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Category: Stock Market and Frontdoor
Date: 7 November 2019 Stock Price: $44.64 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Frontdoor a company that serves more than two million customers through a network of over 16 contractors that employ over 45 000 technicians
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About Frontdoor
Frontdoor is a company that’s obsessed with taking the hassle out of owning a home. With services powered by people and enabled by technology, it is the parent company of four home service plan brands: American Home Shield, HSA, Landmark and OneGuard. Frontdoor serves more than two million customers across the U.S. through a network of more than 16,000 pre-qualified contractor firms that employ over 45,000 technicians. The company’s customizable home service plans help customers protect and maintain their homes from costly and unexpected breakdowns of essential home systems and appliances. With more than 45 years of experience, the company responds to over four million service requests annually (or one request every eight seconds).
Overview of Frontdoor's 3rd quarter 2019 earnings report
The data below refers to the most recent quarter unless specified otherwise
- Revenue: $407 million (up from $377million from the same quarter of the previous year)
- Revenue increased by 8% over the last 12 months
- Cost of services rendered: $201 million (down from $202 million for the same quarter of the previous year)
- Cost of services rendered declined by -0.5% over the last 12 months
- Cost of services rendered declined by -0.5% over the last 12 months
- Net income: $61 million (up from $49 million for the same quarter of the previous year)
- Diluted earnings per share: $0.72 (up from $0.58 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 84.9 million (up from 84.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $425 million
- Cash and cash equivalents per share: $5
- Cash and cash equivalents makes up 11.2% of Frontdoor's market capital
- Cash and cash equivalents makes up 34.9% of Frontdoor's total assets
- Cash generated from operations (for the 9 months): $154 million
- Cash generated from operations per (for the 9 months): $1.81
Frontdoor's management commentary on their 3rd quarter 2019 earnings and guidance
MEMPHIS, Tenn.--(BUSINESS WIRE)--Frontdoor, Inc. (NASDAQ: FTDR), the nation’s leading provider of home service plans, today announced third-quarter 2019 results.
“Frontdoor delivered solid third quarter financial results as we continue to execute our cost reduction and process improvement initiatives,” said Chief Executive Officer Rex Tibbens. “Looking forward, we believe we still have a tremendous opportunity to improve our customer service experience and customer retention, leverage our investments in technology, and increase our revenue trajectory. We are also very excited about launching our On-Demand platform in the fourth quarter of 2019, which will be a transformational step in our company’s evolution.”
“We have meaningfully improved our financial position since the Spin-off in October last year,” said Chief Financial Officer Brian Turcotte. “The fundamentals of our overall business remain strong, and we’re increasing our business investment in the fourth quarter to drive growth into 2020.”
“Frontdoor delivered solid third quarter financial results as we continue to execute our cost reduction and process improvement initiatives,” said Chief Executive Officer Rex Tibbens. “Looking forward, we believe we still have a tremendous opportunity to improve our customer service experience and customer retention, leverage our investments in technology, and increase our revenue trajectory. We are also very excited about launching our On-Demand platform in the fourth quarter of 2019, which will be a transformational step in our company’s evolution.”
“We have meaningfully improved our financial position since the Spin-off in October last year,” said Chief Financial Officer Brian Turcotte. “The fundamentals of our overall business remain strong, and we’re increasing our business investment in the fourth quarter to drive growth into 2020.”
Third-quarter 2019 revenue increased eight percent over the prior year period. Renewal revenue increased 11 percent, primarily driven by growth in the number of home service plans and improved price realization. First-year real estate revenue decreased two percent as improved price realization was more than offset by a decline in new sales. First-year direct-to-consumer revenue increased six percent, primarily due to growth in new sales that was mostly driven by increased investments in marketing.
Third-quarter 2019 net income was $61 million, or diluted earnings per share of $0.72, versus $49 million in third-quarter 2018, or diluted earnings per share of $0.58. Third-quarter 2019 net income included a $21 million favorable impact from higher revenue conversion(3), an $11 million decrease in contract claims cost, and $8 million of lower Spin-off charges versus the prior year. These benefits were partially offset by a $14 million increase in selling and administrative expenses, an $8 million increase in interest expense related to the debt offering completed in conjunction with the Spin-off and a $5 million increase in income taxes.
