This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Trade Parameters
Technical Observations – For
Technical Observations – Against
Bullish breakout thanks to positive read-across from peer Bovis Homes with beat profit expectations and reported robust summer trading conditions (which also benefited Barratt Developments). Very attractive 8% dividend yield. Recently announced that it will propose share buybacks in the future, which should flatter the share price thanks to the forced buyer effect.
Broker Numis says that Barratt Developments has good scope to boost earnings thanks to reduced exposure to London markets and margin-boosting initiatives starting to have an impact (4 Sept). Recent signs of progress in UK/EU Brexit negotiations, according to Bloomberg report (5 Sept), could lift the cloud of uncertainty from the Housebuilder sector.
Risks to Barratt Developments include a poor trading statement in October, a Bank of England interest rate hike leading to reduced demand for mortgages, a bigger UK housing market decline, Brexit uncertainty, an equity market drop that favours more defensive shares and, of course, broker downgrades.
Brokers/analysts are bullish on the shares with only 5% suggesting Sell. This is supported by 83% of broker price targets suggesting upside from current levels, to a consensus target of 647p, well above our target of revisiting June highs of 588p.
Next Event: AGM Trading Update, 17 Oct; Ex-div (35.2p/6.3%), late Oct
Latest Broker 12-Month Consensus: 68% Buy, 26% Hold, 5% Sell (full breakdown on request)
Source: DowJones Newswires, Reuters News, Bloomberg or Company Press releases
| 1wk | 1m | 3m | 6m | 1yr | 2yr | 3yr | 4yr | 5yr | |
| Perf % | 2.2 | 4.7 | 0.4 | 2.6 | -11.3 | 11.0 | -12.3 | 51.5 | 80.0 |
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Prepared by Michael van Dulken, Head of Research