Ferguson (LSE: FERG) is a share that I like very much. And particularly so at current price levels.
The plumbing and heating giant has steadily clawed back ground following the colossal share market sell-off that started in October, but it still remains a whopping 20% cheaper from the record tops struck six months ago above 65.50 per share.
At current price levels, Ferguson is also pretty modestly valued too, by conventional metrics at least its forward P/E ratio of 13.1 times sits well inside the widely-accepted value region of 15 times and below.
I feel as if the market needs reminding of this FTSE 100 stars brilliant profits-growing possibilities. And I reckon half-year results slated for tomorrow March 26 could be the catalyst for a sudden share price spike.
Stateside star
Fergusons most recent update gave me confidence that another terrific release could be in the offing, a statement that confirmed the impressive headway that its making in its critical US marketplace. Between August and October, trading profit in the States leapt 10.2% to $400m, a result which allowed corresponding profit at group level to power 9.9% higher to $432m.
It doesnt matter that its traditional British divisions continue to struggle amid a backcloth of weak repair, maintenance and improvement markets. Fergusons home territory is responsible for just 5% of total trading profit, meaning that the troubled UK economic outlook that Brexit has created doesnt dent the Footsie firms broader growth story.
Im much more encouraged by the firms commentary late last year that since the end of the quarter, the US has continued to grow well and the current indications are that growth will continue in the months ahead.
Indeed, the most recent health check on the US construction industry by the Commerce Department gave cause for optimism in the months ahead. In it the body noted that construction spending leapt 1.3% in January, smashing broker expectations of a 0.4% rise and representing the biggest month-on-month increase since April.
Profits + dividend growth
Its no surprise that City analysts are expecting Ferguson to retain its position as a dependable profits grower year after year.
The bottom lines predicted to swell 18% in the year to July 2019 and by another 5% in fiscal 2020, current consensus suggests. I reckon these numbers could very well be revised upwards in the wake of tomorrows upcoming trading statement, helped by the probability of a less aggressive Federal Reserve interest rate policy over the short-to-medium term.
One final thing: with predictions of additional profits growth over the next couple of years come tips that dividends will keep rising at a pretty fast rate. Current estimates suggest that last years full-year reward of 189.3 US cents per share will swell to 208.7 cents this year and to 223.9 cents next year, figures that yield a chubby 3% and 3.3% respectively. With those half-year numbers a matter of hours away, I reckon Fergusons a great income stock worthy of serious attention today.
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