Davy upgrades Persimmon on 'impressive' Covid response

Davy upped its stance on shares of housebuilder Persimmon to ‘neutral’ from ‘underperform’ on Monday following the company’s "impressive" response to the Covid-19 crisis.

It said Persimmon has driven the best operational rebound post-Covid of any builder in the sector.

"This had led an upgrade to our already reasonably bullish volume outlook, which we had for the sector generally, and we upgrade the stock," it said.

Davy said the company - whose interim results are due on Tuesday - impressed both it and markets generally by being the first UK builder back to 100% run rate of production post the March-May Covid lockdown and social distancing requirements.

The upshot of this performance means Davy has upgraded its volume forecasts on the company for 2020 by around 4%. It now expects approximately 13,100 units in the full year, down only 17.5% compared to 2019. Davy’s operating profit forecast has also increased by 4% to £759m, leaving it 5% ahead of current consensus numbers.

Davy said these upgrades, "while small and 2020-specific", are likely to be the only upward move it makes in the sector around summer announcements, which have generally disappointed on both volume and margin.

Davy, which has a price target of 2,380p on Persimmon, said that with operations returning to normal, the focus will shift back to shareholder returns in the next six months.

At 1040 BST, the shares were up 1.9% at 2,581.82p.