Ferguson Enterprises (FERG) Q3 2024 earnings summary

Executive summary

• Q3 net sales increased 2.4% year-over-year to $7.3 billion, driven by volume improvement, acquisitions, and an extra sales day, despite 2% price deflation.

• Adjusted operating profit rose 2.6% to $674 million; adjusted diluted EPS increased 5.5% to $2.32, with diluted EPS up 33.7% to $2.18.

• Strong cash generation and a robust balance sheet supported increased dividends and share repurchases, with a 5% dividend hike and $1 billion extension to the repurchase program.

• Shareholders approved a merger to redomicile the parent company in the U.S., expected effective August 1, 2024.

• Business remains well-positioned with balanced exposure to residential and non-residential markets, leveraging multi-year tailwinds.

Financial highlights

• Q3 net sales were $7.3 billion, up 2.4% year-over-year; organic revenue declined 0.9% due to deflation, offset by acquisitions and an extra sales day.

• Adjusted operating profit reached $674 million, up 2.6% year-over-year; adjusted EPS was $2.32, up 5.5%.

• Gross margin improved by 50 bps to 30.5% in Q3.

• Year-to-date net sales were $21.7 billion, down 0.9%; adjusted operating profit was $1.967 billion, down 6.5%.

• Free cash flow year-to-date was $1.3 billion.

Outlook and guidance

• Fiscal 2024 net sales expected to be broadly flat, with adjusted operating margin guidance narrowed to 9.2%-9.6%.

• Price deflation for the year now expected at approximately 2%.

• CapEx guidance lowered to $350-$400 million; interest expense guidance reduced to $175-$185 million.

• Company expects a one-time, non-cash deferred tax charge of $75M–$135M in Q4 FY2024 due to the merger.

• Management believes current cash and access to capital are sufficient for the next 12 months.