Can Ferguson – the new name of the rebranded Wolseley – maintain its recent highs after it reveals its first quarter update on Tuesday?
For much of 2017 Ferguson has looked pretty tired. Holding between £49 and £50 for the first half of the year, with brief forays either side that trading bracket, the building materials distributor eventually slipped to a 9 month low of £44.34 towards the end of August. Yet since late September the stock has been on a bit of a tear, rising all the way to a current trading price, and 9 and a half year peak, of £55.01.
(Source: Spreadex, 04/12/2017)
So what changed? Well investors got fully on board with the firm’s full year results at the start of October. Ferguson posted a 21% surge in revenue to £15.2 billion, which a colossal 75% increase in pre-tax profit to £1.18 billion. And the company just kept on giving, hiking its annual dividend by 10% to £1.10, while announcing a £500 million share buyback programme. All this is thanks to its growth in the US, which now comprises 90% of the firm’s business, and was the reason behind July’s name change (Ferguson was originally the name of its US division).
The company’s focus on the US further intensified in November. Ferguson revealed it was selling its Nordic arm Stark Group for €1.03 billion, a move that helped the stock continued to push higher as investors cheered its increased focus on America.
In terms of Ferguson’s Q1 figures, one imagines investors will be happy with more of the same on Tuesday. The company’s already received a pre-statement boost with the news that the Senate had passed the Republican tax bill with 51 votes to 49, with Ferguson in line to benefit given a) the strength of its presence in the US, and b) the sheer size of the corporation tax cuts.
Ferguson PLC (LON:FERG) has a consensus rating of ‘Hold’ with an average target price of £51.72.
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