Berenberg raises target price on Ferguson

Analysts at Berenberg raised their target price on plumbing and heating products distributor Ferguson from 9,500.0p to 10,000.0p on Wednesday following its "impressive" full-year results.

Berenberg stated that Ferguson's trading profit result of $2.17bn was 4% above the top end of prior guidance, representing full-year growth of 30% and a "significant increase" in margins to 9.5% from 7.7%.

The German bank also noted that the trading strength achieved in the third quarter had continued into the fourth, with trading profit growth of 37% and a margin expansion of 100 basis points.

However, while trading remained robust into the first quarter of 2022, Ferguson also indicated that it expects the rate of growth to slow as cost pressures mount and comparatives become more challenging through the year.

"Indeed, on the conference call management said that keeping the margin broadly flat this year, after the material step-up last year, would be considered a good performance and would consolidate a new higher level of profitability for the future," said Berenberg, which reiterated its 'hold' rating on the stock.

"We increase our trading profit forecast by 4% to $2.3bn. The implied 6% growth year-on-year is a driven by revenue growth, given our view that margins will remain flat year-on-year. Overall, we increase earnings per share by an average 10% over 2022-24 which also reflects the impacts of the share buyback."