Analyst Note| Brian Bernard, CFA, CPA |
Ferguson's fiscal third-quarter (ended April 30) results came in well ahead of our expectations. Revenue from continued operations surged 25% year over year (21% organic) to $5.9 billion and adjusted operating margin expanded 250 basis points to 9.5%. Ferguson benefited from still-booming residential construction and repair and remodel spending in the United States and strong residential activity in Quebec and Toronto. Management called out 40% growth within its U.S. heating, ventilation, and air-conditioning market and 50% growth from its eBusiness strategy. The very strong residential HVAC growth is in line with figures quoted by HVAC manufacturers Carrier, Johnson Controls, Lennox, and Trane Technologies. Management also called out solid growth from its water infrastructure business, Waterworks, and a return to growth for its commercial/mechanical business. While sales from the U.S. industrial market were still down year over year, there was a sequential improvement, and we expect growth will return as social distancing restrictions ease.