Ferguson Enterprises
FERG
$215.11
-3.24%
Ferguson Enterprises Inc. is a leading North American distributor of plumbing and HVAC products, serving the repair, maintenance, and improvement (RMI), new construction, and civil infrastructure markets through approximately 1,700 branches, online channels, and residential showrooms. The company serves over 1 million customers and sources from 37,000 suppliers, positioning it as the dominant pure-play distributor in its sector following the 2021 divestiture of its UK business. Ferguson's competitive identity rests on its unmatched scale, dense branch network, and value-added services that embed it deeply in the contractor workflow, making it a critical intermediary in the fragmented plumbing and HVAC supply chain. The current investor narrative is dominated by the tension between resilient profit growth and weakening residential end markets, as evidenced by the Q4 revenue miss attributed to soft residential demand, alongside a notable Goldman Sachs downgrade to Neutral in July 2026 that has weighed on sentiment. Management's ability to offset volume pressure through margin discipline, pricing, and share repurchases remains the central debate, with analysts split on whether the residential downturn is a cyclical trough or a structural headwind.…
FERG
Ferguson Enterprises
$215.11
Related headlines
Investment Opinion: Should I buy FERG Today?
The synthesized recommendation is Hold. Ferguson's analyst consensus is Buy with a mean rating of 1.83 and an average target price of $288.43, implying 29.6% upside, but the stock faces near-term headwinds from a 1.96% YoY revenue decline and margin compression. The core thesis is that Ferguson's market leadership and strong cash flow generation are offset by residential market weakness and a premium valuation, warranting a neutral stance until there is evidence of a turnaround.
Supporting evidence includes a forward PE of 17.73x, which is reasonable but not cheap; a PS ratio of 5.25x, near the high end of its historical range; and a dividend yield of 0.75% with a payout ratio of 52.1%. Free cash flow of $1.009 billion TTM is robust, and the company repurchased $236 million in shares, demonstrating confidence. However, revenue growth is negative, and operating margin has declined to 8.19% in the latest quarter from 10.89% a year ago, highlighting profitability pressures.
The biggest risks are a continued residential downturn, further margin erosion, and a potential valuation de-rating if earnings disappoint. The Hold rating would upgrade to Buy if revenue growth turns positive and operating margin stabilizes above 10%, or if the stock drops below $210 (near the 52-week low) offering a better risk/reward. It would downgrade to Sell if revenue declines accelerate beyond 3% YoY or if free cash flow falls below $800 million. Relative to its history and peers, Ferguson appears fairly valued to slightly overvalued, with the market pricing in a recovery that has yet to materialize.
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FERG 12-Month Price Forecast
Ferguson presents a balanced risk/reward profile, with the stock trading near the lower end of its 52-week range and a forward PE of 17.73x that is not demanding. However, the residential downturn and margin compression are significant headwinds, and the premium PS ratio of 5.25x leaves little room for error. The analyst consensus is bullish, but the market is skeptical, as evidenced by the 17.63% underperformance versus the S&P 500 over the past year. I would upgrade to bullish if revenue growth turns positive and operating margin stabilizes above 10%, or downgrade to bearish if revenue declines accelerate beyond 3% YoY or free cash flow falls below $800 million.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Ferguson Enterprises's 12-month outlook, with a consensus price target around $287.48 and implied upside of +33.6% versus the current price.
Average Target
$287.48
0 analysts
Implied Upside
+33.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$235 - $325
Analyst target range
Ferguson is covered by 21 analysts, with a consensus recommendation of Buy (mean rating of 1.83, where 1 is Strong Buy and 5 is Strong Sell). The average target price is $288.43, which implies a substantial upside of 29.6% from the current price of $222.54. This bullish consensus stands in stark contrast to the stock's recent price weakness and the Goldman Sachs downgrade to Neutral in July 2026, suggesting that most analysts view the selloff as overdone. The Buy/Hold/Sell distribution is not fully detailed, but the recommendation mean of 1.83 indicates a strong tilt toward Buy, with several firms maintaining Overweight or Outperform ratings even as the stock declined. The target range spans from a low of $235.00 to a high of $325.00, a spread of $90.00 or 38.3% of the low target, which signals significant disagreement about the company's trajectory. The high target of $325.00 implies a scenario where residential markets recover, margins expand, and the company successfully leverages its scale to drive earnings growth, potentially aided by multiple expansion. The low target of $235.00, which still represents 5.6% upside from the current price, likely assumes continued residential weakness, margin compression, and a delayed recovery, but does not price in a severe recession. The recent institutional ratings show a mix of reiterations and one notable downgrade (Goldman Sachs from Buy to Neutral), indicating that while the majority remains constructive, caution is creeping in. The wide target spread and the divergence between analyst optimism and price action suggest that the market is skeptical of the bullish case, and a re-rating will require tangible evidence of a turnaround in residential demand and margin stabilization.
