Ferguson Enterprises Inc Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Philip Ng - Jefferies Group LLC - Analyst : Hey, guys. Volume is certainly tracking a little better than you expected coming into the year, notably in your Waterworks and Commercial Mechanical business. Are you seeing, are you starting to see some of that uptick in bidding activity called out for the last few quarters on the heavy commercial industrial activity start to come through? And on the flip side, resi was a little more muted in this higher-for-longer interest rate environment. I'm just curious when you unpack all of these cross grants, how do you think about fourth quarter and certainly looking out to 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: Philip Ng - Jefferies Group LLC - Analyst : Okay. That's great color. And I guess, Bill, now you're expecting some modest deflation for the full year, have you seen prices stabilize, particularly on your more commodity side of things? Is down 2% a good way to think about the fourth quarter? And how has like finished good prices behave? We've seen some inflation for the actual commodities like copper and zinc prices rise noticeably in recent months. Are you seeing any inflation? And does that have a lag effect? Like what does that all mean for you as we kind of look out the next six to nine months in terms of your margins and your top line? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: Philip Ng - Jefferies Group LLC - Analyst : And Bill, any categories that stand out that's a little spottier on the finished goods side from a pricing standpoint?

Question: John Lovallo - UBS Group AG - Analyst : Good morning, guys. Thank you for taking my questions. The first one is can you sort of walk through the moving pieces of your revenue outlook? I mean how much of a headwind versus the prior outlook is the updated view on price? And is that fully offset by organic volume? Or is there some incremental M&A that's part of this as well? And if so, could you help us break out those two components, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: John Lovallo - UBS Group AG - Analyst : Understood. And then can you just help us think about the drivers of risk across the operating margin outlook range? It seems like the top end was taken off the table. What sort of drove you to do that? Was that all the was solely attributable to the deflation? And what would sort of get you to the bottom end of the range now? Why not take that bottom end of the range off the table as well?

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : Thanks so much guys for taking my question. I wanted to maybe unpack the quarter in a bit more detail. You've already provided some color here, but maybe just one more question around this. If I recall, February was kind of trending more flattish from an organic basis. So maybe just talk through how trends might have looked through the remainder of the quarter, especially since you were lapping easier comps in those months. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: Sam Reid - Wells Fargo Securities LLC - Analyst : That's helpful. Maybe let's pivot down the P&L and talk a little bit about SG&A. It's something that a lot of investors, I think are looking at with respect to your name. And maybe just think about kind of absolute SG&A levels this quarter, kind of would you say you're well calibrated into kind of some of these seasonally stronger quarters that are coming up? And maybe how should we be thinking about SG&A into FQ4 and perhaps into FQ1? Thanks.

Question: Quinn Fredrickson - Robert W. Baird & Co. - Analyst : Hi. Good morning guys. This is Quinn Fredrickson on for Dave. Thanks for taking the question. I know that you're not providing fiscal '25 guidance obviously at this stage, but just wondering even conceptually or qualitatively, which of your end markets or customer groups as you're kind of looking out into next fiscal year, you starting to feel better about? And conversely, are there any that you're starting to maybe see a little bit more pressure on? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: Quinn Fredrickson - Robert W. Baird & Co. - Analyst : And then second question on gross margin here in the third quarter. I'm wondering if you could help unpack for us that I think you mentioned, Bill, maybe just on the pricing side of things, really good execution. But was there anything unusual in terms of rebates or anything like that? It's just like seasonally, it was very strong. And then secondly, on the execution side of things, can you help unpack what you're doing to drive that? Are there certain tools that you're providing to associates? Or just any color there. Thanks.

Question: Keith Hughes - Truist Securities - Analyst : Thank you. Just to delve into the deflation a little more, could you talk about what individual products are continuing to see deflation and what sectors that's affecting?

Question: Keith Hughes - Truist Securities - Analyst : Okay. And one final question on this. On the water plastic pipe, the large diameter pipe has remained particularly high after substantial run. Are you seeing any signs of real deflation there of that coming back down to historical prices? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, FERG.N - Q3 2024 Ferguson Enterprises Inc Earnings Call

Question: Keith Hughes - Truist Securities - Analyst : Okay. And final question, the residential trade numbers were very encouraging, that positive 1%. I think you made a comment there on volume. Was the volume a little better than the revenue number you mentioned?

Question: Christopher Kalata - RBC Capital Markets - Analyst : Hey, it's Chris Kalata on for Mike. Just going back to the pricing conversation and your comments around spottiness on the finished goods side, could you just maybe flesh out a little more the dynamic that's causing that? Is it competitive pressures in the market? Is it your customers pushing back? And then I think last quarter, your expectation was overall pricing, including commodity to be positive in 4Q. Now that's through, you expect it to be negative through the end of this year. So are you expecting total pricing to be positive in 1Q '25? Or just some color there on when do you expect eventual positive price inflection?

Question: Christopher Kalata - RBC Capital Markets - Analyst : Understood. And then maybe just shifting to some of the tailwinds you called out on mega projects in the past. And I just was curious what you're seeing today in terms of that tailwind and any kind of quantification you can provide on expectations of growth exiting this year into next? Thanks.

Question: Will Jones - Redburn Atlantic - Analyst : Thanks. Good morning. Can I just come back on volume, please, when you talk about continued improvement through the rest of