Ferguson Enterprises Inc.: Takeaways from the Road

研报英文原文证据摘录

Ferguson Enterprises Inc.: Takeaways from the Road

Barclays | Ferguson Enterprises Inc.

segment in 1Q. Lighter non-resi is, however, still choppier. Within residential, we sensed that

management has not seen much to be excited about, other than with its own efforts within

HVAC, with both new resi and resi R&R seeing minimal signs of a growth catalyst. In our view,

this end market blend is what’s currently reflected in guidance, with the large capital projects

portion being the potential driver of any upside to end market guidance.

Price and inflation outlook: We think that management’s reasoning behind not formally

increasing inflation guidance with Q1 was uncertainty with respect to the duration and

magnitude of inflation relating to the Middle East conflict, which seems prudent given the more

recent calming of energy inflation. With that said, we think there have been enough price

increase announcements across multiple categories (particularly on various types of plastic /

PVC pipe) that could still lead to modest upside vs. FERG’s initial +LSD% inflation guidance, with

price increases on the PVC side at least helping to reduce the prior deflation in that category,

while the rest of the portfolio benefits from inflation (Q1 inflation was +MSD%).

Capital Allocation Priorities: We expect that FERG will maintain leverage closer to 1x relative

to its 1x-2x target, although management would absolutely be willing to extend to 2x in the

event the right acquisition target becomes available. Priorities remain: 1) investing in organic

growth (such as MDCs, HVAC/plumbing counter conversions etc); 2) M&A (+1-3% annual

contribution); 3) growing the dividend; and 4) returning surplus capital to shareholders.

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