10th Jun 2019 09:46
LONDON (Alliance News) - It was a "soggy" start to the second half of Ferguson's financial year amid poor weather conditions in the US, said Liberum.
Shares in the plumbing and heating products distributor were down 4.8% at 5,094.00 pence on Monday, the worst performer in the FTSE 100.
Ferguson reported revenue for the three months to the end of April of USD5.27 billion, up 6.2% from USD4.97 billion reported for the same period a year prior.
However, the third quarter organic growth rate of 2.7% contrasted sharply to the 6.5% recorded in the first half, broker Liberum noted. The company had previously guided for second half growth to slow to around 3% to 5%.
Within divisions, US organic growth slowed sharply to 3.3% in the third quarter from 10% in the first half.
"Management has chosen not to blame the weather, but we note that US rainfall in the quarter was exceptional, which has disrupted construction somewhat, at the same time as there was a natural lull in growth rates caused in part by the rising rate environment at the end of the 2018 calendar year," said Liberum.
In the UK, however, organic growth improved to 2.8% in the first quarter from a contraction of 1.0% in the second quarter and just 0.8% expansion in the first. In Canada, however, the firm reported a 2.9% drop in organic revenue following a 3.3% rise in the first three months of the year which slowed to 0.5% in the second quarter.
Despite the soft third quarter outturn, the broker said it continues to see good value in the shares, noting a 30% discount to US peers.
The firm's price to earnings ratio of 13 times "does not do justice to Ferguson's US leadership position or its long track record of market share gains", the broker added.
Liberum kept its Buy rating on the stock with a price target of 6,500p.
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