Taylor Wimpey Earnings: Nervous Housing Market Sets Up Challenging 2023, but Shares Still Attractive

Taylor Wimpey executed strongly in 2022, delivering 14,154 home completions, underlying EBIT of GBP 923 million, inclusive of joint venture profits, and EPS of GBP 0.20—all broadly in agreement with our expectations for the no-moat stock. Strong average selling price, or ASP, and volume growth in 2022 reflected the buoyant market conditions that prevailed in the first nine months of 2022, representing the cyclical peak of the U.K.’s housing market. Taylor Wimpey’s EBIT margin firmed by 130 basis points year on year to 20.5% as ASP growth of approximately 4% headed off searing build cost inflation during the period. We lift our fair value estimate by 5% to GBX 190, to account for our improved near-term earnings forecast and a time value of money adjustment.