Persimmon share price: new strategy could hit underlying numbers

With output falling amid a focus on greater quality, will Persimmon earnings drive the stock lower?

Persimmon Source: Bloomberg

When are Persimmon results due?

Persimmon will unveil their half-year results Tuesday 20 August.

Persimmon results preview: what have been the main topics?

The housebuilder, Persimmon, has been in the headlines of late, with new chief executive officer (CEO) Dave Jenkinson kicking off a consultation with 100,000 customers as they seek to improve their reputation. That reputation has been tarnished by reports of inadequate quality construction. However, those negative headlines failed to dent the underlying numbers last time around, with the government-run help-to-buy scheme pushing pre-tax profits to £1.09 billion. That made them the first UK housebuilder to top £1 billion. We also saw the company post full-year revenues of £3.7 billion.

We have since seen an update in May, with the company reporting fewer orders this year, thanks to a shift towards quality and customer service over quantity. This shift towards higher quality is also expected to bring up costs, with the May update pointing towards a 4% rise thus far.

What to look out for

Keep a close eye out for that shift in costs and orders as a result of this new strategy. Revenues are expected to come in at £1.752 billion, following the figure of £1.836 billion in the first half (H1) of 2018. Also, look out for the earnings per share (EPS) figure, which is expected to come in at 1.310, down from 1.510 over the prior six months.

Persimmon shares: what do the analysts say?

There are currently 15 analysts covering the stock, with ten ‘Buy’, four ‘Hold’ and one ‘Sell’. The current target price of £24.97 is 34% above the current £18.56 price.

Persimmon share price: technical analysis

Persimmon shares have broken through a critical trendline support this week, with the daily chart highlighting that decline. With the price also breaking below the £18.60 July low, we are seeing a breakdown from the recent trend of higher lows. This brings about heightened expectations of further downside.

Persimmon daily chart Source: ProRealTime

Persimmon daily chart Source: ProRealTime

However, the weekly chart highlights a longer term trendline, dating back to 2016. With that line accompanied by the £18.20 June low and 200-week simple moving average (SMA), we can see that there is another substantial support zone below.

Should we see the price decline below this forthcoming support zone, it could pave the way for substantial losses to come. However, with market estimates pointing towards a substantially higher future price level, such near-term weakness could be a blessing for those who believe in the firm long term.

Persimmon weekly chart Source: ProRealTime

Persimmon weekly chart Source: ProRealTime


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