frontdoor, inc. (NASDAQ:FTDR) shareholders are probably feeling a little disappointed, since its shares fell 4.3% to US$55.64 in the week after its latest yearly results. frontdoor reported in line with analyst predictions, delivering revenues of US$1.5b and statutory earnings per share of US$1.31, suggesting the business is executing well and in line with its plan. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from frontdoor's eight analysts is for revenues of US$1.64b in 2021, which would reflect a solid 11% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to step up 19% to US$1.56. Before this earnings report, the analysts had been forecasting revenues of US$1.62b and earnings per share (EPS) of US$1.65 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 13% to US$60.75, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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. The most optimistic frontdoor analyst has a price target of US$65.00 per share, while the most pessimistic values it at US$52.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting frontdoor's growth to accelerate, with the forecast 11% growth ranking favourably alongside historical growth of 8.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 22% next year. So it's clear that despite the acceleration in growth, frontdoor is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for frontdoor. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that frontdoor's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for frontdoor going out to 2025, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for frontdoor (1 shouldn't be ignored) you should be aware of.
This article by Simply Wall St is general in nature. 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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