Ferguson selloff overdone, says JPMorgan as it upgrades
JPMorgan Cazenove upped its stance on shares of plumbing and heating products distributor Ferguson to 'overweight' from 'neutral' on Wednesday after the stock sold off the day before on the back of half-year results.
Ferguson
16,810.00p
16:35 25/04/24
FTSE 100
8,075.71
16:34 25/04/24
FTSE 350
4,432.51
16:30 25/04/24
FTSE All-Share
4,386.10
16:34 25/04/24
Support Services
10,524.98
16:29 25/04/24
Ferguson shares slumped on Tuesday after the company reported a strong first half but cut its full-year guidance as it said growth had moderated in its markets.
JPM said the recent underperformance and Tuesday's selloff were overdone and that there is 24% upside potential to its unchanged 5,950p price target.
"We see scope for a material re-rating through H2, as we believe new estimates will prove to be sensibly based, we see scope for US lead-indicators to start improving, and we expect scope for further buybacks to fall into view, making what is already a discounted valuation look particularly attractive."
It said the company's new growth guidance is sensibly based and implies a much less alarming view on volumes in the core US markets than on first view.
"Furthermore we expect margin trends to begin showing signs of improvement in H2, reflecting actions in H1, reduced labour inflation, and better margin mix.
"We are also somewhat more positive on the scope for US residential data to improve over the next six months. Together we think these factors should start to drive a re-rating, meaning the recent disconnect versus the US home improvement players reverses."
At 1330 GMT, the shares were up 1.1% to 4,854p.