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Ferguson Surges 42.6% in Six Months: Buy or Hold the Stock?
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Key Takeaways
FERG's stock surged 42.6% in six months, outperforming peers and trading near its 52-week high.
U.S. revenues grew 3.8% in FY25, driven by waterworks and commercial infrastructure market strength.
High costs, $3.75B debt and a 21.79X P/E valuation could limit further upside in the near term.
Ferguson Enterprises Inc.’s (FERG - Free Report) investors have been witnessing some short-term gains from the stock of late. Shares of the leading value-added distributor in the water and air specialized industry have surged 42.6% in the past six months, outpacing the industry and the S&P 500 composite’s growth of 19.4% and 27.5%, respectively. The company has also outperformed other industry players like Johnson Controls plc (JCI - Free Report) and Fastenal Company (FAST - Free Report) , which have returned 38.7% and 15.9% respectively, over the said time frame.
FERG Outperforms the Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
Closing at $234.83 on Thursday, the stock is trading below its 52-week high of $243.40 but significantly higher than its 52-week low of $146.00. The stock is trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability.
FERG Shares’ 50-Day and 200-Day SMA
Image Source: Zacks Investment Research
Factor Driving FERG
Ferguson is witnessing strong momentum in its U.S. business, driven by solid demand in the non-residential markets. In fiscal 2025 (ended July 2025), revenues from the company’s non-residential markets accounted for half of its U.S. business and jumped 6.8% year over year. The revenues were driven by strong growth in waterworks and large capital projects, with strength across commercial and civil infrastructure markets.
It's worth noting that revenues from the company’s commercial & civil infrastructure markets surged 7% and 9%, respectively. This uptick significantly benefited Ferguson’s U.S. business, which reported a 3.8% year-over-year revenue increase in fiscal 2025. However, soft repair, maintenance and improvement work across residential end markets partially offset this strength.
Healthy demand across Ferguson’s non-residential markets, along with the positive contribution from acquisitions, has also been driving its Canada business. Revenues from this business increased 3.7% year over year in the fiscal year.
The company has also been strengthening and expanding its operations through strategic buyouts. For instance, FERG completed four acquisitions during the fourth quarter of fiscal 2025, which included Ritchie Environmental Solutions, HPS Specialties, Manufactured Duct & Supply Company and Water Resources. Acquisitions had a contribution of approximately 1% and 4.9% to the U.S. and Canada business’ sales, respectively, in the fourth quarter of fiscal 2025.
A Few Near-Term Concerns Prevail
Ferguson has been dealing with the adverse impacts of high input costs and operating expenses. In fiscal 2025, the cost of goods sold increased 3.6% year over year to $21.3 billion due to increasing input costs. The metric, as a percentage of net sales, remained relatively flat year over year at 69.3%. Also, the company’s selling, general and administrative expenses rose 5.6% to $6.4 billion.
A high debt level remains another concern for FERG. Exiting fiscal 2024, the company’s long-term debt was high at $3.75 billion. Also, interest expenses in the fiscal year increased 6.1% year over year to $190 million due to higher average borrowings. Considering the company's high debt level, its cash and cash equivalents of $674 million do not look impressive.
Valuation Remains an Overhang
Ferguson is trading at a forward 12-month price-to-earnings (P/E) ratio of 21.79X, higher than the industry average of 20.81X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours.
In comparison with FERG’s valuation, its peers, Johnson Controls and Fastenal Company, are trading at a premium. Notably, Johnson Controls and Fastenal Company are currently trading at 24.56X and 38.64X, respectively.
Image Source: Zacks Investment Research
Earnings Estimates
The Zacks Consensus Estimate for FERG’s fiscal 2026 (ending July 2026) earnings is pegged at $10.59 per share, indicating an increase of 0.4% in the past 60 days. The figure indicates year-over-year growth of 6.5%. However, the consensus mark for fiscal 2027 (ending July 2027) earnings is pinned at $11.55 per share, declining 0.5% in the same period. Nevertheless, the figure indicates year-over-year growth of 9.1%.
Image Source: Zacks Investment Research
Final Take on FERG
Given the strength across its U.S. and Canada businesses, accretive acquisitions and robust share price returns, maintaining a position in Ferguson appears to be the right choice at the moment. Escalating operating expenses, high debt level and premium valuation are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.
