Taylor Wimpey’s woes, mixed fortunes on Wall Street

While Taylor Wimpey (LSE:TW.) is well-positioned for an uptick in demand if and when it comes, for the moment affordability concerns and worries about the impact of the imminent Budget have kept potential buyers on the sidelines.

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With the Bank of England in a similar wait-and-see mode on reducing interest rates, the immediate outlook is unlikely to change. A recent uptick in unemployment could sway the decision towards a December rate cut, but the challenges are clear. For Taylor Wimpey, the net private sales rate per outlet per week is at 0.63 compared to 0.71 in the corresponding period, the order book has 7,253 homes compared to 7,771 with a value of £2.12 billion versus a previous £2.21 billion.

Unsurprisingly, the group has simply reiterated its previous guidance for between 10,400 and 10,800 completions and operating profit of £424 million for the year as a whole. In the background, a short-term landbank of 75,000 homes and a strategic pipeline of 135,000 leaves Taylor Wimpey poised with its finger on the trigger, hoping for the much-awaited rebound in light of government reforms on the planning process.

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The group previously revealed a balance sheet which is in good shape and its commitment to paying investors to wait in the form of a generous dividend remains intact. The current yield of 8.8% is one of the most attractive on the London market, but the share price has laboured in the current environment.

A drop of 23% over the last year resulted in the group losing its place in the FTSE 100 index in September, and compares to a gain of 8.4% in its new home in the FTSE250. Even so, the cyclicality of the sector is well-recognised, as is the group’s potential to benefit from any recovery, such that the market consensus remains at a buy despite its current travails.

Market snapshot

US markets had mixed fortunes overnight, with the Dow Jones claiming a record closing high but with the Nasdaq slipping, as investors continued a measured rotation away from the AI trade to more value-based and traditional names which have to some extent been left behind by the breathless tech rally.

The lack of a strong tech focus which had previously been such a headwind, has helped the FTSE100 back into fashion after years in the investment wilderness. As the index continues to scale new highs, the previously unimaginable prospect of the index reaching 10,000 for the first time has come into view.

The constituents of the index have been in the right place at the right time. Haven-seeking investors have driven the gold price to record highs and brought other metals with them, lifting the mining sector. Increased geopolitical uncertainty and defence spending leaves that sector also firing, while the banks have been rerated and are enjoying a strong year on increased earnings and shareholder returns.

Another sprightly open was driven by the likes of SSE (LSE:SSE), whose shares rose by over 12% after revealing plans to invest £33 billion over the next five years in an attempt to grow earnings and dividends. Games Workshop Group (LSE:GAW) found new friends after a broker upgrade, while Burberry Group (LSE:BRBY) rose by more than 3% ahead of its interim results tomorrow.

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The gain for the premier index propels the FTSE100 to a gain of 21.4% in the year to date, let alone the additional bonus of an average 3.1% dividend yield, and within just 0.8% of the 10,000 level.

Of course, challenges will surface over the coming months. The impending Budget could well have a negative impact on consumer spending, the retailers and investor sentiment. That said, given that the constituents are estimated to earn 70% of their profits from overseas, especially from the US, the index could yet be set fair for a Santa rally which would cap off a hugely impressive year.