Ferguson Shares: Fed Rate Cuts Offer Potential Tailwinds

Ferguson's (NYSE: FERG) (LON: FERG) recent Q4 2024 results delivered flat organic growth, in line with expectations, according to analysts at Goldman Sachs in a note this week.

The investment bank noted that while the company's margins were also in line, it has yet to return to positive organic growth.

However, Goldman Sachs analyst Suhasini Varanasi told investors that the bank sees potential catalysts on the horizon, particularly from Federal Reserve rate cuts, which could provide tailwinds for the construction market.

Goldman Sachs expects Ferguson to experience positive organic growth starting in Q2 FY25, driven by an improved construction end-market environment.

“While the company is yet to see a return to positive organic growth, we see the Fed rate cuts potentially offering tailwinds to growth in the construction end-market,” said Varanasi.

However, the analyst notes that pricing remains a headwind for the company, and stabilising these trends will be crucial to converting volume growth into sustained topline improvement.

“We believe we would need to see a stabilisation in these trends in order to see volume growth convert to sustained positive topline trends,” the Goldman analyst stated.

Despite near-term challenges, Goldman Sachs views Ferguson's diversified end-market exposure as a key factor in maintaining growth resilience over the medium term.

The investment bank maintained its Buy rating on the stock, concluding that “over the medium-term, they see “the balanced exposure of Ferguson's end markets offering a degree of topline growth resilience despite near-term weakness.”

Ferguson shares have gained around 3.3% this year, while they are up more than 18% in the last 12 months.