Edison Investment Research

Market Commentary - Housing, Infrastructure, Construction and Services

The news from housebuilders Redrow and Berkeley this morning regarding trading since the Referendum is positive; the former has released its full year results to end June 2016 and the latter a trading update to coincide with its AGM which takes place later today. Severfield also has its AGM later today and has told us that it is trading in line with expectations. The early conclusion is that, absent long term population decline in London as a consequence of Brexit, which could easily happen if financial services companies leave the capital as is likely without passporting, the housebuilders remain confident.

Market Commentary - Housing, Infrastructure, Construction and Services

As in previous weeks recently the week has started quietly with only Carillion providing new news today with the announcement that Centrica has appointed it preferred partner for a £90m, 5+2 year contract to provide wide ranging FM and project services. The housebuilders will be the main focus in the week ahead. Redrow’s Prelims will be released tomorrow and Berkeley Group will most likely update to coincide with its AGM that day. Barratt Developments will release its Finals on Wednesday. The housebuilders will not get it all their own way in terms of expected news this week, Severfield has its AGM tomorrow and is likely to update, Ashtead has it AGM and Q1 update on Wednesday and on Friday we will get news later in the day of the outcome of the Speedy Hire EGM

Busy summer at Airbus

Record breaking number of deliveries in August

In last week’s blog I highlighted that Boeing and Lockheed Martin had been busy over the traditionally quiet month of August. A recent Reuters interview with Airbus CEO Fabrice Bregier suggest that engineers in Toulouse have also been unusually industrious this summer. Airbus has not yet published official orders and deliveries data for August, but Bregier said “I can already tell you is that it will be the best month of August in Airbus’s history, in terms of the numbers of planes delivered”.

New tanker and fighter jet ready for take off

F-35 declared combat ready and KC-46 ready to enter production

August may traditionally be the month of days spent by the beach and long summer evenings, but it seems life has been somewhat busier at Lockheed Martin and Boeing in August 2016. Last month saw the companies achieve major milestones for the F-35A and KC-46 tanker respectively.  The F-35A has now reached Initial Operating Capability (IOC) and the KC-46 has been approved to enter production. These are significant achievements because the products have both had eventful development phases and both aircraft should be important drivers of profitability going forward, at not only the prime manufacturers but for suppliers as well, notably BAE Systems with its significant programme share.

Market Commentary - Housing, Infrastructure, Construction and Services

McCarthy and Stone provide the only sector-specific news this morning in a trading update covering the year to end August; full year results will be released on 15th November. Completions in the period were up 20%, ASP was up 8% so revenue rose by 31% to £635m. BUT it has broken ranks with its housebuilding peers today and reports that there are some difficulties emerging in the market which other housebuilders have not indicated.

UK economy and corporate profits: Refusing to follow forecasts

Since July, there have been over 250 UK corporate earnings reports or trading statements, which we have been tracking for any sign of Brexit-related weakness. Within these corporate filings we can find little evidence, in either outlook statements or in managements’ referendum commentary, to suggest a slowdown in trading is underway.

On the contrary, over 80% of company earnings reports indicate that trading is in-line with earlier expectations. Furthermore, 16% of companies report that trading is ahead of expectations against only 3% reporting that trading has fallen below expectations. In addition, recent data on house prices and manufacturing surveys seem to confirm that fears of a Brexit-induced slowdown in the UK have proved overblown, over the summer at least.

Market Commentary - Housing, Infrastructure, Construction and Services

The full year results from Alumasc, the building products company and a letter from Speedy Hire to its shareholders, ahead of the EGM on 9th September are released today. Carillion (5.8p), G4S (3.6p) and WYG (1.0p) all go XD today

Boeing struggling to meet 2016 orders target

Is the 777 going the way of the A330?

Aviation Week last week published data that suggest Boeing will struggle to meet its widebody order target in 2016. It appears the American aircraft manufacture is suffering from the same phenomenon as its European rival Airbus where sales of the legacy A330 dropped sharply once the newer and more fuel efficient A330neo was an option. Boeing has only booked 8 orders for the classic 777 in 2016, due in part to the re-engined 777X which is due to enter service in December 2019. So what is happening and is this cause for concern?

Market Commentary - Housing, Infrastructure, Construction and Services

It's getting a bit slippy out there!

The market is likely to be positive regarding the news today from HSS Hire and a little negative on Grafton which is a tad more cautious than it has been previously about the UK market, though not much different than Travis Perkins. Both companies have released in their Interim results this morning. Market conditions are weighing a little on progress in both companies but positive management actions are being taken to mitigate the adverse effects.

Market Commentary - Housing, Infrastructure, Construction and Services

Corporates in the HICS sector are light on reported news today, which is no bad thing. Tomorrow Nationwide tells us about August house price shifts in the UK and HSS Hire and Grafton release their half-year results and on Thursday Alumasc releases its interims. Friday last saw SIG gallop ahead rising 6.3% to 126.6p as news came out that Canadian company IKO Enterprises has raised its shareholding to just over 5%. There were few moves downwards on Friday with Carillion the main faller, it dipped 4% to 270p. It has faced substantial selling pressure since last Wednesday afternoon following results released that morning; volumes were much higher than normal.