Bulls vs Bears: FERG Investment Factors
The bear case currently has stronger evidence due to accelerating revenue decline, margin compression, and severe relative underperformance. The stock has fallen 9.23% in the past month and trades near the bottom of its 52-week range, with a PS ratio of 5.25x that is historically high. However, the bull case rests on strong free cash flow ($1.009 billion TTM), a reasonable forward PE of 17.73x, and a consensus target of $288.43 implying 29.6% upside. The most important tension is whether the residential downturn is a cyclical trough or a structural headwind; if residential demand stabilizes, the stock could re-rate sharply, but continued weakness could drive further downside.
Bullish
- Analyst consensus sees 29.6% upside: 21 analysts have a mean recommendation of 1.83 (Buy) and an average target price of $288.43, implying 29.6% upside from the current $222.54. The low target of $235 still offers 5.6% upside, indicating that even the most cautious analyst sees limited downside.
- Strong free cash flow generation: Ferguson generated $1.009 billion in trailing twelve-month free cash flow and $680 million in the most recent quarter, demonstrating robust cash generation despite a 1.96% YoY revenue decline. This cash supports dividends ($174 million) and buybacks ($236 million), enhancing shareholder returns.
- Forward PE of 17.7x is reasonable: The forward PE of 17.73x, based on estimated EPS of $15.46, is well below the trailing PE of 68.99x and suggests that earnings are expected to normalize. For a market leader with strong cash flows, this multiple is not demanding and leaves room for multiple expansion if growth resumes.
- Market leadership and scale advantages: Ferguson operates approximately 1,700 branches, serves over 1 million customers, and sources from 37,000 suppliers, creating a dense network that competitors cannot easily replicate. This scale provides procurement advantages and embeds the company in the contractor workflow, supporting long-term pricing power.
Bearish
- Revenue decline accelerating: Revenue fell 1.96% YoY to $7.472 billion in the March 2026 quarter, following a sequential decline from $8.169 billion in the October 2025 quarter. The top-line contraction is driven by weak residential end markets, and there is no clear sign of stabilization.
- Margin compression evident: Gross margin declined to 31.02% in the March 2026 quarter from 31.71% in the July 2025 quarter, and operating margin fell to 8.19% from 10.89% over the same period. This suggests that cost leverage is diminishing as sales decline, pressuring earnings.
- Severe relative underperformance: Ferguson has underperformed the S&P 500 by 17.63% over the past year and 8.17% over the past month, with a 1-month price decline of 9.23%. The stock is trading at only 23.3% of its 52-week range, reflecting persistent bearish sentiment and lack of buyer conviction.
- Elevated valuation multiples: The PS ratio of 5.25x is near the high end of its 5-year range (2.88x–6.07x), and the EV/EBITDA of 57.84x is exceptionally high for a distribution business. These multiples leave little room for error if earnings fail to meet optimistic forward estimates.
FERG Technical Analysis
Ferguson is in a range-bound consolidation with a slight downward bias, having declined 1.41% over the past year while trading at 222.54, which places it at approximately 23.3% of its 52-week range (low of 207.64, high of 271.64). This positioning near the lower quartile of the annual range signals that the stock has been a persistent underperformer, with the current price only 7.2% above the 52-week low and 18.1% below the 52-week high. The stock's inability to sustain rallies toward the upper range suggests overhead supply and a lack of conviction from buyers, making it a potential value opportunity only if fundamental catalysts emerge. Recent momentum has deteriorated sharply, with a 1-month decline of 9.23% contrasting starkly with the 1-year change of -1.41%, indicating accelerating downside pressure. The 3-month change of -3.28% and 6-month change of +0.22% reveal that the stock peaked in early August 2026 near 263.78 and has since sold off aggressively, erasing all interim gains. This divergence between the flat 1-year trend and the steep 1-month decline suggests a bearish inflection point rather than a temporary pullback, especially given the relative strength versus SPY of -8.17% over 1 month and -17.63% over 1 year, underscoring severe underperformance. Key technical support rests at the 52-week low of 207.64, a level that, if breached, could trigger a deeper selloff toward psychological support at 200. Resistance is established at the 52-week high of 271.64, and a breakout above this level would require a fundamental re-rating to overcome the current downtrend. With a beta of 1.112, Ferguson is approximately 11.2% more volatile than the broader market, meaning position sizing should account for amplified moves relative to SPY; the maximum drawdown of -18.63% over the observed period further highlights the stock's vulnerability to sharp reversals.
