These Analysts Just Made An Incredible Downgrade To Their Rocket Companies, Inc. (NYSE:RKT) EPS Forecasts

Today is shaping up negative for Rocket Companies, Inc. (NYSE:RKT) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the eight analysts covering Rocket Companies, is for revenues of US$5.4b in 2023, which would reflect a concerning 34% reduction in Rocket Companies' sales over the past 12 months. Statutory earnings per share are supposed to crater 92% to US$0.075 in the same period. Before this latest update, the analysts had been forecasting revenues of US$6.0b and earnings per share (EPS) of US$0.41 in 2023. 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

It'll come as no surprise then, to learn that the analysts have cut their price target 8.5% to US$7.68. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Rocket Companies analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$4.50. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 28% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 18% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Rocket Companies is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Rocket Companies. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Rocket Companies.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Rocket Companies going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.