Bellway full year earnings: Will the UK housebuilder deliver amidst market challenges?​

Bellway full year earnings: Will the UK housebuilder deliver amidst market challenges?

Bellway PLC, one of the UK's largest housebuilders, is scheduled to release its full-year earnings report on 15 October 2024. As the UK property market grapples with high but now falling interest rates amid uncertainties surrounding the end of the month UK budget, investors are keen to see how Bellway has navigated these challenges.

Bellway's trading update: A glimpse into full-year performance

​Bellway's trading update in August provided some insights into its expected full-year results. The company reported completing 7,654 new homes in the financial year ending 31 July 2024, a 30% decrease from the previous year's 10,945 homes.

​Alongside the significant dip in completions, Bellway's average selling price also saw a slight decrease from £310,000.00 for its new homes a year ago, to £308,000.00, still slightly ahead of previous guidance as is the case for completions.

​Revenue for the full year is anticipated to be around £2.35 billion, down from the previous year’s £3.4 billion. This 30% decline reflects the challenging market conditions faced by UK housebuilders amid high interest rates and increased building material costs.

​Bellway's forward order book as of 31 July 2024, rose from 4,224 homes in the previous year to 5,144 homes, with a value of £1.4 billion. This 21% increase reflects the improvement in trading and growth in outlet numbers.

​Market expectations for Bellway's full-year results

​Analysts are cautiously optimistic about Bellway's full-year results, given the company's resilience in a challenging market. The consensus estimate for Bellway's revenue stands at £2.3 billion but for its pre-tax profit to decline 59% to £218 million year-over-year.

​Earnings per share are expected to come in at around 128p, which would represent a 61% decrease from the previous year's 326.5p. This reduction reflects the impact of rising costs and slightly lower completions.

​The market will be particularly interested in Bellway's outlook for the coming year. With interest rates falling and the upcoming UK budget, investors will be looking for guidance on expected completions, average selling prices, and order book trends.

​Analysts will also be keen to hear about Bellway's take on the UK government’s plans to reform the planning system to support a marked increase in the supply of new homes across the country.

​Bellway Smart Score and analyst rating

​Bellway has a Smart Score of 10 ‘Outperform’ and is rated as a ‘strong buy’ by analysts with 6 ‘buy’ (as of 14/10/2024).

​According to LSEG Data & Analytics, analysts rate the Bellway share as a ‘buy’ with 3 ‘strong buy’, 7 ‘buy’ and 4 ‘hold’ (as of 14/10/2024).

Factors influencing Bellway's performance

​Several factors have influenced Bellway's performance over the past year and will continue to shape its outlook:

1. ​Interest rates: The Bank of England's successive interest rate hikes have increased mortgage costs, potentially dampening demand for new homes but now that UK interest rates are falling again, mortgage costs are diminishing with house prices already seeing their fastest annual house price growth in two years, according to the September Nationwide House Price Index.
2. ​Cost inflation: High material and labour costs have put pressure on margins across the housebuilding sector.
3. ​Government policies: Planning reforms could impact future demand and supply dynamics.
4. ​Economic uncertainty: Consumer confidence and spending power have been affected by inflationary pressures and economic concerns but with the former gradually approaching the Bank of England’s 2% inflation target the situation may improve towards the latter part of 2024 and in 2025.

What to watch in Bellway's earnings report

​When Bellway releases its full-year results, investors should pay close attention to several key metrics:

1. ​Final dividend: Bellway's dividend policy will be of interest, given the challenging market conditions.
2. ​Margin performance: How well the company has managed cost pressures will be reflected in its profit margins.
3. ​Land bank: The size and quality of Bellway's land bank will provide insights into its future growth potential.
4. ​Cash position: A strong cash position would indicate Bellway's ability to weather ongoing market challenges.

Bellway technical analysis

​The Bellway share price, up 19% year-to-date, has been range trading below its September 3,222p peak for over a month with the May-to-July highs at 2,904p-to-2,540p expected to offer support in case of a dip being seen.

​Bellway daily candlestick chart

​While no bearish Bellway share price reversal takes it to below the 2,430p mid-April low, the long-term uptrend will remain intact with a rise above the 3,222p September high engaging the January 2022 peak at 3,442p.

​Bellway monthly candlestick chart

How to trade Bellway shares

​As an investor, you have several options for trading Bellway shares based on the upcoming earnings report:

1. ​Research Bellway and the UK housebuilding sector thoroughly.
2. ​Decide whether you want to trade or invest in Bellway shares.
3. ​Open an account with a reputable broker like IG.
4. ​Search for Bellway shares on the trading platform.
5. ​Place your trade based on your analysis and risk tolerance.

​Remember, spread betting and CFD trading allow you to speculate on both rising and falling share prices, while share dealing involves buying and holding the actual shares.

​Always consider the risks involved and never invest more than you can afford to lose. Bellway's earnings report could lead to significant share price movements, so it's crucial to have a solid risk management strategy in place.