Here's Why You Should Add Frontdoor Stock to Your Portfolio Right Now

Frontdoor, Inc. FTDR continues to benefit from contributions from the 2-10 acquisition and ongoing improvements in execution across the business. Strong performance in the non-warranty segment, an attractive business model and favorable real estate channel trends provide additional tailwinds. Margin expansion, driven by operational efficiencies and strategic pricing actions, further supports the company’s outlook and reinforces its long-term relevance in a competitive home services industry.Shares of this home services company have gained 2.1% in the past year, outperforming the Zacks Building Products - Miscellaneous industry’s 1.7% decline. Its earnings topped the Zacks Consensus Estimate in each of the trailing four quarters, with an average being 59.4%.Image Source: Zacks Investment ResearchCurrently, FTDR has had its 2026 EPS estimate revised upward to $4.05 from $3.99 over the past 60 days. Although cost inflation pressure and a challenging macro backdrop are concerning, the company’s operational strategies have been driving growth.Frontdoor — a Zacks Rank #2 (Buy) stock — has a favorable VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities to investors.Let’s delve into the major driving factors.Factors Aiding FTDR StockStrong Revenue Growth Across Channels: Frontdoor continues to benefit from robust revenue growth across its core channels, underscoring broad-based momentum and disciplined execution across the portfolio. Renewal revenues increased 9%, supported by incremental volumes from the 2-10 acquisition and improved price realization through dynamic pricing capabilities. As the backbone of the business, the renewal channel continues to benefit from strong retention rates and prior-period member growth. The real estate channel posted a notable 21% revenue increase, with member counts rising sequentially in the third quarter — a milestone not achieved in the past five years — signaling early signs of a sustained recovery. Direct-to-consumer revenues grew 11%, driven by higher volumes from targeted marketing initiatives and promotional pricing despite some near-term pressure on upfront pricing that management views as a deliberate investment to strengthen the long-term renewal base. In addition, the non-warranty business delivered outsized growth, with revenues surging 73% year over year, led by the rapid scaling and continued outperformance of the new HVAC program and related offerings.2-10 Acquisition: The 2-10 acquisition remained a significant driver of Frontdoor’s strong 2025 performance, enhancing scale, diversification and earnings power across multiple channels. Management noted that 2-10 contributed meaningfully to growth in both the renewal and real estate channels, supporting a 9% increase in renewal revenues and a 21% rise in real estate revenues during the fiscal second quarter. The acquisition also drove $47 million of favorable revenue conversion, alongside higher pricing, underscoring its immediate financial impact. For full-year 2025, total revenues are expected to grow 13%, with approximately 10% attributable to the 2-10 acquisition and the remaining 3% from organic growth.Beyond near-term benefits, the transaction expands Frontdoor’s addressable market through the addition of structural warranty offerings and access to roughly 19,000 builder partners, enabling cross-selling opportunities and new growth avenues over time. Overall, the 2-10 acquisition has strengthened the company’s revenue foundation, enhanced its competitive positioning and supported margin expansion through operating leverage and scale efficiencies.Margin Expansion Initiatives: Frontdoor delivered meaningful margin expansion in the third quarter of 2025, reflecting the effective execution of its strategic pricing and operational initiatives. Gross profit margin expanded by 60 basis points year over year, supported by disciplined pricing actions, including dynamic pricing capabilities and higher trade service fees, which helped mitigate inflationary pressures. Adjusted EBITDA margin improved to 32% in the third quarter, an increase of approximately 100 basis points from the prior-year period. While promotional pricing and selective price reductions weighed on near-term revenues, management emphasized that strong retention rates and pricing discipline enabled the company to preserve healthy margins. In addition, the supply chain team has leveraged Frontdoor’s purchasing scale and extensive supplier network to negotiate more favorable terms and optimize purchasing decisions, driving meaningful cost savings. Reflecting this performance, the company narrowed its full-year 2025 gross profit margin outlook to approximately 55.5% and raised its adjusted EBITDA guidance to a range of $545 million to $550 million.Higher ROE: Frontdoor’s trailing 12-month return on equity (ROE) is indicative of its growth potential. The company’s ROE of 122.7% compares favorably with the industry’s 14.7%, which signals more efficiency in using shareholders’ funds than peers.Other Key PicksOther top-ranked stocks from the Construction sector are:Dycom Industries, Inc. DY presently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 22.7%, on average. DY stock has jumped 44.4% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Dycom’s fiscal 2026 sales indicates growth of 14.5% from the year-ago period’s levels. Argan,Inc. AGX flaunts a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 22.4%, on average. Argan stock has surged 85.3% in the past six months.The Zacks Consensus Estimate for Argan’s fiscal 2026 sales and EPS indicates growth of 7.2% and 34.3%, respectively, from the year-ago period’s levels.Gibraltar Industries, Inc. ROCK has a Zacks Rank of 2 at present. The company delivered a trailing four-quarter earnings surprise of 2.2%, on average. ROCK stock has declined 9.7% in the past six months.The Zacks Consensus Estimate for Gibraltar’s 2026 sales and EPS indicates growth of 6.8% and 11%, respectively, from the prior-year levels.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Gibraltar Industries, Inc. (ROCK): Free Stock Analysis Report Dycom Industries, Inc. (DY): Free Stock Analysis Report Argan, Inc. (AGX): Free Stock Analysis Report Frontdoor Inc. (FTDR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks