Ferguson Thrives Amidst Market Deflation: Delivering Strong Volume Growth and Investing for Future Success
Ferguson, a leading distributor of plumbing, HVAC, and industrial supplies, has announced strong volume growth and adjusted operating profit in its second quarter results. Despite a subdued market with continued commodity-led deflation of approximately 2%, the company delivered sales of $6.9 billion, an increase of 3% over prior year.
The company's associates executed well for customers, driving continued volume growth despite challenging market conditions. This growth was driven by market outperformance, with Ferguson delivering adjusted operating profit of $449 million as it managed through the sixth consecutive quarter of overall deflation.
Ferguson continues to execute its capital priorities, deploying approximately $500 million in capital during the quarter. The company also increased its share repurchase authorization by $1 billion, reflecting its confidence in its business. This investment will be used to drive future growth and profitability, with a focus on customer-facing associates, capabilities, and value-added solutions.
The residential end market, which comprises approximately half of U.S. revenue, remains subdued across both new construction and repair, maintenance, and improvement. However, Ferguson's teams grew revenues in this end market by approximately 2% in the quarter, while the nonresidential market was slightly more resilient with continued activity on large capital projects.
The company also saw modest sales growth in commercial and industrial segments, with particular strength in civil infrastructure. Ferguson's balanced market exposure continues to position it well for both current and future environments, with a mix of new versus repair, maintenance, and improvement and residential versus nonresidential revenue streams.
In terms of customer groups, Ferguson's HVAC customer group saw an increase of 17% in the quarter, building on growth from the prior year. This was driven by strategic investments in distinct growth initiatives, which are expected to continue driving growth in this area. Residential trade plumbing revenues were flat, while residential building and remodel, as well as digital commerce, also showed modest sales growth.
CEO Kevin Murphy emphasized the company's confidence in its business, stating that it remains "very optimistic about both our residential and nonresidential end markets over the medium term." He noted that the company is taking near-term actions to increase speed and efficiency to better serve customers and position itself for future profitable growth.
Ferguson's strong performance in a challenging market highlights its ability to execute on its strategic priorities and deliver value to customers. As the company continues to invest in its capabilities and solutions, investors can expect continued growth and profitability from this leading distributor of plumbing, HVAC, and industrial supplies.
