Barratt Developments PLC (LSE:BDEV) full-year results come amid a renewed sense of optimism in the housebuilding sector and an inflection point for Barratt particularly.
Following Labour’s landslide election victory in July on a pro-build policy platform, the market started to reprice housebuilding shares higher to account for the 1.5 million-new-homes-in-five-years target set out by Labour leader Keir Starmer.
Barratt is well positioned to take advantage of this policy, having just subsumed smaller rival Redrow PLC (LSE:RDW) in a £2.5 million takeover, despite the niggling competition concerns of the national competition watchdog.
It sets the stage for some bullish longer-term guidance when Barratt reports on Wednesday, 3 September.
That being said, there remains a number of imminent headwinds in the housebuilding sector which investors will be keen to hear about.
Deutsche Bank analysts recently lowered Barratt’s pre-tax profit forecasts for the 2025/26 financial year by between 9% and 10%, citing low sales rates, planning delays, depressed margins and fire safety liabilities.
“We think some other stocks in the sector will need to reduce estimates due to the same headwinds, which is likely to act as a headwind to share prices,” analysts said.
Barratt has already guided to delivering 1,000 fewer homes in the year ahead than previously anticipated, but the real story will be what happens next.
As these results approach, Jefferies has stated that there is little wriggle room in the share price.
“Like others in the sector, Barratt Redrow has significant leverage to the improving housing market as well as the meaningful land investment opportunity that we believe the changes in planning bring.
“And at 1.2x calendar P/ NTAV the group is not expensive.
“But with the risk of hiccups in integration and largest fire safety provision, we see better risk/reward balance elsewhere.