Barratt Developments’ profits forecast to drop
Barratt Developments’ profits forecast to drop
On Wednesday morning the UK housebuilder Barratt Developments is expected to publish its full-year results. It is expected to report pre-tax profit of £365 million for the year, on revenue of £4.19 billion. This is down from the £884 million profit and £5.3 billion revenue of a year ago, while profit margins are expected to shrink to 15.6% from 18.3%.
Barratt is also expected to report a decline in home completions. For the year ending June 30, 2023, completions dropped to 14,004, and further declines to between 13,000 and 13,500 are forecast for 2024-25.
Despite easing building costs and Labour's promise to reduce planning obstacles, concerns about the housing market persist, fuelled by Prime Minister Keir Starmer's warning of a "painful" upcoming Budget. Additionally, the Competition and Markets Authority (CMA) has raised concerns over Barratt’s £2.5 billion merger with Redrow, requiring the two companies to remain independent until further notice.
Analysts recommendations
Fundamental analysts are rating Barratt developments as a ‘hold’ with LSEG Data & Analytics showing 2 strong buy, 6 buy, 8 hold and 1 sell - with the mean of estimates suggesting a long-term price target of 558.88 pence for the share, roughly 6% above the share’s current price (as of 3 September 2024).
IG sentiment
IG client sentiment shows that for 501+ clients with open positions 70% are short the Barratt share with only 30% of clients having long positions (as of 3 September 2024). This month to date 51% of clients were selling the stock.
Technical analysis on the Barratt share price
Barratt’s share price - still down around 5% year-to-date - has risen over 25% from its 438.1p April low to its 563.0p August peak before suddenly dropping by 9% to its late August low at 500.2p.
What is interesting is that the August low was made close to a round number, i.e. the 500.00p mark, which acted as psychological support, and the 200-day simple moving average (SMA) at 502.24p, before bouncing back ahead of its full-year earnings out on Wednesday.
Barratt daily chart
Post earnings, a rise above the August peak at 563.00p is needed, for the December peak at 582.60p to be back in play.
Barratt weekly chart
For a long-term bull market in the Barratt share price to ensue, the 2023 high at 563.00p will need to be exceeded. In such a scenario the October 2021 low at 618.60p would represent the next upside target.
Were a fall through last week’s low at 500.20p to unfold, though, the October 2023 to September 2024 support line at 480.00p and the June trough at 467.40p would be back in sight.
While the late August low at 500.20p underpins on a daily chart closing basis, the medium-term uptrend remains intact.