Will Ferguson's Cost Control Measures Drive Margin Expansion?

Core Insights - Ferguson Enterprises Inc. (FERG) achieved margin growth in fiscal 2025 despite rising costs and expenses, indicating a commitment to long-term profitability [1][2] Financial Performance - The cost of sales for FERG increased by 3.6% year over year to $21.3 billion due to higher input costs [1] - Selling, general and administrative expenses rose by 5.6% year over year to $6.4 billion, driven by labor costs, performance-based compensation, and infrastructure investments [1] - FERG's gross margin improved by 70 basis points to 31.7% year over year [2] - Adjusted operating profit grew by 0.6% year over year to $2.84 billion, with an adjusted operating margin of 9.2% [2][8] - The company expects an adjusted operating margin of 9.2-9.6% for calendar 2025, compared to 9.1% in calendar 2024 [2] Operational Initiatives - In the second half of fiscal 2025, FERG undertook business restructuring initiatives, incurring $73 million in related expenses to optimize operations and improve productivity [3][4] Market Position - FERG's focus on cost control, efficient operations, and balanced exposure across residential and non-residential markets positions it well for sustained margin performance [4] - FERG's shares surged by 18.6% over the past year, outperforming the industry's growth of 0.1% [7] Valuation Metrics - FERG is trading at a forward price-to-earnings ratio of 22.28X, above the industry average of 20.50X [10] - The Zacks Consensus Estimate for FERG's fiscal 2026 earnings has been on the rise over the past 60 days [12]