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AJ Bell Youinvest Breaking the Mould – Taylor Wimpey full year trading update 2020

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We are about to go back into overdrive, as the US fourth-quarter reporting season starts in earnest on Tuesday 14th January when American mega-banks JP Morgan Chase, Wells Fargo and Citigroup announce their results They should also provide useful insight into what’s going on in the world’s largest economy, where we will also get three handy macroeconomic data points this week

The first is the monthly US Smaller Companies Optimism index from the NFIB on Tuesday 14th Smaller firms are more likely to get the bulk of their business from their home market and the signs here have been encouraging of late The last NFIB reading was 1047, only a handful of points below August’s 2018’s all-time high of 1088

The second is the monthly National Association of House Builders, or NAHB, Housing Market index, due on Thursday 16th This dipped badly in 2018 but rallied strongly last year and ended 2019 at 76, only a fraction below its 1998 record high of 78 As we can see in both cases, the US stock market pays attention and investors with exposure to America’s financial markets will also read the third data point with interest This is the so-called Beige Book that is due out on Wednesday 15th This will be the first of eight editions this year and features anecdotal evidence from all of the regional Federal Reserve banks on the US economy

That will help to set the tone for the Fed’s first policy meeting of the year on 28-29 January, although the US central bank’s current plan is to keep interest rates unchanged at 175% throughout this year On this side of the pond, news flow will also start to pick up again Around half a dozen FTSE 100 firms are due to release trading statements or results or host an analysts’ meeting, while plenty of mid- and small-cap names will be updating their shareholders, too They include, among others: Miner Ferrexpo on Monday 13th January Recruitment giant PageGroup and specialist retailer Games Workshop on the 14th WPP and a pair of housebuilders, Persimmon and Bovis, on the 15th Primark owner Associated British Foods, Whitbread, Rio Tinto, retailer Halfords and another recruiter, Hays, on the 16th And Experian on Friday 17th But the biggest source of a fuss in the week ahead could be a full-year trading update from another house builder, Taylor Wimpey, on Tuesday 14th January

The firm should provide some insight into the UK’s housing market and economy, while from a stock market perspective it is currently the second-highest yielding stock in the FTSE 100, according to analysts’ consensus forecasts, trailing only Imperial Brands As we can see here, the shares have done very well over the past 12 months, buoyed by that yield – of which more shortly –, persistently low interest rates and hopes that a Boris Johnson-led Tory government will act to support the housing market, perhaps in the form of lower stamp duty When it comes to the trading statement, analysts will look towards four headline figures The first two are completions and average selling prices In 2018, Taylor Wimpey completed 15,275 houses at an average price of £302,000

Both are likely to have marginally increased in 2019 – and watch out for any guidance for this coming year The watch out for any comment on profits Analysts are looking for pre-tax income of £820 million, a fraction above £811 million in 2018, helped by increases in volumes and prices and a slowdown in cost inflation in the second half of 2019 Should CEO Pete Redfern make any comments on the 2020 outlook, bear in mind that the current consensus forecast is for a flat pre-tax profit of £820 million Finally, analysts will be watching out for reaffirmation of the company’s cash return policy

Taylor Wimpey is looking to return just over £600 million to shareholders for 2019 That equates to just over 18p a share and it is that sum which underpins the double-digit dividend yield on the stock Shareholders will also be looking toward Mr Redfern for any forecasts on cash returns for 2020, as the builder had a net cash balance sheet at the end of last year to the tune of £644 million Thank you for watching and I look forward to seeing you next time

Source: Youtube

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