Frontdoor (FTDR) Q4 Earnings & Revenues Beat, Up Y/Y on Pricing
Frontdoor, Inc. FTDR reported impressive fourth-quarter 2023 earnings, which strongly surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Net revenues also beat the analysts’ expectations and rose from the previous year’s number on solid pricing.
Shares of this home repair and maintenance provider tumbled 5.8% on Feb 28, after the earnings release. This might be due to bleak first-quarter 2024 revenues and adjusted EBITDA guidance.
FTDR’s chairman and chief executive officer, Bill Cobb, said, “In 2024, our top priority is to grow revenue and reignite customer growth as we relaunch the American Home Shield brand and expand our on-demand service offerings.”
Inside the Headlines
Frontdoor reported adjusted earnings per share (EPS) of 20 cents, which strikingly topped the Zacks Consensus Estimate of 2 cents. The metric also grew 53% year over year from 13 cents.
Frontdoor Inc. Price, Consensus and EPS Surprise
Frontdoor Inc. price-consensus-eps-surprise-chart | Frontdoor Inc. Quote
Revenues of $366 million topped the consensus mark of $359 million by 2% and increased 8% year over year. A 15% increase in price was partially offset by a 7% decline from lower volume.
Coming to revenues by customer channel, Renewal increased 12% on improved price realization, Real estate decreased 15% due to lower sales as a result of the challenging market conditions, and Direct-to-consumer also fell 14% due to lower sales, which was owing to a decline in overall category demand for home warranties. Other, however, increased 55% on higher on-demand home services.
Gross profit increased 22% year over year to $177 million. Gross margin expanded 570 bps year over year to 48%. Adjusted EBITDA improved 35% year over year to $45 million.
2023 Highlights
FTDR generated net revenues of $1.78 billion, which increased 7% from 2022, backed by an 11% increase in price, partly offset by a 4% decline in volume.
Gross margin expanded 700 bps year over year to 50%. The upside was driven by higher realized price, milder weather, favorable cost development along with a transition to higher service fees, a lower number of service requests per customer and continued process improvement initiatives.
Adjusted EPS of $2.30 increased 82% from $1.27 reported in 2022. Adjusted EBITDA also increased 62% to $346 million.
The customer retention rate at 2023-end was 76.2% versus 75.7% a year ago, backed by mix shift benefits, improving onboarding and engagement, and an 86% rise in autopay.
Financials
As of Dec 31, 2023, the company had cash and cash equivalents of $325 million compared with $292 million at 2022-end. Long-term debt at 2023-end was $577 million, down from $592 million at 2022-end.
Net cash provided by operations was $202 million in 2023 compared with $142 million in 2022.
Q1 Outlook
The company expects revenues of $370-$380 million, which reflects upper-single-digit growth in the renewals channel, partially offset by a 20-25% decline in the first-year real estate channel and an approximately 20% reduction in the first-year direct-to-consumer channel. Additionally, other revenue is projected to increase by approximately $5 million from the prior year.
Adjusted EBITDA is likely to be between $40 million and $50 million, a decline from the prior-year period due to increased marketing investments to drive first-year direct-to-consumer customer count.
2024 Guidance
FTDR projects revenues to grow approximately 2-3% to $1.81-$1.84 billion. This is likely to be supported by a mid-single-digit increase in renewals channel revenues and an approximately 30% increase in other revenues, primarily on the back of a new HVAC program. However, a 10% decline in direct-to-consumer channel revenues and a 15-20% fall in real estate channel revenues are likely to partially offset these tailwinds. The number of home warranties is expected to decline 1-3%.
A gross margin expectation of 48.5%-49.5% reflects the impact of reverting back to normal weather conditions, as well as a slightly higher mix of on-demand services. SG&A is likely to be in the range of $580-$595 million, which is slightly higher than the prior year due to normal cost inflation in general and administrative expenses. Also, a shift in marketing investments from the Frontdoor brand to American Home Shield to support the brand relaunch is a concern.
Adjusted EBITDA is likely to be between $350 million and $360 million, with an annual effective tax rate of approximately 25%. Capital expenditures are projected to be in the range of $35-$45 million.
The company targets full-year share repurchases of approximately $100 million.
Zacks Rank & Recent Construction Releases
Frontdoor currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Armstrong World Industries, Inc. AWI reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value, driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth, along with adjusted EBITDA margin expansion.
Owens Corning OC reported better-than-expected results for fourth-quarter 2023. Both earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
The Roofing segment’s contributions, favorable price and cost mix, and manufacturing performance aided the uptrend. The Roofing segment’s net sales rose 16% year over year to $928 million, driven by strong demand tied to the mild weather extending the roofing season in many regions and strong components attachment rate, as well as favorable mix and positive price. For the first quarter of 2024, OC expects net sales to be slightly below the first quarter of 2023 while generating mid-teens margins.
Martin Marietta Materials, Inc. MLM reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. Revenues missed the consensus mark but rose year over year.
Going forward, MLM anticipates strong demand for infrastructure, large-scale energy and domestic manufacturing projects. This will largely offset weaker residential demand and the anticipated softening in light non-residential activity. With mortgage rates stabilizing and affordability headwinds receding, MLM fully expects single-family residential construction to recover as demand still exceeds supply, particularly in its key markets. For 2024, it expects consolidated products and services revenues of $6.75-$7.19 billion. Also, adjusted EBITDA is projected to be between $2.14 billion and $2.34 billion.
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