Slowing housing market is hurting this plumbing and HVAC distributor's stock

MW Slowing housing market is hurting this plumbing and HVAC distributor's stock

By Tomi Kilgore

Quarterly profit beat expectations, but sales came up short and the full-year growth outlook was a bit downbeat

Shares of Ferguson Enterprises Inc. were headed for a fall in early Tuesday trading, after the plumbing, HVAC and appliance-products distributor missed quarterly revenue expectations, citing "muted" residential end markets as housing activity weakened.

The company also provided a downbeat full-year sales growth outlook, as the "challenging near-term market environment" is expected to continue.

The stock $(FERG)$ dropped 2.5% in premarket trading, which puts it on track to trade in the red for the year.

Through Monday, the stock had lost 11.9% since closing at a record $223.85 on April 5, knocking the company's market capitalization down by roughly $5.4 billion, to $39.8 billion.

Net income for the fiscal fourth quarter to July 31 fell to $451 million, or $2.23 a share, from $584 million, or $2.85 a share, in the same period a year ago.

Excluding nonrecurring items, such as deferred tax charges, adjusted earnings per share rose to $2.98 from $2.77 to beat the FactSet EPS consensus of $2.85.

Net sales grew 1.4% to $7.95 billion, but were below the FactSet consensus of $8.01 billion, as U.S. sales increased 1.3%.

"Residential end markets, representing approximately half of U.S. revenue, remained muted," the company said. "New residential housing start and permit activity weakened during the second half of our fiscal year."

For fiscal 2025, the company expects sales growth in the low-single-digit percentage range, while the current FactSet sales consensus of $31.14 billion implies 5.1% growth.

"While we anticipate an ongoing challenging near-term market environment, we will continue to invest in scale and capabilities to take advantage of multi-year structural tailwinds such as underbuilt and aging U.S. housing, non-residential large capital projects and our opportunity with the dual-trade plumbing and HVAC contractor," said Chief Executive Kevin Murphy.

The stock has tacked on 2.2% year to date through Monday, while the S&P 500 index has rallied 18.1%.

-Tomi Kilgore

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September 17, 2024 07:53 ET (11:53 GMT)

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