Can Persimmon (LON:PSN) add another layer of golden bricks to its record peak following next Tuesday’s half year results?
On paper, at least, there has been plenty to disrupt the housing market in 2017, with Brexit and the general election smothering the UK in economic uncertainty. Yet no-one seems to have told Persimmon. Instead the country’s second largest homebuilder has spent the year climbing higher and higher.
It all started back in early January, the company’s post-Christmas trading update sparking a 5.7% rise after claiming it had seen ‘healthy customer demand for new homes’ in the months following last June’s EU referendum. Cut to the end of February and the good news kept on coming, Persimmon revealing an 8% increase in full year revenue to £3.15 billion – in part thanks to a 3.8% rise in average house prices to £206,765 – and a whopping 25% surge in pre-tax profit to £774.8 billion.
This left the stock trading laterally at the £21 mark until April, where a combination of Theresa May’s election gamble announcement and another stellar update – this time Persimmon revealed an 11% increase in total forward sales for the first few months of the year –sent the stock to £24.50 by early June. Here the company suffered its one real 2017 blip (so far, at least), falling back to £23 after being dragged lower by election jitters and, more importantly, going ex-dividend.
However, Persimmon didn’t stay down for any time at all. Instead its early July statement gave investors even more reason to pour back into the stock, the company claiming it ‘took the election in its stride’. For the 6 months to June it saw a 12% rise in revenue to £1.7 billion, with average house prices up 3.5% year-on-year to £213,000.
This green lit more growth for the housing stock, eventually leading to an all-time high of £25.69 on 3rd August. It hasn’t all gone Persimmon’s way since then, however, with the stock falling on reports that the government is considering ending the Help to Buy scheme early. Persimmon PLC now sits at a current trading price of £25.32 (Spreadex, 16/08/2017).
In terms of next week’s interim results, investors will want another chunky jump in pre-tax profit following July’s confident update, as well as reassurances that the company is continuing to ride out the various issues plaguing the housing sector.
Persimmon PLC has a consensus rating of ‘Hold’ alongside an average target price of £23.70.