Shareholders of Frontdoor, Inc. (NASDAQ:FTDR) will be pleased this week, given that the stock price is up 15% to US$44.00 following its latest second-quarter results. It looks like a credible result overall - although revenues of US$542m were in line with what the analysts predicted, Frontdoor surprised by delivering a statutory profit of US$1.18 per share, a notable 18% above expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, Frontdoor's six analysts are forecasting 2024 revenues to be US$1.84b, approximately in line with the last 12 months. Statutory per share are forecast to be US$2.68, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$1.83b and earnings per share (EPS) of US$2.50 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 15% to US$48.00. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Frontdoor analyst has a price target of US$56.00 per share, while the most pessimistic values it at US$41.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Frontdoor shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Frontdoor's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.8% growth on an annualised basis. This is compared to a historical growth rate of 6.3% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.6% per year. Factoring in the forecast slowdown in growth, it seems obvious that Frontdoor is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Frontdoor's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Frontdoor analysts - going out to 2026, and you can see them free on our platform here.
Even so, be aware that Frontdoor is showing 1 warning sign in our investment analysis , you should know about...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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