Image: Bigstock
Ferguson Surges 42.6% in Six Months: Buy or Hold the Stock?
Key Takeaways
Ferguson Enterprises Inc.’s (FERG - Free Report) investors have been witnessing some short-term gains from the stock of late. Shares of the leading value-added distributor in the water and air specialized industry have surged 42.6% in the past six months, outpacing the industry and the S&P 500 composite’s growth of 19.4% and 27.5%, respectively. The company has also outperformed other industry players like Johnson Controls plc (JCI - Free Report) and Fastenal Company (FAST - Free Report) , which have returned 38.7% and 15.9% respectively, over the said time frame.
FERG Outperforms the Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
Closing at $234.83 on Thursday, the stock is trading below its 52-week high of $243.40 but significantly higher than its 52-week low of $146.00. The stock is trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability.
FERG Shares’ 50-Day and 200-Day SMA
Image Source: Zacks Investment Research
Factor Driving FERG
Ferguson is witnessing strong momentum in its U.S. business, driven by solid demand in the non-residential markets. In fiscal 2025 (ended July 2025), revenues from the company’s non-residential markets accounted for half of its U.S. business and jumped 6.8% year over year. The revenues were driven by strong growth in waterworks and large capital projects, with strength across commercial and civil infrastructure markets.
It's worth noting that revenues from the company’s commercial & civil infrastructure markets surged 7% and 9%, respectively. This uptick significantly benefited Ferguson’s U.S. business, which reported a 3.8% year-over-year revenue increase in fiscal 2025. However, soft repair, maintenance and improvement work across residential end markets partially offset this strength.
Healthy demand across Ferguson’s non-residential markets, along with the positive contribution from acquisitions, has also been driving its Canada business. Revenues from this business increased 3.7% year over year in the fiscal year.
The company has also been strengthening and expanding its operations through strategic buyouts. For instance, FERG completed four acquisitions during the fourth quarter of fiscal 2025, which included Ritchie Environmental Solutions, HPS Specialties, Manufactured Duct & Supply Company and Water Resources. Acquisitions had a contribution of approximately 1% and 4.9% to the U.S. and Canada business’ sales, respectively, in the fourth quarter of fiscal 2025.
A Few Near-Term Concerns Prevail
Ferguson has been dealing with the adverse impacts of high input costs and operating expenses. In fiscal 2025, the cost of goods sold increased 3.6% year over year to $21.3 billion due to increasing input costs. The metric, as a percentage of net sales, remained relatively flat year over year at 69.3%. Also, the company’s selling, general and administrative expenses rose 5.6% to $6.4 billion.
A high debt level remains another concern for FERG. Exiting fiscal 2024, the company’s long-term debt was high at $3.75 billion. Also, interest expenses in the fiscal year increased 6.1% year over year to $190 million due to higher average borrowings. Considering the company's high debt level, its cash and cash equivalents of $674 million do not look impressive.
Valuation Remains an Overhang
Ferguson is trading at a forward 12-month price-to-earnings (P/E) ratio of 21.79X, higher than the industry average of 20.81X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours.
In comparison with FERG’s valuation, its peers, Johnson Controls and Fastenal Company, are trading at a premium. Notably, Johnson Controls and Fastenal Company are currently trading at 24.56X and 38.64X, respectively.
Image Source: Zacks Investment Research
Earnings Estimates
The Zacks Consensus Estimate for FERG’s fiscal 2026 (ending July 2026) earnings is pegged at $10.59 per share, indicating an increase of 0.4% in the past 60 days. The figure indicates year-over-year growth of 6.5%. However, the consensus mark for fiscal 2027 (ending July 2027) earnings is pinned at $11.55 per share, declining 0.5% in the same period. Nevertheless, the figure indicates year-over-year growth of 9.1%.
Image Source: Zacks Investment Research
Final Take on FERG
Given the strength across its U.S. and Canada businesses, accretive acquisitions and robust share price returns, maintaining a position in Ferguson appears to be the right choice at the moment. Escalating operating expenses, high debt level and premium valuation are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.