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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.

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. 

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