Shares in FTSE 100 plumbing and heating group Ferguson (FERG) touched all-time highs of £96.80 in early trading after the firm brought forward its third quarter trading update and lifted its full year earnings outlook.
For the three months to the end of April sales rose an impressive 24.5% to $5.9 billion, with organic growth topping 20% as the firm passed on what it described as sequentially increasing sales price inflation.
Good cost control and an improved sales mix meant the firm achieved a gross margin on sales of 30.9%, 110 basis points or 1.1% ahead of the same period last year.
Chief executive Kevin Murphy commented: ‘Revenue picked up strongly through the quarter continuing into early May and we are pleased with the momentum in our business.’ By 11am shares settled up 3% at £95.56, making them the best performers on the FTSE.
RAISED GUIDANCE
Given the better than expected third quarter performance and continued outperformance in the fourth quarter, the firm revised up its outlook for the full year to the end of July.
Trading profits are now expected to be in the range of $2.0 billion to $2.1 billion, compared with a consensus forecast compiled by the company of $1.86 billion and a top estimate of $1.9 billion.
‘We are well positioned to manage through the near term though we are mindful of the ongoing effect of inflation on sales and gross margins and its potential adverse impact on operating costs’, added the chief executive.
SURGING DEMAND
Ferguson is far from being the only building products maker to see better than expected demand for its products, as we have previously noted.
Tyman (TYMN), which supplies fixtures and fittings, raised its earnings forecast just under a fortnight ago thanks to stronger than anticipated trading in the US and the UK.
US single family housing starts jumped 20% in the first quarter, while the UK March Markit/Construction purchasing managers’ index hit 61.7, the highest level since September 2014.
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