Skanska could benefit from lower inflation
The summer rally on the stock markets led by the S&P500 continues. Overall, slightly declining inflation figures mean that long-term investors are mainly looking for stocks in defensive sectors in companies that are deemed to have a high long-term dividend pay-out capacity.
The summer rally on the stock markets
led by the S&P500 continues. Overall, slightly declining inflation figures
mean that long-term investors are mainly looking for stocks in defensive sectors
in companies that are deemed to have a high long-term dividend pay-out
Skanska is not a defensive stock. However, the Group offers a financially strong position and a well-diversified construction and property development business in the US, UK, the Nordic region, and Eastern Europe. This structure has proven to be well suited for a stable level of dividends to shareholders over several years. Skanska declared a dividend of SEK 10 per share for FY 2021. Based on this, the share gives a yield of about 5.8%.
Skanska shares are sensitive to interest rates due to their exposure to the value of completed properties and investors' yield requirements on these. In addition, construction costs have risen sharply this year due to rising input prices on everything from rebar (steel) to sawn wood products. Since July, a reverse downward trend on these input goods seems to have started. The supply of sawn timber has increased significantly, which should have a dampening effect on further price developments.
The combination of slightly lower interest rates and construction costs could benefiting Skanska's business. Earlier this year, rising construction costs triggered at least one Swedish property company to put new production projects on hold.
Skanska’s shares rose sharply after the Q2 report on 21 July, which was better than expected. This was particularly true for the US business and the order intake at the group level, which is a leading indicator for future revenues and earnings. Since then, the Skanska share has moved relatively sideways around the same level of about SEK 173 that was last reached on June 3, where yesterday’s last quote was SEK 171. If the current trend of rebounding interest rates and input price levels continues, Skanska shares could be able to recover further.
The full name for abbreviations used in the previous text:
EMA 9: 9-day exponential moving average
Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.
MA20: 20-day moving average
MA50: 50-day moving average
MA100: 100-day moving average
MA200: 200-day moving average
MACD: Moving average convergence divergence
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