Ferguson PLC (NYSE:FERG) stock fell 5.45% (As on March 5, 11:14:21 AM UTC-4, Source: Google Finance) after the company reported a decline in its second-quarter earnings and revenue, falling short of Wall Street estimates. Organic revenue declined 3.7% driven by a decline in residential sales with a smaller decline in non-residential sales. These declines were partially offset by acquisition contributions of 1.5% The company has completed two acquisitions during the quarter and one subsequent to the quarter with aggregate annualized revenues of approximately $220 million.
FERG in the second quarter of FY 24 has reported the adjusted earnings per share of $1.74, missing the analysts’ estimates for the adjusted earnings per share of $1.82. The company had reported 2.2 percent decline in the adjusted revenue growth to $6.67 billion in the second quarter of FY 24, missing the analysts’ estimates for revenue of $6.72 billion. This is primarily due to approximately 2% deflation. Despite the sales dip, Ferguson’s gross margin improved by 20 basis points YoY, attributed to effective pricing execution. The adjusted operating profit for the quarter was $520 million, a 10.7% decrease from the previous year, with the adjusted operating margin at 7.8%.
Moreover, net sales in the US business declined 2.2%, with an organic revenue decline of 3.7% partially offset by a 1.5% contribution from acquisitions. Residential end markets, which comprise just over half of US revenue, remained subdued. New residential housing start and permit activity improved slightly in the quarter, while repair, maintenance and improvement (“RMI”) work remained soft. Overall, residential revenue declined by approximately 4% in the second quarter. Net sales of Canada compressed by 3.7%, with an organic revenue decline of 3.3% and a 0.4% adverse impact from foreign exchange rates. Adjusted operating profit of $9 million declined by $5 million compared to last year. Subsequent to the quarter we acquired Yorkwest Plumbing Supply Inc., a leading distributor of plumbing, municipal, hydronics, institutional, HVAC and industrial products in the greater Toronto area.
Looking ahead, Ferguson’s financial guidance for FY2024 remains unchanged, with net sales expected to be broadly flat. The company anticipates leveraging structural tailwinds in non-residential construction and further supporting the residential trade professional.
Ferguson said it remains committed to its strategy of organic growth, sustainable dividend growth, market consolidation through acquisitions, and returning capital to shareholders, as evidenced by the declared quarterly dividend of $0.79, reflecting a 5% increase over the prior year.