RBC Capital Markets downgrades Ferguson on short-term caution
RBC Capital Markets downgraded shares of plumbing merchant Ferguson to 'underperform' from 'sector perform' on Thursday, trimming the price target to 5,100p from 5,200p on short-term caution.
Ferguson
16,925.00p
16:40 24/04/24
FTSE 100
8,040.38
16:34 24/04/24
FTSE 350
4,419.71
17:09 24/04/24
FTSE All-Share
4,374.06
16:44 24/04/24
Support Services
10,566.99
17:09 24/04/24
"We like its market position, balance sheet and focus, but believe the share price has run too far," it said. It noted that the stock is up 20% since its third-quarter results, buoyed by an activist stake and the intention to demerge its UK business and consider the most appropriate listing structure.
"The CEO is also stepping down in November - we find the timing as odd and the handover period as short. In our view, this does add to the risk profile, although Kevin Murphy is a proven leader and has done a good job in the US," it said.
RBC expects a muted fourth-quarter performance and doesn't see a UK demerger or listing change as necessarily creating value. It said that while a UK exit makes sense, it is relatively immaterial. Meanwhile, a demerger will leave a domestically challenged business, which many larger funds will be forced to sell.
For similar US exposure in the sector, it prefers equipment rental company Ashtead, which it said has higher structural growth, less construction exposure and trades at a significant discount.
At 1445 BST, the shares were down 0.2% at 6,056p.