CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Barratt Developments is still booming

The company will announce its full-year results on 9 September, and investors have high hopes for the home builder.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Barratt Developments construction in progress
Source: Bloomberg

The firm had a strong first-half, and posted a 75% jump in profits in February as the combination of rising property prices, low interest rates, and the help-to-buy scheme continue to play a part in its recent success. Barratt’s bullishness was underpinned in July when the company stated that it expects full-year profits to increase by 45%.

The share price of Barratt’s came under pressure in May as the uncertainty of the UK general election prompted traders to book their profits ahead of voters going to the polls. The macroeconomic picture for Barratt Developments looks much better now, as the Conservative majority has helped house builders as a whole, and now it appears that UK interest rates will remain at a record low until 2016.

When Barratt Developments reveals its results, traders are anticipating revenue of £3.64 billion and adjusted net income of £440 million. That represents a 15% jump in revenue and a 44% jump in adjusted net income. The house builder will also reveal its second-half results on the same date, and traders are expecting revenue of £2.1 billion and adjusted net income of £266 million. This compares with the first-half revenue and adjusted net income of £1.57 billion and £151 million respectively.

Investment banks are very bullish on Barratt Developments, and out of the 17 recommendations, eight are buys, eight are holds, and one is a sell. The average target price is £6.35, which is marginally higher than the current price.

Equity analysts are even more bullish on Bovis Homes, and out of the 14 ratings, nine are buys, four are holds, and one is a sell. The average target price is £12.66, and this is 16% above the current price.

The stock of Barratt Developments has been on the rise since 2008, and the resistance at £6.59 is the initial target, and a move beyond that will put £7.40 on the radar. Any pullbacks will find support at £5.85. 

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.