Results: Frontdoor, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Shareholders of Frontdoor, Inc. (NASDAQ:FTDR) will be pleased this week, given that the stock price is up 12% to US$34.65 following its latest first-quarter results. Revenues were US$378m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.43, an impressive 124% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Frontdoor

Taking into account the latest results, the most recent consensus for Frontdoor from seven analysts is for revenues of US$1.83b in 2024. If met, it would imply an okay 2.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to rise 6.5% to US$2.49. Before this earnings report, the analysts had been forecasting revenues of US$1.83b and earnings per share (EPS) of US$2.32 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$41.20, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Frontdoor analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$33.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Frontdoor is an easy business to forecast or the the analysts are all using similar assumptions.

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 Frontdoor's revenue growth is expected to slow, with the forecast 2.9% annualised growth rate until the end of 2024 being well below the historical 6.6% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% 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. The consensus price target held steady at US$41.20, with the latest estimates not enough to have an impact on their price targets.

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 Frontdoor analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Frontdoor that you should be aware of.

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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.