Updated Full-Year 2019 Outlook
Third-quarter 2019 net income was $61 million, or diluted earnings per share of $0.72, versus $49 million in third-quarter 2018, or diluted earnings per share of $0.58. Third-quarter 2019 net income included a $21 million favorable impact from higher revenue conversion(3), an $11 million decrease in contract claims cost, and $8 million of lower Spin-off charges versus the prior year. These benefits were partially offset by a $14 million increase in selling and administrative expenses, an $8 million increase in interest expense related to the debt offering completed in conjunction with the Spin-off and a $5 million increase in income taxes.
Updated Full-Year 2019 Outlook
- Revenue is now anticipated to be in the range of $1.36 billion to $1.37 billion;
- Gross profit margin is now anticipated to be in the range of 49 to 50 percent;
- Adjusted EBITDA(2) is now anticipated to be in the range of $295 million to $300 million;
- Capital expenditures are now anticipated to be in the range of $25 million to $30 million; and
- Annual Effective Tax Rate is anticipated to remain at approximately 25 percent.
Frontdoor (NASDAQ: FTDR) stock price history
The image below, obtained from Google, shows the stock price history of Frontdoor (NASDAQ: FTDR) since their listing in September 2018. And its been a decent time for Frontdoor stockholders. At listing it was trading around $37 a stock and its currently trading at $44.64. That's a return of 20.6% provided to Frontdoor stockholders in just over a year.
Frontdoor is trading at closer to its 52 week high of $53.30than it is to its 52 week low of $20.66 which is a clear indication that the short term sentiment and momentum of Frontdoor stock is positive.
Frontdoor is trading at closer to its 52 week high of $53.30than it is to its 52 week low of $20.66 which is a clear indication that the short term sentiment and momentum of Frontdoor stock is positive.
Recent coverage of Frontdoor
The extract below shows recent coverage of Frontdoor as obtained from TheStreet.com
Today, Frontdoor (NASDAQ:FTDR), the country's leading provider of home service plans, will hold Good Day 2019, a company-wide day of service focused on giving back to communities where its employees live and work. The event comes just days after Frontdoor celebrated its one-year anniversary as an independent, publicly traded company. Good Day 2019 will include more than 30 group projects involving over 1,000 employees in six cities, as well as numerou s individual service projects by field-based employees from across the country. Employees from each of the company's four brands will take part: American Home Shield, HSA, Landmark and OneGuard. "Our employees are extremely passionate about serving others, and this extends beyond the great work they do every day to serve our customers," said Jen Alessandra, chief people officer for Frontdoor. "Today is about Bringing the Good, and we're excited to be putting our energy into action by helping some remarkable and diverse organizations serve those in need."
Today, Frontdoor (NASDAQ:FTDR), the country's leading provider of home service plans, will hold Good Day 2019, a company-wide day of service focused on giving back to communities where its employees live and work. The event comes just days after Frontdoor celebrated its one-year anniversary as an independent, publicly traded company. Good Day 2019 will include more than 30 group projects involving over 1,000 employees in six cities, as well as numerou s individual service projects by field-based employees from across the country. Employees from each of the company's four brands will take part: American Home Shield, HSA, Landmark and OneGuard. "Our employees are extremely passionate about serving others, and this extends beyond the great work they do every day to serve our customers," said Jen Alessandra, chief people officer for Frontdoor. "Today is about Bringing the Good, and we're excited to be putting our energy into action by helping some remarkable and diverse organizations serve those in need."
Frontdoor (NASDAQ: FTDR) latest stock valuation
So based on Frontdoor's latest earnings report and their fiscal guidance provided what do we value Frontdoor's stock at? Based on their earnings reported and fiscal guidance provided our valuation model provides a target (full value) price for Frontdoor at $45.50 per stock
We therefore believe that the stock of Frontdoor's is close to being fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $45.50. A good entry price into Frontdoor would therefore be at $41 or below. We expect the stock price of Frontdoor to trade around current levels until there is a new catalyst that drives the stock price higher or lower. But for new we predict that it will trade in a narrow range around our target (full value) price.
We therefore believe that the stock of Frontdoor's is close to being fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $45.50. A good entry price into Frontdoor would therefore be at $41 or below. We expect the stock price of Frontdoor to trade around current levels until there is a new catalyst that drives the stock price higher or lower. But for new we predict that it will trade in a narrow range around our target (full value) price.
Next earnings release of Frontdoor
It is expected that Frontdoor will release their 4th quarter and full fiscal 2019 results in early February 2020