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Taylor Wimpey share price: what to expect from annual results

In the near term, Taylor Wimpey has plenty of hurdles, but long-term imbalances in housing supply provide support for prices, even though the ‘Help to Buy’ scheme has a firm end date.

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When is Taylor Wimpey’s annual results date?

Taylor Wimpey is expected to report full-year earnings, covering 2018, on 27 February.

Taylor Wimpey results preview: what does the City expect?

Taylor Wimpey is expected to report year-on-year growth of 5.3% in headline earnings, to 21.2p per share. Meanwhile, revenue is forecast to grow 3.4% to £4.1 billion. It has beaten forecasts in six of the last eight reports for earnings, and in seven of the last eight for revenue. Earnings have steadily climbed over the past five years, but the pace of growth is expected to slow in the next few years, as Brexit, a weaker UK economy and cost inflation hit margins.

Taylor Wimpey enjoyed a good end to 2018, and finished up with net cash on its balance sheet, providing a solid financial foundation for the future. But the future for housebuilders is deeply cloudy. The ‘Help to Buy’ programme is set to end in 2023, and while this is still four years away, it does point to more difficult times ahead for the sector.

It is impossible to talk about housing stocks without mentioning Brexit. The situation for the next few months remains difficult to forecast, with a range of possibilities from no-deal Brexit to a delay to Article 50 still in play. But the uncertainty is playing havoc with demand; home buyers will be understandably cautious about embarking on a major purchase when that deal might be followed by a drop in house prices that leaves the homeowner in negative equity.

However, the overall outlook is still encouraging, given that demand in the UK continues to outstrip supply by a healthy margin. The UK has seen house building levels decline since their post-war peak in 1960. Before 2008, the country built around 200,000 homes per year, but that dropped towards 100,000 in the immediate aftermath of the recession. Since then the numbers have crept up, but even at the 2017 high of 184,000, the UK is still building below even the inadequate pre-recession rate.

Forecasts suggest that the UK will have 210,000 extra households per year for every year of the 2014-2039 period. Tens of thousands of extra houses are needed per year, but at present there seems little chance that these expectations will be met, and thus demand will continue to outstrip supply.

This mixed picture, of short-term caution but long-term optimism, helps to explain why Taylor Wimpey currently trades around 8.2 times forecast earnings. This is below the five-year average of 9.6 times, and has steadily declined since 2017. At the end of 2018, Taylor Wimpey traded at around six times forward earnings, the lowest level since the crash in its share price in the wake of the 2016 Brexit referendum. Arguably, this low valuation accurately discounts much of the bad news – weakness in house prices is becoming a global phenomenon, in the US, Australia and Canada, so it is not surprising to see Taylor Wimpey trade on a relatively undemanding valuation. This increases the potential for positive surprises, leading to gains for the share price.

How to trade Taylor Wimpey’s annual results

The average move on results day has been 3.3% for Taylor Wimpey, while at present the 14-day average true range for Taylor Wimpey shares is 3.58, around 2.1% of the current share price. Volatility in the shares picked up since November, when the price dropped from 170p to a two-year low of 127p, and then a rebound from 130p returned the share price to the November levels around 170p.

Taylor Wimpey results: technical analysis

The share price had steadily declined during 2018, dropping back from the 194p highs that acted as significant resistance during late 2017 and early 2018. From June of last year, the price headed lower, making a series of lower highs and lower lows. The decline accelerated markedly in September and October, as volatility hit stock markets worldwide.

But since then the price has rebounded significantly, breaching trendline resistance in mid-January and returning to 170p. But ahead of full-year figures the rally has stalled, and the price has moved in a tight range between 163p and 170p. This kind of range-bound trading is to be expected after such a leap higher, as bullish momentum dries up and the price ‘digests’ the rally. Above 170p the 174p and 183p levels come into play. A move back below 153p might revive the bearish view.

Taylor Wimpey daily chart
Taylor Wimpey daily chart

Taylor Wimpey share price looks promising longer term

Taylor Wimpey’s fundamental outlook is still promising in the longer term. While the era of ‘Help to Buy’ and low interest rates around the globe has come to an end, the outlook for housing in the UK is still heavily weighted in favour of demand, with a long-term undersupply of houses helping to keep prices high.

Despite the volatility in the share price since 2016, the overall post-2009 trend higher is firmly intact. Sharp dips, such as we saw in 2016 and then (to a lesser degree) in 2018, have found buyers, and in the longer-term higher prices should be expected.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.

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