Wednesday preview: Fedspeak, UK homebuilders in focus

updated: 5 February 2019 at 3:09pm Author: Alexander Bueso

(Sharecast News) - The market spotlight on Wednesday will continue to be on the ongoing stream of corporate results being published on both sides of the Atlantic.
Nonetheless, speeches from US Federal Reserve chair, Jerome Powell, and his lieutenant, Randal Quarles, after the London market close, will be closely eyed for any policy implications.

A report on German factory sector orders in December is also likely to catch markets's attention.

Further afield, policymakers at the Polish and Thai central banks are set to meet to decide on interest rates.

Ahead on an interest rate decision on Friday, light vehicle sales and consumer price data for January in Russia are also set for release.

Redrow and Barratt Developments are among the companies scheduled to update investors on Wednesday, with both homebuilders set to post their latest half-year figures.

For the former, Numis has penciled-in earnings per share of 90.0p (consensus: 86.9p) and while the broker expects top-line growth to moderate and margins to plateau, on its forecasts Redrow will continue to be one of the quickest growing companies in its sector.

That, Numis said, was not sufficiently reflected in the shares' P/NTAV multiple.

On the other hand, in the shorter-term, analyst Chris Millington harboured some concerns around the company's exposure to higher-priced properties, which he said left it more exposed to the ups-and-downs of the second hand market.

"Until clarity emerges on this point, we see greater predictability in Barratt and Bellway which at their last updates were showing greater momentum and trade on comparable valuations."

Speaking of Barratt Developments, Numis is anticipating half-year EPS of 70.0p (consensus: 67.3p).

Markets' focus will be on management's assessment of market conditions and on Barratt's progress in improving its margins.

Over time, Numis's Chris Millington believes the group is capable of lifting its reported EBIT margins from 17.7% for the year to June 2018 towards 20%.

"Alongside 3-5% volume growth pa, means ythat Barratt has one of the strongest earnings stories in the sector, which is also supported by a 9.1% yield and a low P/NTAV valuation (1.32x vs the sector average of 1.5x."

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