On Tuesday, Truist Securities updated its outlook on Frontdoor Inc. (NASDAQ:FTDR) shares, increasing the price target to $58 from the previous $56, while retaining a Buy rating on the stock. The adjustment follows Frontdoor's third-quarter performance and revised guidance, which led to an increased earnings per share (EPS) forecast for 2024.
The analyst at Truist Securities has adjusted the 2024 EPS estimate to $3.20, up from the prior forecast of $2.83, citing the company's strong performance in the third quarter and its updated guidance. However, the EPS forecast for 2025 remains unchanged at $2.95.
The new price target of $58 is based on the premise that Frontdoor's shares will trade at 11.5 times the firm's 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast. This valuation multiple is still considered to be below the company's historical average, suggesting a conservative approach to the stock's potential.
The firm also indicated that it plans to revise its financial model to account for the expected acquisition of 2-10, details of which will be shared during Frontdoor's Investor Day in February. The impact of this acquisition will be factored into Truist Securities' analysis at that time.
The recent update from Truist Securities reflects a positive stance on Frontdoor Inc.'s prospects, backed by solid quarterly results and a strategic acquisition on the horizon. The company's stock will be closely watched as it approaches its Investor Day, where further insights into its financial strategies and growth plans are anticipated.
In other recent news, Frontdoor Inc. reported significant growth in its third quarter, with a 3% increase in revenue to $540 million and a 40% rise in net income to $100 million. The company's adjusted EBITDA also saw a 29% increase to $165 million, while gross margins reached a record high of 53%.
Despite a challenging real estate market, Frontdoor anticipates a full-year revenue of approximately $1.83 billion, marking a 3% increase, and an adjusted EBITDA of around $430 million.
The company also completed a $400 million share repurchase program ahead of schedule and initiated a new one worth $650 million. Additionally, the acquisition of 2-10 Home Buyers Warranty is nearing completion and is expected to add over $100 million in revenue from the on-demand business.
Goldman Sachs (NYSE:GS) recently updated its outlook on Frontdoor, increasing the price target to $46.00 from the previous $41.00 while maintaining a Sell rating. The firm noted that Frontdoor's recent results have consistently exceeded margin expectations. However, the decision to maintain a Sell rating is based on a comparative risk/reward analysis within their broader coverage universe.
Frontdoor's future strategy will focus on improving targeting, building consideration, increasing leads, and optimizing discount strategies. The company's next Investor Day, scheduled for February 27, 2025, is expected to provide further insights into the company's performance and strategic direction.
InvestingPro Insights
Frontdoor Inc.'s recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 16.52 suggests it's trading at a relatively modest valuation compared to its earnings, which is particularly noteworthy given its strong recent performance. This is further supported by an InvestingPro Tip indicating that Frontdoor is trading at a low P/E ratio relative to its near-term earnings growth.
The company's financial health appears robust, with an operating income margin of 17.18% for the last twelve months as of Q3 2024. This solid profitability is complemented by another InvestingPro Tip highlighting Frontdoor's high return over the last year, with a remarkable 56.92% price total return over the past year.
Frontdoor's stock price is currently trading near its 52-week high, as noted in an InvestingPro Tip, which aligns with Truist Securities' bullish outlook and increased price target. The company's strong momentum is further evidenced by its 52.76% price total return over the last six months.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 11 more tips available for Frontdoor Inc. These could provide valuable context for understanding the company's position in the market and its potential for future growth.
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