Canaccord raises price target on Ferguson as US transformation continues

Analysts at Canaccord Genuity raised their price target on plumbing and heating products distributor Ferguson from 6,125p to 6,270p on Wednesday as the group enters the last phase of its transformation into a solely US-focused group.

Canaccord said Ferguson looked set to continue to exploit its competitive advantage as its sole focus switches to taking market share in the US.

However, the Canadian broker did note that after such a long period of macro recovery, there was always a risk that macro conditions could worsen.

But over and above this issue, Canaccord emphasised that it was the final stages of Ferguson's long journey since the 2008 financial crisis of becoming a pure US plumbing and heating group with a US chief executive, based in the US, that investors should focus on.

"A US listing remains a final opportunity to enjoy a re-rating resulting from its transformation in recent years and we expect this to happen at some point in the future," said Canaccord, which reiterated its 'hold' rating on the group.

"In the meantime, US trading conditions will likely dominate the share price with a close eye on the likely timing and success of moving to a full US listing.

"[...] Overall, we expect modest turnover growth to translate into modest profit growth in FY2020. How the de-merger of the UK proceeds as well as how the new CEO settles in and what decision is ultimately made around a US listing are likely to be very important catalysts during FY2020. The balance sheet looks in good shape."