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frontdoor inc (FTDR)
NASDAQ:FTDR
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frontdoor
(NASDAQ:FTDR)
75Outperform
Positive Factors
Earnings Performance
Frontdoor announced strong fourth-quarter and full year 2024 results, materially beating estimates with earnings and cash flows at record levels.
Revenue Growth
Top-line growth should still be in the double digits this year and share buybacks should rise further.
Valuation
With the stock trading at only 14 times the 2025 EPS estimate, versus a historical average of 20 times, the sell-off was overdone and represents a good buying opportunity.
Negative Factors
Market Conditions
Guidance has been set conservatively given the tough environment, which could result in earnings beats.
Revenue Guidance
The stock traded down 19% likely due to the weaker-than-expected 2025 revenue guide.
frontdoor (FTDR) vs. S&P 500 (SPY)
Market Cap
$2.99B
Dividend YieldN/A
Average Volume (3M)939.82K
Price to Earnings (P/E)13.4
Beta (1Y)0.96
Revenue Growth3.48%
EPS Growth43.98%
CountryUS
Employees2,120
SectorConsumer Cyclical
Sector Strength56
IndustryPersonal Products & Services
Share Statistics
EPS (TTM)3.02
Shares Outstanding73,893,486
10 Day Avg. Volume942,587
30 Day Avg. Volume939,820
Financial Highlights & Ratios
PEG Ratio0.30
Price to Book (P/B)N/A
Price to Sales (P/S)1.54
Price to Cash Flow (P/CF)12.30
P/FCF Ratio11.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$53.50Price Target Upside32.16% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
frontdoor Business Overview & Revenue Model
Company DescriptionFrontdoor, Inc. provides home service plans in the United States. The company's home service plans cover the repair or replacement of principal components of approximately 20 home systems and appliances, including electrical, plumbing, water heaters, refrigerators, dishwashers, and ranges/ovens/cooktops, as well as electronics, pools, and spas and pumps; and central heating, ventilation, and air conditioning systems. It also offers ProConnect on-demand home services business and Streem, a technology platform that uses augmented reality, computer vision, and machine learning that helps home service professionals quickly and accurately diagnose breakdowns and complete repairs. The company serves homeowners under the American Home Shield, HSA, Landmark Home Warranty, OneGuard, Frontdoor, and Streem brands. The company was founded in 1971 and is headquartered in Memphis, Tennessee.
How the Company Makes MoneyFrontdoor makes money primarily through the sale of home service plans, which offer repair and replacement services for home systems and appliances. Customers pay a monthly or annual fee to subscribe to these plans, which cover the costs of repairs or replacements for specified items in their homes. The company's revenue model largely relies on these subscription fees, which provide a steady and recurring income stream. Additionally, Frontdoor may earn income from service fees charged for each service call or repair, as well as from partnerships with service technicians and contractors who perform the repair work. These partnerships help Frontdoor manage service delivery costs and maintain a network of qualified professionals to meet customer needs efficiently.
frontdoor Financial Statement Overview
Summary
Frontdoor demonstrates robust financial performance, with strong revenue growth, improving margins, and solid cash flow generation. The company's increased equity and strong ROE are positive indicators, though high leverage remains a concern.Income Statement
Frontdoor's income statement reflects solid revenue growth and improving profitability. The revenue grew by 3.54% from 2023 to 2024, which is a positive trajectory. The gross profit margin increased to 53.76% in 2024, showcasing cost efficiency. The net profit margin also improved to 12.75%, indicating stronger bottom-line performance. The EBIT and EBITDA margins have consistently improved, reaching 20.57% and 21.06% respectively, highlighting operating efficiency. Overall, the company shows robust growth and profitability trends.85
Very Positive
Balance Sheet
Frontdoor's balance sheet reveals a significant increase in stockholders' equity from $137 million in 2023 to $239 million in 2024, signaling improved financial stability. However, the debt-to-equity ratio remains high at 5.10, indicating substantial leverage. Despite this, the equity ratio improved to 11.34%, reflecting a stronger equity base relative to total assets. Return on equity (ROE) increased to an impressive 98.33%, driven by rising net income. While the improvements are notable, the high leverage poses a potential risk.70
Positive
Cash Flow
Frontdoor's cash flow statement shows a healthy increase in operating cash flow to $270 million in 2024, supporting the company's operational efficiency. The free cash flow grew by 35.29%, reflecting strong cash generation capabilities. The operating cash flow to net income ratio is 1.15, indicating good cash conversion efficiency. The free cash flow to net income ratio is 0.98, suggesting most earnings are converted into cash. While the cash flow metrics are strong, substantial financing cash inflows raise concerns about cash flow sustainability.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.84B | 1.78B | 1.66B | 1.60B | 1.47B | Gross Profit |
| 952.00M | 848.00M | 676.00M | 749.00M | 682.00M | EBIT |
| 357.00M | 267.00M | 154.00M | 240.00M | 215.00M | EBITDA |
| 408.00M | 311.00M | 153.00M | 232.00M | 231.00M | Net Income Common Stockholders |
| 235.00M | 171.00M | 71.00M | 128.00M | 112.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 436.00M | 325.00M | 292.00M | 262.00M | 597.00M | Total Assets |
| 2.11B | 1.09B | 1.08B | 1.07B | 1.41B | Total Debt |
| 1.22B | 610.00M | 627.00M | 644.00M | 993.00M | Net Debt |
| 798.00M | 285.00M | 335.00M | 382.00M | 396.00M | Total Liabilities |
| 1.87B | 953.00M | 1.02B | 1.07B | 1.47B | Stockholders Equity |
| 239.00M | 137.00M | 61.00M | 3.00M | -61.00M |
| Cash Flow | Free Cash Flow | |||
| 231.00M | 170.00M | 102.00M | 154.00M | 175.00M | Operating Cash Flow |
| 270.00M | 202.00M | 142.00M | 185.00M | 207.00M | Investing Cash Flow |
| -622.00M | -32.00M | -35.00M | -31.00M | -31.00M | Financing Cash Flow |
| 447.00M | -137.00M | -77.00M | -489.00M | -7.00M |
frontdoor Technical Analysis
Neutral
40.48
Price Trends
43.11
Negative
50.44
Negative
49.01
Negative
Market Momentum
-0.49
Negative
50.93
Neutral
73.59
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FTDR, the sentiment is Neutral. The current price of 40.48 is above the 20-day moving average (MA) of 39.17, below the 50-day MA of 43.11, and below the 200-day MA of 49.01, indicating a neutral trend. The MACD of -0.49 indicates Negative momentum. The RSI at 50.93 is Neutral, neither overbought nor oversold. The STOCH value of 73.59 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for FTDR.
