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Broker views: Housebuilders and furniture

06 October 2017 14:13

Equity research analysts at Credit Suisse upgraded their investment rating on housebuilder Barratt Developments (LON:BDEV) to 'outperform' from 'neutral', believing the renewed focus on earnings margin will drive an 110bps increase in margins between FY17a-20e.

Specifically, the broker said: "We believe the Group now offers an attractive margin progression play and expect its renewed focus on driving EBIT margin will lead to a strong multiple re-rating as Group returns improve."

Credit Suisse lifted its earnings per share forecasts for 2018 and 2019 by 4% and 3%, respectively, and its target price to 702 pence per share (from 578 pence).

Elsewhere, Berenberg moderated its recommendation on DFS Furniture (LON:DFS) and moved to 'hold' rating (from 'buy') due to the lack of near-term catalysts and after highlighting that, while the UK upholstery market has recovered following a weak period from March to June, it remains in decline.

Despite the bank saying that DFS "is well positioned to both take market share and protect profitability" it added:

"In light of 'modest' profit growth guidance, near-term focus on balance sheet deleverage and tough comparatives in H1, we believe the shares offer little upside in the near term."

Target trimmed to 230 pence a share from 245 pence.

At 2:13pm:

(LON:BDEV) Barratt Developments PLC share price was +9.5p at 656p

(LON:DFS) DFS Furniture Plc share price was -5.25p at 210.25p

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