According to Jefferies, specialty plumbing and home appliance retailer Ferguson is a high-quality business that’s ready to take over [market] Stock.” The company upgraded Ferguson to buy from hold. Its new price target of $181 implies shares are up 28% from Monday’s close. Ng wrote in a note on Tuesday, “FERG should be resilient in a downturn, driven by its pricing power, high variable cost structure and his capital saving model. FERG’s pricing power and limited exposure to commodity products result in stable gross margins throughout the cycle.” The analyst added that while Ferguson holds a top-five position in all product categories, it has less than 25% share of each market — meaning there’s a significant opportunity to “unroll the industry.” Ng also believes Ferguson is able to beat rivals by differentiating itself on service, technology and value-added capabilities rather than price. He added added that following the divestiture, a “re-evaluation opportunity” is expected of the company’s European business and initial listing on the New York Stock Exchange. “The stock has come under technical pressure due to its removal (13% outflow) from European indices and the JEF Index strategy team sees the uptake of the Russell 1000 (potentially in June) and S&P500, implying 20-25% inflow of buying ‘ Ng said. ‘As the stock trades at a 25% discount to its peers with a comparable yield profile, we see valuation range narrowing with inclusion in the US Index & increased interest and coverage from US investors Investors We believe FERG is due for a catch up trade and see [long-term] Investors drawn to quality stocks like FERG as real estate sentiment improves.” Shares are up almost 11% in 2023. They are also up 24.3% over the past 12 months. – CNBC’s Michael Bloom contributed to this report.
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https://www.cnbc.com/2023/05/09/jefferies-says-this-plumbing-stock-can-rally-nearly-30percent-sees-company-increasing-market-share.html
