A week, just like in politics, is a long time in financial markets. This is particularly the case today as the coronavirus crisis keeps traders and investors glued to their screens for all the latest news on infection rates, government action, and comments from big business on the pandemic.
It’s anyone’s guess as to what market sentiment will be like when Ferguson (LSE: FERG) comes to update shareholders next week. The plumbing specialist is slated to release half-year financials on 17 March.
Still, unless there’s another washout in investor confidence I reckon this is a share that could gain serious traction on the back of the release.
Building a head of steam
The recent share price descent at Ferguson – one which saw the FTSE 100 plumb its cheapest in nine months – leaves it trading on a low forward price-to-earnings (P/E) multiple of 14.3 times. Given that this upcoming release is likely to underline the strength of its core North American markets, it’s a reading that leaves plenty of scope for a meaty share price rise.
Most recent data from the Commerce Department underlined the strength of Ferguson’s underlying markets. These showed US housing starts in January breach 1m for the second month in a row. This came in at a seasonally adjusted 1.57m. On top of this, officials upgraded their figures for December to 1.63m from 1.61m previously.
This wasn’t the main standout figure from that latest release, however. Oh no. Instead, it was news that building permits in the US rang in at 987,000 last month that grabbed the headlines. This was the biggest number since the summer of 2007.
A brilliant buy
Is it likely that share pickers will be that bothered by the release, though? Or should I say, will the market be more bothered by the prospect of the coronavirus outbreak derailing the strong homes market and with it Ferguson’s profits outlook for the rest of 2020?
Obviously investors need to bear in mind the huge disruption that the COVID-19 tragedy will cause to the entire North American economy. Though having said that, it’s possible that recent Federal Reserve action to limit the economic impact will serve directly to support the US housing market.
The Fed last week hacked back its benchmark rate to 1% to 1.25% in an emergency ruling on 3 March. In the following hours mortgage rates fell to multi-decade lows (according to Freddie Mac, the average rate on a 30-year fixed-rate mortgage dropped to 3.29%, the lowest since the lender began collating such data half a century ago).
It’s more than likely that rates will fall even more when the central bank next convenes in midweek.
I remain convinced that Ferguson remains a top share for long-term investors to buy. The massive homes shortage in the US means that building rates will have to remain strong. And so demand for the Footsie firm’s fittings should keep growing, too. I’d happily buy this share in an ISA or similar product today.