Ferguson plc(US:FERG)2024-06-04 14:58Financial Data and Key Metrics Changes - The company reported revenue growth of 2.4% despite a continued deflation of approximately 2% [19][36] - Adjusted operating profit was $674 million, an increase of 2.6% year-over-year, with an adjusted diluted earnings per share of $2.32, up 5.5% [32][62] - Adjusted operating margin for the quarter was 9.2%, with a guidance range for the full year adjusted to between 9.2% to 9.6% [69][71] Business Line Data and Key Metrics Changes - Residential trade plumbing grew by 1%, while the Commercial Mechanical customer group saw an 8% increase [21][22] - The Industrial, Fire and Fabrication, and Facilities Supply businesses delivered a combined net sales growth of 2% [22] - Residential Digital Commerce declined by 12%, while Waterworks revenues increased by 7% [34] Market Data and Key Metrics Changes - Net sales in the U.S. grew by 2.2%, with an organic decline of 0.9%, offset by acquisitions and additional sales days [37][63] - In Canada, net sales were up 6.7% year-over-year, with an organic decline of 0.6% [25] - Nonresidential markets showed resilience with mid-single-digit growth, while overall net sales in nonresidential were up 4% [33] Company Strategy and Development Direction - The company is focused on leveraging multiyear tailwinds in both residential and nonresidential end markets, with a balanced business mix [20][48] - Capital allocation priorities include investing in organic growth, consolidating fragmented markets through acquisitions, and returning surplus capital to shareholders [40][42] - The company plans to continue its strategy of opening new market distribution centers (MDCs) and enhancing automation [103] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the markets over the medium to long term, expecting to capitalize on growth opportunities [48][90] - The company anticipates continued volume growth and resilient gross margins despite ongoing mild deflation [71] - Management noted that the deflationary pressures are expected to lessen as the company moves into the next fiscal year [100] Other Important Information - The company declared a 5% increase in its quarterly ordinary dividend and extended its share repurchase program by an additional $1 billion [20][42] - The balance sheet remains strong, with a net debt to adjusted EBITDA ratio of one times [27][62] Q&A Session Summary Question: Volume tracking and bidding activity - Management noted an uptick in bidding activity, particularly in Waterworks and Commercial Mechanical, and expressed optimism about future performance [51] Question: Guidance for fourth quarter and deflation expectations - Management confirmed expectations for modest deflation to continue into the fourth quarter, with overall guidance remaining broadly flat [52][100] Question: Pricing dynamics and finished goods - Management indicated that finished goods pricing has been stable, with some categories experiencing spottiness in price increases [123] Question: Drivers of risk across operating margin outlook - Management explained that the top end of the margin range was adjusted due to ongoing deflationary pressures, while the bottom end remains intact [108] Question: End market outlook for fiscal '25 - Management expressed optimism about nonresidential markets and the potential for growth in infrastructure investments [115]