Barratt Developments Half Year Results – What to Expect

Barratt Developments (LON: BDEV) will report its half-year results on Wednesday, February 8, and with concerns about the UK housing market prevalent, you would expect UK housebuilder stocks to decline this year.

However, Barratt Developments shares are up 23.6% in the last three months and 18% so far in 2023, providing relief for shareholders after a strong decline in 2022.

In its trading statement for the half-year, released January 11, Barratt warned about the outlook following a “marked slowdown in the UK housing market.”

“Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter,” the company added.

BDEV revealed that total home completions, including joint ventures, were at 8,626 in HY23, compared to 8,067 in HY22.

The housebuilder said its full-year out-turn will depend on how the market evolves in the early months of 2023, and so far, the signs for housing demand aren’t overly positive.

UK Mortgage Approvals – Source: TradingEconomics

UK mortgage lending fell to £3.24 billion from £4.26 billion in December, while mortgage approvals in the month fell to 35.612K from 46.186K.

In addition, UK house prices fell for a fifth month in January, according to Nationwide, representing the longest string of declines since the financial crisis.

Source: Bloomberg

Even so, looking at Semrush data, traffic to the Rightmove website is still at significant highs, although it has stalled somewhat in the last few months. Zoopla web traffic is down from its May 2022 highs, but it has, like Rightmove, stabilised in recent months…

Whether the sideways traffic is a sign of waning demand or robust strength is the question to ask here when assessing the current market, although, alongside the mortgage approval data, it does lean more negative.

When it comes to analysts, they are split between neutral and positive for BDEV shares.

In December, Barratt Developments was initiated with an Overweight rating and a 509p price target at Barclays.

Analyst Emily Biddulph initiated coverage on the UK housebuilders and merchants with a Neutral view, stating that she sees an “increasingly tough” near-term outlook and expects house price declines by 2024 and weaker home improvement markets…

However, she feels double-digit price declines are already priced in, and balance sheet strength “means it really is different this time.”

The analyst listed Barratt, Taylor Wimpey, Redrow, and Berkeley as her favoured housebuilders.

Last week, Morgan Stanley analyst Cedar Ekblom raised the firm’s price target on BDEV to 461p from 388p, maintaining an Equal Weight rating on the stock.

Four of eight analysts have a Buy rating on BDEV shares, while four have a Hold rating on the stock, according to TipRanks. The average price target is 469.88p per share.

Leave a Reply