Beta
1.11
1.11x market volatility
Max Drawdown
-19.6%
Largest decline past year
52-Week Range
$214-$272
Price range past year
Annual Return
+0.3%
Cumulative gain past year
| Period | FERG Return | S&P 500 |
|---|---|---|
| 1m | -12.2% | -2.4% |
| 3m | -6.3% | +2.2% |
| 6m | -1.2% | +14.8% |
| 1y | +0.3% | +14.6% |
| ytd | -4.4% | +11.1% |
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FERG Fundamental Analysis
Ferguson's revenue trajectory has turned negative, with the most recent quarter (ending 2026-03-31) reporting revenue of $7.472 billion, a year-over-year decline of 1.96%. This follows a sequential decline from $7.495 billion in the prior quarter and $8.169 billion in the quarter before that, indicating a clear deceleration in top-line growth. The weakness is concentrated in the residential end market, as highlighted by the Q4 earnings miss, while the US segment generated $7.146 billion, representing the overwhelming majority of sales. The multi-quarter trend shows revenue peaked at $8.497 billion in the July 2025 quarter and has since contracted, implying that the investment case now hinges on stabilizing volumes rather than growth acceleration. Profitability remains solid but is under pressure, with net income of $414 million in the latest quarter and a net margin of 7.61% on a trailing basis. Gross margin came in at 31.02% for the March 2026 quarter, down from 31.71% in the July 2025 quarter, reflecting modest compression likely due to mix and pricing dynamics. Operating margin stood at 10.20% on a trailing basis, but the quarterly operating margin of 8.19% was below the 10.89% reported in the July 2025 quarter, signaling that cost leverage is diminishing as sales decline. The company remains profitable, but the narrowing margins suggest that earnings growth will be challenging without a revenue recovery. The balance sheet shows a debt-to-equity ratio of 1.03, which is elevated for a distributor but manageable given the company's stable cash flows. Free cash flow on a trailing twelve-month basis is $1.009 billion, and the most recent quarter generated $680 million in free cash flow, demonstrating strong cash generation despite the revenue headwind. The current ratio of 1.73 indicates adequate liquidity, while the return on equity of 10.74% is respectable but not exceptional. With $844 million in cash at the end of the March 2026 quarter and consistent dividend payments ($174 million) and share repurchases ($236 million), Ferguson is returning capital to shareholders, but the high payout ratio of 52.1% and the need to fund working capital could limit flexibility if the downturn persists.
Quarterly Revenue
$7.5B
2026-03
Revenue YoY Growth
-2.0%
YoY Comparison
Gross Margin
31.0%
Latest Quarter
Free Cash Flow
$1.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is FERG Overvalued?
Because Ferguson is profitable with positive net income, the PE ratio is the primary valuation metric. The trailing PE stands at 68.99x, while the forward PE is 17.73x, a dramatic gap that implies the market expects a substantial earnings recovery in the coming year. This disparity is partly explained by the trailing EPS of $0.0145, which appears distorted by non-recurring items or accounting adjustments, making the forward PE a more reliable gauge. The forward PE of 17.73x, based on estimated EPS of $15.46, suggests that analysts anticipate a normalization of earnings power that is not reflected in the trailing figures. Relative to the Industrials sector, Ferguson's forward PE of 17.73x is difficult to contextualize without a direct industry average, but the PS ratio of 5.25x and EV/EBITDA of 57.84x appear elevated for a distribution business, which typically trades at lower multiples. The EV/Sales of 1.56x is more reasonable, but the price-to-book of 7.41x is rich, reflecting the company's asset-light model and strong brand equity. The PEG ratio of -1.09 is negative due to the trailing earnings distortion and is not meaningful. Compared to its own historical range, the current forward PE of 17.73x is below the trailing PE of 68.99x but above the historical median PE of roughly 20-25x seen in prior years, suggesting that the stock is not cheap on a forward basis. The PS ratio of 5.25x is near the higher end of its historical band (which has ranged from 2.88x to 6.07x over the past five years), indicating that the market is still pricing in a premium despite the recent price decline. This premium may be justified by Ferguson's market leadership and cash generation, but it leaves little room for error if earnings fail to meet the optimistic forward estimates.
