This AI-Adjacent Company Doesn't See Much Data-Center Pause-yet

Dow Jones
16小時前

Shares of Ferguson Enterprises were on pace for their best day in more than a year after reporting third-quarter earnings Monday morning. Management for the HVAC company, which has received a significant boost from the artificial-intelligence data-center buildout, said that there hasn't been been much pausing or delaying of major projects.

Ferguson reported better-than-expected third-quarter earnings on the back of non-residential sales growth of 15% and raised its full-year net sales expectations to 7% growth, up from its previous mid-single-digit growth forecast.

Ferguson stock surged 13% to $262.89 and was on pace for its best daily percentage gain in more than a year, according to Dow Jones Market Data. Ferguson was a Barron's stock pick on April 22. Shares have risen about 1% since then.

Ferguson, one of the largest plumbing and HVAC distributors in the U.S., has benefited from a commercial construction boom concentrated in AI data centers. As of Monday, shares of Ferguson have risen 19% this year and are about 1.3% below their record closing high of $267.71 from April 30.

Several other AI-adjacent stocks were also rising and were among the best-performing S&P 500 components in the trading session. Shares of on-site energy provider Bloom Energy along with Monolithic Power Systems each rose about 14%. Shares of Flex, the electronics manufacturing services company, also advanced 13%.

Wall Street has been concerned that the Democratic Party's big win in the midterm elections could mean heightened regulation of data centers and the AI buildout. Ferguson's results amount to a rebuke of worries over how the political shift could impact its business -- at least for now.

Management said on the earnings call that it's still a "bit early to tell" how data-center project delays or pauses will unfold but that the company hasn't seen a "tremendous amount of pause."

Ferguson added that its "large capital project" backlog remains strong and is growing. Those projects include data centers, power generation, water infrastructure, pharmaceuticals, semiconductors, mining, and additional manufacturing projects.

Morgan Stanley analysts Annelies Vermeulen and Zachariah Al-Qaryooti said in a research note that the firm's investment thesis was unchanged as the U.S. residential market remains under pressure. The analysts have an Overweight rating on the stock with a $295 price target.

Ferguson management also said that large capital projects represent around mid- to high-single digits of the company's revenue and that data-center projects account for roughly half of that. Even if Democrat lawmakers at the state or federal level impose data-center regulations, Ferguson sounded an optimistic tone that the diversification of growth projects should insulate it from oversight risk.

It was a mountain of good news from Ferguson, and Wall Street was certainly happy.

 

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