A Member of Pat McKeough’s Inner Circle recently asked for his advice on Ferguson Enternprises, North America’s largest wholesale distributor of plumbing, HVAC, waterworks, and industrial products for the residential, commercial, civil infrastructure, and industrial end markets.
Pat likes the company’s exceptional positioning in secular growth markets with accelerating momentum. The firm also features a reasonable valuation.
FERGUSON ENTERPRISES INC. (Symbol FERG on New York) is a U.S. distributor of construction products.
Founded in 1953, Ferguson initially focused on Europe, Canada, and the U.S. In the early 2000s, the company moved to concentrate on what it sees as more attractive North American markets. Consequently, the company sold its European businesses.
Today, Ferguson is a value-added distributor. That means the company goes beyond standard distribution by offering services like customization, technical support, and training.
Ferguson is the largest specialized distributor in the $340-billion residential and non-residential North American construction market. The company operates through two segments: the U.S. (accounting for 95% of revenue) and Canada (5%).
The company operates mainly under the Ferguson brand in the U.S. through 1,519 branch locations, 10 regional distribution centres, and five market distribution centres (MDC), which it uses to replenish branches. It serves all 50 states with its team of 32,000 associates. In Canada, it has 3,000 employees who operate mostly under the Wolsely brand through 227 branches, one regional distribution centre, and one MDC.
Ferguson’s sales and profits were up in the latest quarter
In fiscal 2025 fourth quarter, ended July 31, 2025, Ferguson’s revenue rose 6.9%, to $8.50 billion from $7.95 billion a year earlier. That gain reflects a 7.1% increase in revenue for the U.S. segment, to $8.06 billion from $7.53 billion, and a 4.8% increase for the Canada segment, to $438 million from $418 million.
Excluding one-time items, Ferguson earned $687 million, or $3.48 a share, in the latest quarter. That was up 14.1% from $602 million, or $2.98 a share. Additionally, its earnings per share exceeded the $3.01 consensus estimate.
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Note—Ferguson is changing its fiscal year-end from July to December. Starting January 1, 2026, it will report its quarterly results on a calendar-year basis.
The company’s shares have gained 45% since the start of 2025. They now trade at a reasonable 23.3 times the company’s likely 2026 earnings of $10.79 a share. Ferguson also raised its quarterly dividend by 5.1% with the February 2025 payment, to $0.83 a share from $0.79. The stock yields 1.3%.
Ferguson’s outlook is positive, although it will need an improving economy to keep reporting rising sales and profits.
Recommendation in Pat’s Inner Circle: Ferguson Enterprises Inc. is okay to hold.
