News Flash: Analysts Just Made A Meaningful Upgrade To Their Rocket Companies, Inc. (NYSE:RKT) Forecasts

Simply Wall St
·4 min read

Rocket Companies, Inc. (NYSE:RKT) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Rocket Companies will make substantially more sales than they'd previously expected. The stock price has risen 7.8% to US$21.85 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the upgrade, the consensus from ten analysts covering Rocket Companies is for revenues of US$14b in 2021, implying an uncomfortable 13% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 33% to US$2.35. Before this latest update, the analysts had been forecasting revenues of US$12b and earnings per share (EPS) of US$2.16 in 2021. The most recent forecasts are noticeably more optimistic, with a sizeable gain to revenue estimates and a lift to earnings per share as well.

Check out our latest analysis for Rocket Companies

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Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$24.40, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Rocket Companies, with the most bullish analyst valuing it at US$33.00 and the most bearish at US$18.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 13% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 41% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 5.7% annually for the foreseeable future. So it's pretty clear that Rocket Companies' revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates, with sales apparently performing well even though revenue growth expected to decline against the wider market this year. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Rocket Companies.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Rocket Companies going out to 2023, and you can see them free on our platform here..

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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