PE
69.0x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 10x~33x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
57.8x
Enterprise Value Multiple
Investment Risk Disclosure
Ferguson faces financial and operational risks primarily from its elevated debt-to-equity ratio of 1.03 and a high payout ratio of 52.1%, which could limit flexibility if the residential downturn persists. Revenue declined 1.96% YoY in the latest quarter, and gross margin compressed to 31.02% from 31.71% a year earlier, indicating margin pressure. The company's profitability is also vulnerable to volume deleverage, as operating margin fell to 8.19% in the March 2026 quarter from 10.89% in the July 2025 quarter. With $844 million in cash and a current ratio of 1.73, liquidity is adequate, but the need to fund working capital and dividends could strain resources if earnings decline further.
Market and competitive risks include valuation compression, as the stock trades at a PS ratio of 5.25x, near the high end of its historical range, and an EV/EBITDA of 57.84x, which is rich for a distributor. The beta of 1.112 means Ferguson is 11.2% more volatile than the market, amplifying downside during sector rotations. The residential end market weakness, highlighted by the Q4 revenue miss, could persist if interest rates remain high, dampening new construction and RMI activity. Additionally, the Goldman Sachs downgrade to Neutral in July 2026 reflects growing caution, and any further analyst downgrades could pressure the stock.
The worst-case scenario involves a prolonged residential downturn leading to further revenue declines and margin erosion, potentially driving the stock to its 52-week low of $207.64, which represents a 6.7% decline from the current price of $222.54. If the stock breaks below that support, it could fall toward the psychological level of $200, implying a 10.1% loss. In a more severe scenario where earnings disappoint and the forward PE compresses to 15x, the stock could trade down to $232 (based on EPS of $15.46), but that is above the current price; however, if estimates are revised down to $13, a 15x multiple would imply $195, a 12.4% decline. The maximum drawdown over the observed period was -18.63%, suggesting that a drop to around $181 is possible in a severe market correction, representing a 18.6% loss from current levels.
FAQ
The most severe risk is a prolonged residential downturn, which could accelerate revenue declines beyond the current 1.96% YoY drop and compress margins further. Financial risks include a debt-to-equity ratio of 1.03 and a payout ratio of 52.1%, which could strain resources if cash flow weakens. Competitive risks involve pricing pressure from rivals, potentially eroding gross margin below 30%. Macro risks include high interest rates dampening construction activity, and the stock's beta of 1.112 means it is more volatile than the market. Additionally, a break below the 52-week low of $207.64 could trigger a selloff toward $200.
The 12-month forecast is neutral with a base case probability of 55%, targeting a range of $235–$288, assuming residential markets stabilize and EPS meets the $15.46 consensus. The bull case (25% probability) targets $288–$325 if rate cuts spur a recovery, while the bear case (20% probability) targets $207–$235 if the downturn persists. The most likely scenario is the base case, where the stock trades sideways to modestly higher as the company navigates near-term challenges. Key catalysts include Fed policy decisions and quarterly earnings reports.
Ferguson appears fairly valued to slightly overvalued. The forward PE of 17.73x is reasonable, but the PS ratio of 5.25x is near the high end of its 5-year range (2.88x–6.07x), and the EV/EBITDA of 57.84x is exceptionally high for a distributor. The market is pricing in a significant earnings recovery, as evidenced by the gap between trailing PE (68.99x) and forward PE (17.73x). If earnings meet the consensus EPS of $15.46, the stock could be undervalued, but any miss could lead to multiple compression. Compared to peers, Ferguson's premium is justified by its market leadership and cash flow, but it leaves little margin of safety.
Ferguson offers a compelling risk/reward for value investors, with a forward PE of 17.73x and a consensus target of $288.43 implying 29.6% upside. However, the stock has declined 9.23% in the past month and faces revenue headwinds, with a 1.96% YoY decline in the latest quarter. The biggest downside risk is a break below the 52-week low of $207.64, which would represent a 6.7% loss from current levels. For long-term investors with a 2-3 year horizon, the current price may be attractive, but near-term volatility could persist. It is a good buy for those who believe in a residential recovery and can tolerate short-term pain.
Ferguson is better suited for long-term investment due to its cyclical nature and the current residential downturn, which may take several quarters to resolve. The stock's beta of 1.112 and recent 9.23% monthly decline make it volatile for short-term trading. With a dividend yield of 0.75% and a payout ratio of 52.1%, it offers modest income but is primarily a capital appreciation play. A minimum holding period of 2-3 years is recommended to ride out the residential cycle and benefit from a potential recovery. Short-term traders could exploit volatility, but the risk/reward favors patient investors.