Ferguson Enterprises (FERG) Q3 2024 earnings summary

Executive summary

• Q3 net sales grew 2.4% year-over-year to $7.3 billion, driven by volume gains, 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, while reported diluted EPS rose 33.7% to $2.18.

• Gross margin improved by 50 bps to 30.5% in Q3; adjusted operating margin at 9.2%.

• Eight acquisitions completed fiscal year-to-date, adding approximately $350 million in annualized revenue.

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

Financial highlights

• Q3 net sales: $7.3 billion, up 2.4% year-over-year; organic revenue declined 0.9% but was offset by acquisitions and an extra sales day.

• Adjusted operating profit for Q3: $674 million (+2.6% YoY); adjusted EPS: $2.32 (+5.5% YoY).

• Gross margin improved to 30.5% in Q3 (from 30.0% YoY); adjusted operating margin at 9.2%.

• Free cash flow year-to-date was $1.3 billion; operating cash flow for the nine months: $1,507 million.

• Net debt to adjusted EBITDA at 1x, reflecting a strong balance sheet.

Outlook and guidance

• FY2024 net sales expected to remain broadly flat, with adjusted operating margin guidance narrowed to 9.2%-9.6%.

• Interest expense forecast lowered to $175-$185 million; capital expenditures expected at $350-$400 million.

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

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

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