Can Bellway (LON:BWY) rebuild following Wednesday’s year-end trading update?
The firm has had an awful time of it in 2018. Starting at £35.95, the stock found itself at £28.30 by early August, a 14 month nadir. It has since lifted away from that low, if only just, with Bellway PLC now sitting at a current trading price of £29.53 (Spreadex, 07/08/2018) – that’s a near 18% decline in little over 7 months.
The housebuilder’s last update came in June and wasn’t as bad as its 2018 drop would suggest. Bellway said it was on track to complete the sales ‘in excess of 10,000 homes’ for the first time in the company’s history, with the average selling price over £280,000. However, the expectation of a slight dip in operating margin, from 22.3% to 22% year-on-year, seemed to sour investors on the update, as did a comment about the ‘use of incentives’ – i.e. price cuts – for more expensive properties ‘where sales rates can be slower’.
In terms of Wednesday’s statement, housing revenue is expected to be up 13% to £2.5 billion following a 10.6% jump in the number of completions to 9644. Pre-tax profit, meanwhile, is set to come in at £633 million, a 12.9% increase on 2017’s £560.7 million, with earnings per share at 418.12p against the previous year’s 370.6p.
Bellway PLC has a consensus rating of ‘Buy’ alongside an average target price of £37.73.
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