James Gard: Welcome to Morningstar. Our latest stock of the week is Ferguson, the building supply firm. The company has just released results, which our analysts described as extraordinary. Ferguson is a play on the U.S. housing market, which has been in rude health recently despite the rising cost of materials like timber and copper pipes. One of its divisions aims to repair, maintain and improve, and there's been plenty of that going on since the pandemic.
Property developers also have been busy building homes, and that's helped boost demand for materials. Ferguson has also been involved with civil projects like upgrading water pipes. Despite a healthy rise in revenues, profits and dividends, Ferguson's shares have been under pressure this year. The company is about to leave the FTSE 100 this spring as it takes up a primary listing in New York. This reflects the company's shift to the U.S. generally, which our analysts think will benefit shareholders in the longer term.
What are the risks to the outlook? Well, the Federal Reserve has just started raising interest rates, which may cull the U.S. housing market, and inflation remains a serious danger. The company has a narrow economic moat according to our analysts, and its shares are currently trading above their fair value.
For Morningstar, I'm James Gard.