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Tory election victory to provide boost for housebuilders, says Canaccord, except McCarthy & Stone

The broker highlighted Persimmon and Barratt as firms with healthy dividend yields, while Redrow and Bellway offered greater growth potential

Persimmon - Tory election victory to provide boost for housebuilders, says Canaccord, except McCarthy & Stone

The Conservative victory in December’s general election has “removed significant political and macro risks” for most of the UK’s housebuilders, say analysts at Canaccord Genuity, who on Tuesday hiked price targets for companies across the sector.

In a note, the broker said they saw “attractive shareholder returns supported by healthy dividend yields”, particularly in the case of Persimmon PLC (LON:PSN) and Barratt Developments PLC (LON:BDEV) while firms such as Redrow plc (LON:RDW) and Bellway PLC (LON:BWY) offered more growth potential.

Canaccord hiked its price targets for Persimmon and Barratt to 3,000p from 2,720p and to 820p from 660p respectively. Redrow, meanwhile, was increased to 840p from 700p and Bellway was hiked to 4,260p from 3,590p.

Other companies in the note included Berkeley Group Holdings PLC (LON:BKG), which was raised to 4,890p from 4,570p, Crest Nicholson Holdings PLC (LON:CRST), upped to 435p from 355p, Taylor Wimpey PLC (LON:TW.), increased to 211p from 181p, Vistry Group PLC (LON:VTY), raised to 1,420p from 1,260p, and MJ Gleeson PLC (LON:GLE) which was hiked to 920p from 870p.

One exception to the positive assessment was McCarthy & Stone PLC (LON:MCS), which was downgraded to ‘sell’ from ‘hold’ on valuation grounds as Canaccord expected “little margin improvement” for the company in 2020, however its target was still inched up to 134p from 133p.

Looking ahead, analysts said financial metrics for the sector “continue to look generally positive supported by healthy demand, a supportive land market and strong balance sheets”.

“We have not altered our sector estimates, but do have more confidence that trading will hold up well during the upcoming spring selling season, which combined with good order books underpins profit, cash-flow and dividend forecasts for 2020”, the broker said.

Quick facts: Persimmon

Price: 1622.5 GBX

LSE:PSN
Market: LSE
Market Cap: £5.17 billion
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