frontdoor Risk Analysis
frontdoor disclosed 39 risk factors in its most recent earnings report. frontdoor reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
frontdoor Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $26.91B | 56.30 | 37.83% | 1.15% | 9.46% | 9.04% | |
75 Outperform | $2.99B | 13.38 | 125.33% | ― | 3.48% | 43.98% | |
75 Outperform | $11.45B | 22.49 | 32.22% | 1.52% | 2.11% | 0.05% | |
68 Neutral | $7.87B | 16.19 | 657.13% | 2.43% | 3.77% | -2.16% | |
60 Neutral | $6.78B | 11.63 | 3.24% | 4.20% | 2.36% | -21.91% |
* Consumer Cyclical Sector Average
Performance Comparison
FTDR
frontdoor
40.48
9.79
31.90%
HRB
H&R Block
58.81
13.35
29.37%
ROL
Rollins
55.47
11.77
26.93%
SCI
Service International
78.95
9.20
13.19%
frontdoor Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -29.19% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted several key achievements, including record gross margins, successful acquisition integration, and innovative service offerings. However, ongoing challenges in the real estate market and macroeconomic uncertainties such as inflation and tariffs pose significant hurdles. The company's strong financial performance and strategic initiatives in non-warranty services and member growth provide a positive outlook, but the impact of external economic factors remains a concern.Highlights
Record Gross Margin Improvement
Frontdoor's gross margin improved from an all-time low of 43% in 2022 to a record high of 54% in 2024, attributed to process improvement and business transformation initiatives.
Significant Stock Price Increase
The company's stock price increased by 137% from $24.15 in June 2022 to $57.17, demonstrating strong market confidence in its performance and strategy.
Successful 210 Homebuyers Warranty Acquisition
The acquisition of 210 Homebuyers Warranty added over 170,000 home warranty members and diversified Frontdoor's revenue streams with structural warranties, expected to deliver over $30 million in synergies by 2028.
Launch of AHS Video Chat with an Expert
The company introduced a new feature allowing members to connect with repair experts through the AHS app, enhancing customer service and differentiating its offerings.
Strong Financial Performance in 2024
For the full year 2024, revenue increased by 4% to $1.84 billion, and adjusted EBITDA reached an all-time high of $443 million, a 28% increase from the previous year.
Positive Momentum in D2C Member Growth
Direct-to-consumer member count grew by over 5% in the second half of 2024, with double-digit growth in units sold in the fourth quarter, driven by strategic discounts and marketing efforts.
Lowlights
Challenging Real Estate Market
The real estate channel faced significant challenges with existing home sales at a 40-year low, impacting the sales of home warranties in this channel.
Macroeconomic Uncertainties
Inflation, interest rates, and tariffs present ongoing challenges, with inflation expected to rise to mid-single digits in 2025, impacting cost management.
Stock Price Volatility
Despite strong financial performance, the stock faced market pressure during the investor day presentation, highlighting concerns about macroeconomic conditions.
High Cost of Service Requests
The cost per service request increased significantly due to inflation, with appliance costs up 12% and HVAC costs up 22%, challenging cost management strategies.
Company Guidance
During the 2025 Investor Day call, Frontdoor, Inc. provided an extensive guidance on its performance metrics and strategic priorities. The company reported a significant improvement in its gross margin, which rose from a historic low of 43% in 2022 to an all-time high of 54% by the end of 2024. This was accompanied by an increase in retention rates from 75.7% in 2022 to 78.5% in 2024. The acquisition of 210 Homebuyers Warranty added over 170,000 home warranty members and is expected to deliver more than $10 million in synergies in 2025, with a target run rate of $30 million by 2028. The company also highlighted its non-warranty business growth, reporting $107 million in revenue for 2024. For 2025, Frontdoor anticipates a revenue increase of approximately 10%, driven by realized price increases and volume growth, with projected gross margins of around 52% and an adjusted EBITDA margin of about 23%. The company plans to repurchase over $180 million worth of shares in 2025, reflecting its strong cash flow generation. These figures underscore Frontdoor's shift to a more proactive mindset and its positioning for long-term growth in both warranty and non-warranty services.frontdoor Corporate Events
Private Placements and FinancingM&A TransactionsBusiness Operations and Strategy
Frontdoor Expands with Major Acquisition and Financing
Positive
Dec 19, 2024
Frontdoor, Inc. announced the completion of its acquisition of 2-10 Home Buyers Warranty for $585 million, enhancing its customer base, revenue, and product portfolio. The acquisition aligns with Frontdoor’s strategic growth priorities by opening new sales channels and diversifying its offerings. Additionally, the company secured a $1.47 billion credit facility to finance the purchase and refinance existing debts, positioning itself for further corporate initiatives.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.