Downgrade: Here's How Analysts See Rocket Companies, Inc. (NYSE:RKT) Performing In The Near Term

The latest analyst coverage could presage a bad day for Rocket Companies, Inc. (NYSE:RKT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the eleven analysts covering Rocket Companies, is for revenues of US$7.4b in 2022, which would reflect a concerning 34% reduction in Rocket Companies' sales over the past 12 months. Per-share earnings are expected to jump 325% to US$0.51. Previously, the analysts had been modelling revenues of US$9.1b and earnings per share (EPS) of US$1.04 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Rocket Companies

The consensus price target fell 14% to US$11.00, with the weaker earnings outlook clearly leading analyst valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Rocket Companies, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$8.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Rocket Companies' past performance and to peers in the same industry. One thing that stands out from these estimates is that revenues are expected to keep falling until the end of 2022, roughly in line with the historical decline of 41% per annum over the past year. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.7% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Rocket Companies to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Rocket Companies' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Rocket Companies analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.