Investing.com — Shares of Taylor Wimpey (LON:TW) fell over 3% on Thursday after it flagged concerns over rising costs, particularly in the context of supplier pricing adjustments to reflect higher input costs.
In its trading update, Taylor Wimpey reported a decline in total completions in 2024 to 10,593, down from 10,848 in 2023.
The UK net private reservation rate also fell, reflecting a weaker sales environment. “We remain confident in the attractive medium and long term fundamentals of the sector and are well placed to play our part in addressing the significant undersupply of UK housing,” said Jennie Daly, chief executive at Taylor Wimpey.
The company’s order book at year-end stood at £1,772 million, encompassing 7,312 homes, an increase from the previous year.
This positions Taylor Wimpey favorably for volume growth in 2025, dependent on evolving mortgage rates and buyer behavior.
While the company’s FY24 EBIT is expected to align with market expectations, concerns are raised regarding the FY25 consensus, which may face downward pressure, as per analysts at Jefferies.
The analysts identify pricing versus cost dynamics as the key challenge for margins, even though the group has signaled confidence in growing volumes due to its strong order book and land pipeline.
In regions such as the South of England, affordability challenges and supplier price increases are contributing factors. Gross margins for 2024 are expected to be approximately 19%, reflecting these cost dynamics.
“We have seen an encouraging level of enquiries at the start of the year, however it is too early to gauge customer behaviour for 2025,” the company said.
Jefferies also observes that Taylor Wimpey’s stock trades at a 13% discount to price/net tangible asset value, suggesting that the current valuation may already reflect these challenges.
The stock’s attractive 8% dividend yield is noted as a potential offset to investor concerns. However, Jefferies indicates that the narrative for Taylor Wimpey now hinges on macroeconomic momentum, which is critical for driving confidence in future margin recovery and improvement.