Earnings look ahead – Barratt Developments, Vectura, Bovis Homes

A look at company earnings next week.

Barratt residential development
Source: Bloomberg

Barratt Developments (full-year results 6 September)

Barratt is expected to report adjusted earnings of 60 pence per share, up 9.6% on the year, while revenue rises 9.3% to £4.6 billion. It has seen a steady climb in earnings over the past few years, and has managed to beat forecasts, 6 out of the last 8 times on earnings, and seven out of eight in revenue. At a current PE of 10.8, and on a price-to-earnings growth (PEG) rate of 1.1, it remains attractive. Given the uncertainties the sector is currently facing, the firm’s valuation would seem to provide a good margin of safety for the future.

Barratt has been on a great run so far this year, with the price action over the past couple of days pushing above the May high at 624p. Dips should continue to find buyers, so the overall target in coming months remains the 673p high from September 2015.

 

Barratt Development chart

Vectura (first-half results 6 September)

Vectura’s recent good news saw the firm announce that it had agreed with Dynavax that would allow the latter to use Vectura’s technology in the clinical application of a lung cancer drug. Vectura will receive revenue from development milestones as the drug goes into use. The shares currently trade at 19.8 times forward earnings, versus a two-year average of 18.6 times. Earnings per share of 3.6p are expected, down 36% over the year, while revenue is expected to be £167 million, up 132% compared to a year earlier.

It has not been a great 2017 for the shares, with further losses coming though. The 110p area was broken during August, and so far the price has failed to recover. Even if it does move above here, gains since June have been capped by the 120p area.

 

 

Vectura chart

Bovis Homes (first-half results 7 September)

Bovis is expected to report earnings of 74.1p per share, down 17% over the year, while earnings are forecast to decline 11% to £937 million. This will be the first decline in earnings in a number of years. The firm has been focusing on quality over quantity, which accounts for the reduction in revenues. A forward PE of 13 and a dividend yield of 4.6% makes the firm attractive on valuation grounds.

Bovis shares broke to fresh multi-year highs, taking out the 2016 high at £10.26. As with Barratt, we would look for dips on the daily chart to provide more interesting buying opportunities, but this looks like a healthy trend for the time being. An over-extended stochastic means some weakness is possible, but over the longer-term, pullbacks remain places to add to existing long positions or initiating new ones.

Bovis Home chart

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