What to Expect from Taylor Wimpey’s Upcoming Earnings

​​​What to Expect from Taylor Wimpey’s Upcoming Earnings

​Homebuilder Taylor Wimpey is set to report its 2023 annual results on Wednesday, providing a fresh look into the state of the UK housing market.

​The developer’s update on current trading and future prospects will be highly anticipated given recent signs of improving activity as mortgage rates ease back from 2022 highs. It is expected to report revenue of £3.5 billion and operating profit of £464 million.

​Industry data has shown momentum building in UK housing, evidenced by metrics like mortgage approvals and housing starts. This bodes well for Taylor Wimpey’s pipeline and demand outlook. However, its 2023 figures are still expected to mark a steep decline versus the prior year period.

​In its January trading statement, Taylor Wimpey provided several key performance indicators that limit the potential for major surprises in upcoming results. Consensus estimates point to revenue plunging over 20% year-over-year to around £3.4 billion. Adjusted gross profit could sink nearly 40% to approximately £690 million, with adjusted gross margin dipping to 20%.

​Guidance for adjusted operating profit, including joint ventures, of £440-470 million implies the operating margin may land close to 13.5%. This would represent a significant contraction from 2022’s margin near 21%, reflecting Taylor Wimpey’s exposure to the normalisation in the housing market.

​Beyond the rearview results, the homebuilder’s expectations for 2024 and commentary on market conditions, pricing trends, cost inflation and other variables will be critical. Signs of stabilising margins and upbeat forward guidance would likely boost investor sentiment.

​The UK’s housing sector stands at a potential inflection point as headwinds from rising interest rates and broader economic uncertainty may finally be abating. Taylor Wimpey’s outlook will provide meaningful clues on how developers see the environment evolving.

​With mortgage rates appearing to peak and recessionary fears fading, housing stocks like Taylor Wimpey could be poised for upside. But execution risks remain, and the developer’s guidance must confirm stabilisation for the recent optimism to be justified. Its upcoming earnings will give fresh insight into the key drivers that may determine whether homebuilders can rebound.

​Technical analysis on Taylor Wimpey share price

​Taylor Wimpey’s share price, which is down around 2.5% on Monday as UK housebuilders are investigated over possible information-sharing regarding the quality and supply of new homes by the country’s watchdog, has been little changed since December.

​The Taylor Wimpey share price has been capped by a previous major support zone which consists of the December 2020 to October 2021 lows. Since December this area has been acting as a resistance zone with forays to one-year highs stalling at the December to February 150.40p to 150.60p region.

​Taylor Wimpey Weekly Chart

​Even though the Taylor Wimpey share price has been range bound since December of last year, it remains within a medium-term uptrend, even if short-term it may be slipping back towards its January and mid-February lows at 104.95p to 139.85p below which meanders the 200-week simple moving average (SMA) at 136.10p.

​Taylor Wimpey Daily Chart

​Immediate resistance can be spotted along the 55-day SMA at 144.45p as well as at last week’s 148.35p high. This will need to be exceeded for the 150p region to be back in focus.

​Currently it looks improbable that the recent highs at 150.40p to 150.60p will be bettered anytime soon.

​A potential slip through the 200-week SMA at 136.10pm may lead to the May 2023 high at 132.05p being revisited.

​Analysts recommendations and IG sentiment

​Fundamental analysts are rating Taylor Wimpey as between a ‘buy’ and a ‘hold’ with Refinitiv data showing 5 strong buy, 5 buy and 7 hold - with the mean of estimates suggesting a long-term price target of 153.57 pence for the share, roughly 8% above the share’s current price (as of 26 February 2024).

​IG sentiment data shows that 85% of clients with open positions on the share (as of 26 February 2024) expect the price to rise over the near term, while 15% of clients expect the price to fall. Trading activity this month shows 51% of sells and this week 70% of buys. This number needs to be taken with a pinch of salt, though, as today is only the first trading day of the week.