Ferguson Reports Solid First-Quarter Results but Maintains Tempered Fiscal 2023 Outlook

Ferguson’s first-quarter financial performance exceeded our expectations as the narrow-moat-rated building products distributor reported over 16% year-over-year revenue growth (13% organic) and adjusted operating margin remained relatively steady (10.9% compared with 11.3% last year) despite waning price/cost tailwinds. Still, management maintains its view that its end markets will contract by a low-single-digit percentage in 2023 as volume declines more than offset price inflation. As detailed in our Nov. 23 analyst note, we project that per-unit owner-occupied improvement spending will decline by approximately 2% year over year. Ferguson maintained its full-year fiscal 2023 financial guidance, which calls for low-single-digit percentage revenue growth (aided by acquisitions and market outperformance) and adjusted operating margin of 9.3%-9.9% (compared with 10.3% in 2023). After reviewing Ferguson’s first-quarter performance, we now model approximately 3% revenue growth with a 9.4% adjusted operating margin in 2023 (up from 2% and 9.3%, respectively).