Executive Summary
Ferguson plc reported a resilient QQ3 2024 with modest revenue growth and through-cycle EBITDA margins maintaining a high level of profitability in a deflationary input-cost environment. Reported revenue was $7.309 billion, up 2.4% year over year, aided by a 1.7% acquisition contribution and a one-time 1.6% uplift from an extra sales day, offset by organic volume decline of 0.9% and continued approximately 2% price deflation. Management highlighted disciplined cost management and pricing execution, delivering adjusted operating profit of $674 million (up 2.6%), translating into an adjusted operating margin of about 9.3% for the quarter (vs. about 9.1% prior year). Net income rose to $443 million and adjusted diluted EPS to $2.32, up approximately 5.5% year over year. Ferguson generated strong operating cash flow of $643 million and free cash flow of roughly $572 million in the quarter, supporting a balance sheet with net debt to adjusted EBITDA of 1.0x. The company expanded its capital return program, boosting the quarterly dividend by 5% to $0.79 per share and extending its $1 billion share repurchase program. These dynamics underpin a positive but cautious near-term outlook, with full-year 2024 revenue expected to be broadly flat and adjusted operating margin guided narrowly to 9.2%–9.6%. Ferguson remains well-positioned to benefit from multiyear tailwinds in residential and nonresidential end markets while continuing to pursue bolt-on acquisitions to consolidate fragmented markets.
Key Performance Indicators
Key Insights
Revenue: $7.308B in Q3 2024 (+2.3% YoY; +9.5% QoQ shown in quarterly sequence data). Gross margin (GAAP) 29.38%; adjusted gross margin related to product mix and pricing execution around 30.5% in segment reporting, with total quarterly gross profit of $2.147B. Operating income: $0.637B (GAAP); EBITDA: $0.707B; Adjusted operating profit: $0.674B (+2.6% YoY); Adjusted operating margin: ~9.3% for the quarter. Net income: $0.443B; Net income margin: 6.06%; Earnings per share (GAAP): $2.19; Adjusted ...
Financial Highlights
Revenue: $7.308B in Q3 2024 (+2.3% YoY; +9.5% QoQ shown in quarterly sequence data). Gross margin (GAAP) 29.38%; adjusted gross margin related to product mix and pricing execution around 30.5% in segment reporting, with total quarterly gross profit of $2.147B. Operating income: $0.637B (GAAP); EBITDA: $0.707B; Adjusted operating profit: $0.674B (+2.6% YoY); Adjusted operating margin: ~9.3% for the quarter. Net income: $0.443B; Net income margin: 6.06%; Earnings per share (GAAP): $2.19; Adjusted diluted EPS: $2.32 (+5.5% YoY). Cash flow: Net cash from operating activities $642.99M; Capital expenditure (CapEx): $70.53M; Free cash flow: $572.45M. Balance sheet: Total assets $16.458B; Total debt $5.205B; Net debt $4.450B; Net debt to adjusted EBITDA 1.0x; Cash and equivalents $0.755B. Dividend: $0.79 per share for the quarter (up 5% YoY); Payout ratio: 36%; Shares repurchased: $171.0M in the quarter; Year-to-date buybacks total ~$421M, ~2.3M shares reduced. End-market mix: US net sales +2.2%; Canada +6.7%; overall year-to-date: organic revenue down 3.2% with acquisitions contributing +1.9% and extra sales day +0.4%. DSO 43.5 days; DIO 71.8 days; DPO 63.4 days; CCC ~51.8 days.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
7.31B |
2.35% |
9.52% |
| Gross Profit |
2.15B |
0.33% |
5.82% |
| Operating Income |
637.00M |
28.17% |
33.54% |
| Net Income |
443.00M |
31.85% |
37.58% |
| EPS |
2.19 |
33.54% |
38.61% |
Key Financial Ratios
operatingProfitMargin
8.72%
operatingCashFlowPerShare
$3.17
freeCashFlowPerShare
$2.83
Management Commentary
Key insights from management call by theme: Strategy and M&A: Ferguson reported eight acquisitions in the year totaling roughly $350 million of annualized revenue and extended its share repurchase program by $1.0 billion, underscoring a disciplined capital-allocation framework. 'we have now completed eight deals this year, bringing in approximately $350 million of annualized revenue' and 'our Board declared a $0.79 per share quarterly dividend, a 5% increase over the prior year, reflecting our confidence in the business and cash generation.' Operations and end-market trends: management highlighted volume growth in Q3 (2.4% revenue growth) despite 2% deflation, with nonresidential end markets showing resilience (Waterworks +7%, Commercial Mechanical +8% US; total nonres up 4%). Price deflation remained a headwind (~2%), driven by commodity inputs, while finished goods prices remained broadly flat. Gross margin discipline and pricing execution supported margin resilience; adjusted gross margin benefited from pricing actions. 'Gross margin of 30.5% was up 50 basis points over the prior year' and 'adjusted operating profit of $674 million was up 2.6%.' Cash flow and balance sheet: strong cash generation with operating cash flow of $643 million and free cash flow of $572 million in the quarter; net debt to EBITDA at 1.0x; balance-sheet strength supports ongoing buybacks and capex. Guidance and outlook: management reiterated a broadly flat revenue view for FY2024 with modest deflation expected to persist, narrowing the adjusted operating margin guidance to 9.2%–9.6% for the year. 'we now expect to deliver between 9.2% to 9.6% adjusted operating margin for the year' and 'revenue will be broadly flat for the year albeit with slightly stronger volumes.'
In the quarter, we saw revenue growth of 2.4% despite continued deflation of approximately 2%. We delivered resilient gross margins and appropriately managed cost to the volume environment, generating adjusted operating profit of $674 million, an increase of 2.6%.
— Kevin Murphy
Our Board declared a $0.79 per share quarterly dividend, a 5% increase over the prior year, reflecting our confidence in the business and cash generation.
— Bill Brundage
Forward Guidance
Fiscal 2024 guidance remains broadly unchanged in aggregate terms, with: - Revenue: broadly flat for the year, reflecting continued deflationary pressure on inputs and modest volume recovery in Q4. - Adjusted operating margin: narrowed to 9.2%–9.6% for the year, reflecting longer-than-expected deflation impact and SG&A leverage challenges in the near term; Q4 margin is expected to be in the mid-to-upper 9% range versus 10.4% in the prior year Q4. - Interest expense: guided to $175M–$185M; - CapEx: now expected to be $350M–$400M for the year due to timing; - Tax rate: ~25%. Management emphasized the long-term tailwinds from multiyear residential and nonresidential recovery and the potential to further accelerate earnings through disciplined pricing, buybacks, and bolt-on acquisitions. Investors should monitor: (1) commodity deflation stabilization and its lagged effect on finished goods pricing, (2) end-market mix changes (onshoring, data centers, infrastructure projects), (3) cadence of acquisitions and integration efficiency, and (4) the pace of share repurchases and dividend growth, which together support earnings resilience even in a slower top-line environment.