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On Tuesday, Morgan Stanley (NYSE:MS) resumed coverage on Barratt Redrow (LON:RDW) PLC (BTRW:LN) (OTC: BTDPY), elevating the stock’s rating to Overweight from Equal-weight and increasing the price target to GBP6.10 from GBP5.80. The move reflects the firm’s confidence in the UK’s largest traditional house builder to experience a robust volume rebound. The company, currently valued at $9.08 billion, has shown strong momentum with a 10.82% return over the past year. According to InvestingPro analysis, the company maintains a FAIR financial health score of 2.16.
Stifel analysts underscored the enhanced capabilities of Barratt Redrow following its acquisition of Redrow. They noted the company’s improved position to compete for larger sites in the land market, particularly those that can accommodate various home types and larger plots. The analysts pointed to the accessibility of significant multi-phase projects, which could include more than 1,000 units, as a new avenue for development that was less feasible before the acquisition. InvestingPro data reveals the company holds more cash than debt on its balance sheet, with a strong current ratio of 4.53x, supporting its expansion capabilities.
The strategic acquisition is seen as a pivotal factor that has yet to be fully recognized in Barratt Redrow’s current share price. Stifel’s volume projections for the company are optimistic, with estimates of a 6%, 7%, and 11% increase for the fiscal years 2025, 2026, and 2027, respectively. These figures notably exceed the Visible Alpha consensus. InvestingPro analysts anticipate sales growth in the current year, though the stock currently trades at a relatively high P/E ratio of 43.15x.
The analysis by Morgan Stanley suggests that Barratt Redrow is positioned for growth, with the potential to outperform market expectations. This sentiment is based on the company’s ability to undertake larger-scale developments, which could significantly impact its volume sales in the coming years.
The revised price target and upgraded rating reflect the firm’s belief in the inherent value and growth prospects of Barratt Redrow, as it expands its reach within the UK housing market. The company’s ability to capitalize on larger and more diverse land plots is seen as a key driver of its anticipated success.
In other recent news, Barratt Developments (LON:BTRW) Plc. has seen its stock rating upgraded from Hold to Buy by Deutsche Bank (ETR:DBKGn). This change comes with an unchanged price target of GBP 5.36. Deutsche Bank analysts have highlighted a strong current trading performance and predict that the company’s adjusted profit before tax for the fiscal year 2025 will reach the upper end of the consensus range. The firm’s fiscal year 2025 profit forecast has been increased by 5%, although projections for the following years remain largely steady.
The company has released positive interim results, indicating a robust rebuild of profits in the future, supported by an expanding outlet profile and expected synergies from its acquisition of Redrow. Despite these developments, medium-term return targets suggest a return on equity that will be lower than pre-pandemic levels, consistent with industry trends. Deutsche Bank’s analysis indicates that Barratt Developments is trading at a value that aligns with its current net tangible assets, suggesting that the market has not fully recognized a potential recovery. The unchanged price target indicates a potential 24% upside for the stock. The upgrade by Deutsche Bank reflects confidence in Barratt Developments’ strategic moves and financial outlook.
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