On Thursday, CFRA analyst adjusted the investment outlook for Taylor Wimpey (LON:TW) Plc shares (TW/:LN) (OTC: TWODF), downgrading the stock from Buy to Hold and revising the price target downward to GBP1.20 from the previous GBP1.90. The adjustment reflects a cautious stance on the company's near-term prospects amid the current economic environment.
Taylor Wimpey reported total group completions of 10,593 for the year 2024, a figure that slightly exceeded the projected range of 9,500 to 10,000 units. This performance was coupled with an average selling price in the UK of GBP319k in 2024, which remained relatively stable compared to GBP324k in 2023.
Despite the stable selling prices and better-than-expected completions, CFRA expressed concerns about the impact of the ongoing household budget constraints on Taylor Wimpey's future performance. While the company's current order book indicates potential volume growth into 2025, there are worries that increasing build costs could limit margin expansion in the coming year.
In his statement, analyst highlighted the company's well-located landbanks as a justification for a price-to-earnings (P/E) ratio of 12.0x, slightly above the industry forward average of 11.5x. However, the analyst maintained the 2024 earnings per share (EPS) estimate at GBP0.10 and reduced the 2025 EPS forecast to GBP0.10 from GBP0.12.
The downgrade to a Hold rating by CFRA suggests that the firm believes the risks facing Taylor Wimpey now outweigh potential benefits, prompting investors to maintain a more conservative approach towards the stock.
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