Ferguson Enterprises (FERG) on 9/20 with a buyer of 700 December $210 calls for above $7.90 in a size trade for a name that sees very little options flow. These calls can now be owned at $6. FERG shares have been making lower highs since the start of August and essentially flat YTD but the weekly chart shows promise as a falling bull wedge forms with the $205 level the largest volume node to clear near-term.

Ferguson is the largest value-added distributor serving the specialized professional in the $340 billion residential and non-residential North American construction market. FERG provides expertise and a wide range of products and services from plumbing, heating, ventilation and air conditioning (“HVAC”), appliances, and lighting to pipes, valves and fittings (“PVF”), water and wastewater solutions and more. FERG sells through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels. Ferguson distributes products from 36k suppliers, via a network of 11 distribution centers, 5,300 fleet vehicles, 31k employees and 1,679 branches, to >1 million customers. FERG market exposure and positioning is shown below.

Residential and non-residential markets each account for approximately half of its net sales, with net sales within these combined markets balanced between repair, maintenance and improvement (2/3) and new construction (1/3). Ferguson operates in highly fragmented markets, with no one market dominated by any single distributor. Its business bridges the gap between a large and fragmented supplier base with an even larger and more fragmented customer base. RMI spend, Credit, GDP, demographics, construction, and age of housing stock  are key market growth drivers.

FERG has a market cap of $40B and trades 17.75X Earnings, 14.6X EBITDA and 18.6X FCF with a 1.6% dividend yield, valuation attractive for a company seen growing the topline 6-10% annually with 8-10% EBITDA growth. FERG organic growth closely tracks the US Repair, Maintenance and Improvement (RMI) spend patterns. Despite market headwinds and deflation, FERG outperformed its markets, returned to volume growth, expanded gross margins, and delivered solid operating margin performance.

FERG screens cheap to peers like FAST, GWW, WSO with comparable growth, though FAST remains a margin leader.

Analysts have an average target of $225 and short interest very low at 1% of the float. Barclays raised its target to $245 saying FERG is a strong growth story with resilient margin performance that is mired in choppy end markets with modest deflation and with the recent conservative 2025 guide, sets the stage for beat and raises.