JPMorgan upgrades Taylor Wimpey, downgrades Barratt

JPMorgan Cazenove downgraded Barratt Developments on Monday but upgraded Taylor Wimpey as it took a look at the UK housebuilding sector.

The bank said government’s continued support has helped the sector outperform the market year-to-date, with the sector up 15% versus the market up 3%.

"With good demand trends and increased near-term visibility, we raise our 2021E volumes to circa 95% of 2019’s level, leading to 4% profit before tax upgrade for the sector, slightly ahead of consensus," JPM said. "With the sector still trading at 9.7x Adj. 2022E price-to-earnings (below the LT average), we remain positive and see further room for outperformance as earnings continue to grow towards 2019 levels and beyond."

JPM said it continues to like Persimmon, Redrow and Bellway, all of which are rated ‘overweight’.

It upgraded shares of Taylor Wimpey to ‘overweight’ from ‘neutral’ and increased the price target to 220p from 190p, arguing that the company’s earnings momentum is likely to outperform the sector, with JPM’s forecasts 7% ahead of consensus despite margin expectations at the bottom end of management guidance.

JPMorgan downgraded Barratt Developments to ‘neutral’ from ‘overweight’ in light of limited upside to consensus and strong performance over the last few months, resulting in limited re-rating potential. The bank lifted its price target to 850p from 800p.