Plumbing products specialist Ferguson (FERG) is the biggest faller on the FTSE 100 on Tuesday after warning annual trading profit and sales will be lower than analysts' forecasts following a recent slowdown.
Shares in Ferguson slump 10% to £46.54 as the plumbers' merchant reveals that trading profit is expected to reach $1.58bn in the year ending 31 July 2019. That is below consensus forecasts of approximately $1.63bn.
Annual organic sales growth is now anticipated to be in the 3%-to-5% range, implying scope for disappointment as analysts were looking for 5% growth before today's update.
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AJ Bell investment director Russ Mould says US trading may be under pressure, flagging mixed recent housing data, which is concerning as Ferguson generates 80% of overall sales and 90% of profits from the country.
'This also explains why Ashtead's (AHT) shares are weaker today since the equipment rental specialist also generates around 90% of its profits in the US via its Sunbelt operations,' comments Mould.
SLOWDOWN IN SALES GROWTH
While sales jumped 8.2% to $10.8bn in the six months to 31 January, Ferguson says the growth rate has moderated. In Canada, rising interest rates and stricter rules for mortgage credit have sparked a slowdown in residential markets and in the UK, plumbing and heating markets are subdued.
Canaccord Genuity analyst Aynsley Lammin says recent trends at Ferguson are 'not conclusive' as to whether a slowdown is occurring or a US recession is possibly starting.
Although growth has subsequently moderated, Lammin believes the company has delivered a decent set of results with organic US growth of 9.7% in the second quarter to January actually exceeding expectations.
