Can Ferguson – formerly Wolseley (LON:FERG) – find the materials to rebuild its stock price with Tuesday’s half year results?
Wobble in the middle of the year aside, when the stock found itself lurking between £45 and £47.50, 2017 ended up being a pretty solid 12 months for the FTSE 100 firm. Starting at £49.87 Ferguson eventually closed out the year at £53.78, marking a respectable 8% annual market increase.
Initially 2018 saw the stock continue the upward swing that started with last October’s full year results, with the company quickly climbing to an all-time high of £57.21 by mid-January. However, the stock wasn’t left unscathed by the market-wide drop that occurred over late January/early February, returning to a £51 to £53 trading bracket. Ferguson PLC now sits at a current trading price of £53.24.
The firm’s most recent update came in December, and painted a stark contrast between its UK and US divisions (the strength of the latter was responsible for the company’s name change last March). Overall Ferguson’s performance was very strong, with a 7.6% increase in first quarter organic revenue to $5.2 billion, alongside a 13.9% surge in trading profit to $394 million.
However, the bulk of that growth came from the US, where organic revenue and trading profit (at constant exchange rates) rose 8.3% and 14.2% respectively. As for the UK, it saw a solid 3.2% increase in organic revenue thanks to ‘price inflation’, but with ‘challenging market conditions’ leading to an ominous 3.8% slump in trading profit as ‘customers resisted supplier price rises’. In Canada and Central Europe, meanwhile, organic revenue was up 7.7%, alongside a stellar 19.3% jump in trading profit.
In terms of Tuesday’s interim results, investors are going to want to see some kind of improvement in the UK division, though the size and strength of the US arm may be able to compensate for any British problems if it posts similar figures as it did in Q1.
Ferguson PLC has a consensus rating of ‘Hold’ with an average target price of £57.68.
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