By the end of June, the Taylor Wimpey (LSE: TW) share price was barely changed from where it started 2024. This has led it to lag the FTSE 100 index by around 7%.
However, performance in the second half so far has been much more encouraging. The company’s value is up almost 11% in just a couple of weeks.
Will this momentum last? No one knows for sure. But here are several things for investors to ponder.
Big target
The arrival of a new government has given a real boost to housebuilding stocks and no wonder.
Earlier this month, new Chancellor Rachel Reeves set a target of building 1.5 million homes over the next five years. This would be achieved by reforming the country’s planning system and prioritising previously developed brownfield land and neglected ‘grey-belt’ land.
It’s easy to understand the market reaction to these plans. But hitting this target is easier said than done. There could be considerable local opposition for a start.
There’s the question of affordability too. A whole lot of building won’t matter if there’s a shortage of buyers. I’ll come back to this in a bit.
For now, confirmation of Keir Starmer and co’s plans in the King’s Speech on 17 July might provide another temporary boost.
Something I am more confident of is that demand for quality housing in the UK still exceeds supply. This makes for a solid long-term outlook for firms like Taylor Wimpey, in my opinion.
Results incoming!
The reaction to half-year numbers, due 31 July, is also worth noting.
When it last reported to the market in April, management declared that the Spring selling season was “progressing as expected” and that it had seen “continued market stability” helped by good mortgage availability and improving customer confidence.
At the time, full-year UK completions were anticipated to be between 9,500 and 10,000. Any improvement on this range — either on the day or later in the year — will go down well. Any reduction and we could see the opposite, especially as the shares already trade at a forward price-to-earnings (P/E) ratio of 19.
Rate cut on the cards
A third thing that could move the dial is a cut to interest rates. Confirmation that the Bank Of England believes inflation has been tamed will bring some relief to people who have struggled to obtain mortgages in recent years.
As things stand, it’s a question of ‘wait and see’. But a larger-than-expected first cut and/or suggestions of more in short succession could push analysts to adjust their earnings forecasts. This could make the current share price look cheap in time.
But, again, there’s an argument for thinking that some of this has already been factored in. And it could get nasty for holders if there’s yet another delay.
I’m positive
Taking the above into account, I’m cautiously optimistic on Taylor Wimpey in 2024. Minus any unpleasant surprises, I’m inclined to think that the second half will be (much) better than the first. I also think the shares could outperform the FTSE 100 for the year by the end of December.
If I didn’t already own rival Persimmon, I’d give serious consideration to adding this company to my portfolio.
