins. CEO Kevin Murphy commented,
Despite market headwinds and deflation during the year, we continued to outperform our markets, returned to volume growth, expanded gross margins and delivered solid operating margin performance."
FY2025 Guidance
Looking ahead, Ferguson provided guidance for fiscal 2025, anticipating modest full-year growth with continued market outperformance. The company expects net sales to grow in the low single digits, with an adjusted operating margin between 9.0% and 9.5%. Capital expenditures are projected to be between $400 million and $450 million.
For more detailed financial breakdowns and further information, visit corporate.ferguson.com.
Explore the complete 8-K earnings release (here) from Ferguson Enterprises Inc for further details.
