Liberum upgrades Barratt Developments to 'buy'

Analysts at Liberum upgraded Barratt Developments from 'hold' to 'buy' and raised their target price on the homebuilder to 735.0p from 690.0p on the back of the group's better-than-expected first-half earnings.

Barratt ended the first half with pre-tax profits 7% ahead of consensus estimates thanks to margin strength, said Liberum, which highlighted that the company's solid first-half outcome benefited from some price inflation and controlled costs.

Liberum, which raised its 2021 earnings per share forecasts by 8% on improved full-year margin assumptions, pushed its outer year forecasts up by 9-11% as it revisited expectations for house prices.

"We no longer think that they will drop meaningfully through the middle of this year, as we expect homebuyers' remarkable determination to endure," said Liberum, which added that he highly discussed cliff edges of Help to Buy, Stamp Duty and furlough were all being "negotiated successfully".

Elsewhere, Canaccord, which stood by its 'buy' rating on Barratt, also said recent trading looked to be "holding up well", with a healthy level of reservations being taken for completion beyond the end of March.

"Assuming trading holds up at decent levels and the group rebuilds its WIP and average site numbers, it looks set to deliver good growth beyond a good outcome for FY2020, with the upside risk that FY2022 completions could reach pre-Covid FY2019 levels."

The Canadian bank noted that it continues to see "good value" in the stock, assuming the recovery continues and that Barratt further structurally improves margins.