Financial Trading Blog
Stock of the day 30/11/2015 – The Berkeley Group Holdings PLC
Can the company revitalise its stock with its interim half year results on Friday?
After gradually reaching the mid-£20s by the end of April, Berkeley really took off in May, when the Conservative Party’s UK election win saw the stock rocket £6 in 6 weeks. The company doubled down on those gains with its mid-June full year results; massively outperforming expectations with pre-tax profits of £539.7 million against the £470.1 million forecast despite selling fewer homes year-on-year, Berkeley surged to a then-high of £35.16.
(Source: IT-Finance.com 30/11/2015)
A tumble at the start of July, largely in line with the FTSE’s own trading, was recovered as the stock headed into August, culminating in Berkeley’s all-time peak of £35.70. The stock then quickly recuperated its heavy losses at the end of August, oh so briefly dipping below £31 before bouncing back to £35 by mid-September (aided by a trading update that stated its earnings would be in the £2 billion region for the next 3 years). Yet since then things haven’t gone quite as smoothly for the house-builder.
Falling across the end of September and the start of October, Berkeley slipped to £32 before recovering to £33 by the end of the month. However, a sharp 6.5% drop, inspired by a bearish note on the sector from Liberum Capital, at the start of November wiped away the stock’s rebound and the stock has struggled since. Even an Autumn Statement that saw a doubled housing budget and the promise of 400,000 new affordable homes couldn’t help Berkeley break too far above £31, after the Chancellor also announced increased taxes on buy-to-let properties. Berkeley Group now sits at a current trading price of £31.38 (IT-Finance.com, 30/11/2015).
In terms of its half year interim results on Friday, Berkeley is expected to post revenue of £872 million (down from £1.09 billion in the second half of its last fiscal year), signalling a slowdown that would culminate in a 15% fall in revenue for the full year to April 30th if current forecasts are correct.
The Berkeley Group Holdings PLC has a consensus rating of ‘Hold’ alongside an average target price of £34.22.
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