Financial Trading Blog

Stock of the day 07/09/2015 – Barratt Developments PLC




Will this trend continue as the company releases its 2014/15 full year results on Wednesday?

Like many UK stocks, the initial start to January was a bit rocky for Barratt Developments as the stock fell from a 2015 opening of £4.68 to £4.25 two weeks later. However, a trading update in the middle of the month soon ignited a fire under the belly of the company’s investors that hasn’t really disappeared since. In that January statement Barratt Developments announced a 12.5% increase in total completions for the 6 months ending the 31st December 2014, in turn producing a 17.1% jump in total forward sales to £1.681 billion.

These impressive figures caused the company to re-cross the £4.50 mark going into February. February itself then saw the company firmly climb above £5 for the first time since November 2007, with the stock boosted by the anticipation, and sufficiently impressive release, of its half year results at the end of the month. Pre-tax profit had jumped a whopping 75% to £210.2 million; the company’s basic earnings per share, meanwhile, grew by 78.9% to £0.17. The cherry on top? News that its total forward sales to the end of February were up 17.5% to £2.275 billion.

Barratt Developments PLC Chart September 2015
(Source: IT-Finance.com 07/09/2015)

Nearing the end of March the company, bar a mid-month wobble, had continued its impressive growth to reach £5.40. However, pre-UK election jitters began to kick in around this time, and whilst Barratt Developments had hit £5.57 at the start of April, sustained declines in the run up to May 7th caused the stock to briefly dip back below the £5 mark to £4.95 as the country waited for the votes to be counted. Yet, as is now well documented, the Tory win was not only a massive boost for the FTSE in general, but a very specific injection of growth for building stocks, with the sector set to benefit from a swathe of Conservative policies.

It meant that Barratt Developments leapt over 7% on May 8th alone, surging back to £5.50 with gusto. The stock’s situation was only improved by yet another investor-pleasing update on the 13th May, with the company reporting that it would complete 16,100 homes for the year to June 30th, compared to the 15,700 first thought and the 14,838 completed in 2014. It also saw its forward sales total climb to £2.6 billion against £2.2 billion year-on-year, with CEO Mark Clare stating that this rise saw the company’s ‘forward order book [reach] the highest level ever achieved by the group’.

With all this goodwill surrounding the stock, Barratt Developments touched £6 for the first time since November 2007 at the start of June; and whilst its growth has slowed since then, due to the turbulence caused by Greece and, more recently, China, the stock has been incredibly resilient in holding onto its 2015 highs. It was helped by its July 9th update, with the company stating it expects its full year pre-tax profit to rise by 45% to £565 million, prompted by a 10.8% increase in total competitions to 16.447. And after hitting a 2015 high of £6.60 in the middle of August, Barratt Developments is at a current trading price of £6.32 (IT-Finance.com, 07/09/2015).

In terms of its full year results on Wednesday, analysts are expecting a 15% increase in revenue to £3.64 billion alongside a 44% rise in adjusted net income to £440 million, alongside that aforementioned 45% jump in pre-tax profit.

Barratt Developments has a consensus rating of ‘Hold’ (with analysts giving 1 ‘sell’, 5 ‘buys’ and ’10 ‘holds) alongside an average target price of £5.82.


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