Shares in Bellway (BWY) rose 3% to £26.26 after the housebuilder said there were ‘clear signs’ of improving H1 demand. The positive sentiment helped lift shares in rival Barratt Redrow (BTRW), which reports earnings tomorrow.
| Share price: £26.26 (+3.2%) | PE: 13.8x |
| Market cap: £3bn | Yield: 3% |
Reservations rising
In a trading update covering the six months to the end of January, Bellway sounded upbeat about its performance. Total completions rose 3% to 4,702 homes, while average selling prices rose 4% to £322,000.
The weekly private reservation rate, a closely watched indicator, rose slightly to 0.46 units excluding bulk sales. The forward order book was 4,442 homes, and the company confirmed its FY guidance of delivering 9,200 units.
Bellway delivered ‘a robust first-half performance in a challenging market’, said CEO Jason Honeyman. There were ‘clear signs of improving customer demand in the early weeks of the spring selling season’, the firm added.
Bellway’s optimism around reservations and sales leads fed into shares of Barratt Redrow, which reports on Wednesday. Barratt shares are marginally up so far this year while Bellway shares are still in negative territory.
It’s an understatement to say there are lots of bulls of the housebuilders waiting to jump in. Today’s update from Bellway hasn’t quite fired the starting gun, but it will provide encouragement to those on the sidelines.
We’ve been fairly clear we aren’t fans of the sector on the basis earnings are still way below their peak. For them to get back there, volumes and prices would have to increase a lot more than seems feasible.
While housebuilders have a degree of operational gearing, higher volumes inevitably mean higher input prices both for labour and materials. We prefer infrastructure stocks, where the demand picture, margins and revenue visibility are a lot better.
Read the press release here: https://www.bellwayplc.co.uk/investor-centre
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