As the FTSE 100 fliesto fresh highs the following two companies have issuedpromisingtrading updates. Could theyhelp you chase the market even higher?
Safe as houses?
Many expect this to be a tough year for the housebuilders, as Brexit uncertainty and the threat ofrising interest rates threatento knock buyer confidence. Personally, I think the dangerhas been overblown, given the intense UKhousing shortage, andthe recent sector sell-off could prove a buying opportunity.
Housebuilder Persimmon (LSE: PSN) has scattered the sceptics this morning by reporting an 8% rise in 2016 revenues to 3.14bn, with new home volumes up 4.1% to 15,171, making an extra 599 completions. The groups average selling price increased by 4% from 199,127to 206,700. Healthy customer demand, low mortgage rates, and the attraction of buying a new-build are all sustaining sales.
Room for development
Growth prospects lookpromising, with Persimmon opening 255 new development sites across the UK during the year and acquiring18,700 plots of new land in 83 locations. Itscash balance at 31 December stood at a healthy 913m, up from 570m in 2015.
Markets welcomed the update with the stock up 4% in early trading, but it wasnt all good news. That 8% year-on-year revenue growth was down from the 12% in the first half of the year.Annual sales growth for the second half slowed to 15% from 17% in the first half. Management also says it remains mindful of the impact of Brexit.
These are still attractiveresults, especially from a cash-rich company thats trading at an affordable-looking 10.46 times earnings, and yielding 5.89%. Persimmon has boostedrival housebuilders, with Barratt Developments and Taylor Wimpey uparound 2% this morning. The sector appears to be standing on firm ground.
Construction and civic engineering firm Costain Group (LSE: COST) drewa less excitedresponse, with the share price clicking up just 0.91% sofar. Itsyear-end update shows the company continuing to perform solidlyand expectingto deliver full-year results in line with the boards expectations.
Costain saidits major customers are spending billions of pounds upgrading and renewing the UKsenergy, water and transportation infrastructures, helping it securea string of new contract wins during the second half of the year. These include the High Speed 2South Enabling Works and the Area 14 Maintenance commission for Highways England.
This helped maintain the order book at arecord 3.9bn, while secured revenues for 2017 rose slightly to 1.2bn, up from 1.1bn in 2016. Its preferred bidder position tops 500m and it boasts a strong net cash position of 100m. This morning,Transport for London announceda 500m deal which will seeCostain carry out major road improvement projects over the nextfour years alongside Morgan Sindall and Skanska.
Costainhas rallied strongly from itspost-Brexit slump but todays muted market response suggests a lack of excitement over this steady state stock. Its valuation of 14.22 times earnings and 3.02% yield also look steady, with Brexit fallout the only concern. However, forecast earnings per share (EPS) growth of 15% in 2017 adda note of excitement, putting the yield at4.1%. Costaincertainly looks to be on the right road.
The doom-mongers said Brexit would be a disaster for the UK, until the FTSE 100 surprised everybody by rebounding to new highs.
However, this is still a phoney war and the turbulence may return with a vengeance once Prime Minister Theresa May triggers Article 50.
This BRAND NEW special Motley Fool report sets out exactly what Brexit means for your portfolio, and how you can take advantage by picking up top company stocks at bargain basement prices.
Don’t fret about Brexit any longer but click here to read this no obligation report. It will be yours in moments and won’t cost you a penny.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.