BKW – Morgans rates the stock as Hold

Morgans reviews Brickworks ahead of the company’s FY20 result for the July year-end on September 24.

The company’s last trading update was for the four months February to May. The broker explains US building products peer updates showed a sequential improvement in sales from April to June. As a result, underlying sales volumes should have improved for the company  over June/July. However, Australian new residential construction remains soft.

Morgans raises underlying earnings (EBIT) estimates for FY20, FY21 and FY22 by 1.4%, 6.9% and 3.6%, respectively. This is due to the stronger-than-expected recent recovery in US residential construction activity and benefit of cost saving initiatives.

The analyst suggests the company’s dividend yield of 3.2% and property tailwinds are likely to provide continued valuation support.

The Hold rating is unchanged and the target price is increased to $18.24 from $13.56.

Sector: Materials.

Target price is $18.24.Current Price is $18.10. Difference: $0.14 – (brackets indicate current price is over target). If BKW meets the Morgans target it will return approximately 1% (excluding dividends , fees and charges – negative figures indicate an expected loss).

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