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Here's Why Hold Strategy is Apt for First American (FAF)
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First American Financial Corporation (FAF - Free Report) has been in investors' good books on the back of higher direct premiums and escrow fees, solid performance of the commercial market, effective capital deployment and strong liquidity position.
Earnings Surprise History
First American has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in one, with the average being 19.5%.
Zacks Rank
First American currently carries a Zacks Rank #3 (Hold).
Return on Equity
The insurer’s trailing 12-month return on equity (ROE) is 15.4%, which compares favorably with the industry average of 6.4%. ROE reflects its efficiency in using shareholders’ funds.
Style Score
First American has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Business Tailwinds
The Title Insurance and Services business of First American is expected to gain momentum from improved agent premiums, higher direct premiums and escrow fees, and increased domestic residential purchase and commercial transactions.
First American expects the commercial business to continue to record improved performance in the second half of 2022.
Higher operating revenues in the home warranty business and higher net realized investment gain in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
A higher number of closed orders, increases in the average revenue per order, solid performance of the commercial market, as well as improved direct premium and escrow fees from favorable refinance are likely to drive revenue growth.
Higher demand for title information products in data and analytics and commercial and loss mitigation business lines should also add to the upside.
Investment income within the Title Insurance and Services segment will continue to gain from higher average invested balances. Riding on an improving interest rate environment, FAF projects annualized investment income to increase to $200 million by the end of 2022 , up from the earlier guidance of $150 million.
First American Financial remains focused on strategic initiatives to strengthen its product offerings and intensify focus on its core business. In May 2022, First American completed the acquisition of Mother Lode Holding Company and its 17 operating subsidiaries, which are likely to broaden its exposure in crucial growth markets and fortify its presence in the United States. FAF also continues to make significant investments in technology across all its major businesses to enhance customer experience through digital solutions.
First American boasts a strong liquidity position to enhance operating leverage, implying that its cash reserves are sufficient to meet debt obligations.
First American has increased dividends at an eight-year CAGR (2015-2022) of 9.3%. The insurer’s dividend yield of 4.4% compares favorably with the industry average of 0.4%. In June 2022, the board approved a new share repurchase plan, authorizing the repurchase of up to $400 million of shares, of which $392 million remained as of Jun 30, 2022.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $6.48, indicating a year-over-year increase of 1.6%.
The stock has lost 35.7% in the past year compared with the industry’s decline of 1.2%.
Radian Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 29.51%.
The Zacks Consensus Estimate for RDN’s 2023 earnings has moved 5.3% north in the past 60 days. In the past year, the insurer has lost 19.8%.
The bottom line of Berkshire Hathaway surpassed earnings estimates in three of the last four quarters and missed in one, the average being 17.55%. In the past year, BRK.B has lost 3%.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings has moved 2% and 0.6% north, respectively, in the past 30 days.
The bottom line of Root surpassed earnings estimates in each of the last four quarters, the average being 22.4%. In the past year, ROOT has lost 90.6%.
The Zacks Consensus Estimate for Root’s 2022 and 2023 earnings indicates a 39.1% and 25.2% increase, respectively, from the year-ago reported figure.
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Here's Why Hold Strategy is Apt for First American (FAF)
First American Financial Corporation (FAF - Free Report) has been in investors' good books on the back of higher direct premiums and escrow fees, solid performance of the commercial market, effective capital deployment and strong liquidity position.
Earnings Surprise History
First American has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in one, with the average being 19.5%.
Zacks Rank
First American currently carries a Zacks Rank #3 (Hold).
Return on Equity
The insurer’s trailing 12-month return on equity (ROE) is 15.4%, which compares favorably with the industry average of 6.4%. ROE reflects its efficiency in using shareholders’ funds.
Style Score
First American has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Business Tailwinds
The Title Insurance and Services business of First American is expected to gain momentum from improved agent premiums, higher direct premiums and escrow fees, and increased domestic residential purchase and commercial transactions.
First American expects the commercial business to continue to record improved performance in the second half of 2022.
Higher operating revenues in the home warranty business and higher net realized investment gain in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
A higher number of closed orders, increases in the average revenue per order, solid performance of the commercial market, as well as improved direct premium and escrow fees from favorable refinance are likely to drive revenue growth.
Higher demand for title information products in data and analytics and commercial and loss mitigation business lines should also add to the upside.
Investment income within the Title Insurance and Services segment will continue to gain from higher average invested balances. Riding on an improving interest rate environment, FAF projects annualized investment income to increase to $200 million by the end of 2022 , up from the earlier guidance of $150 million.
First American Financial remains focused on strategic initiatives to strengthen its product offerings and intensify focus on its core business. In May 2022, First American completed the acquisition of Mother Lode Holding Company and its 17 operating subsidiaries, which are likely to broaden its exposure in crucial growth markets and fortify its presence in the United States. FAF also continues to make significant investments in technology across all its major businesses to enhance customer experience through digital solutions.
First American boasts a strong liquidity position to enhance operating leverage, implying that its cash reserves are sufficient to meet debt obligations.
First American has increased dividends at an eight-year CAGR (2015-2022) of 9.3%. The insurer’s dividend yield of 4.4% compares favorably with the industry average of 0.4%. In June 2022, the board approved a new share repurchase plan, authorizing the repurchase of up to $400 million of shares, of which $392 million remained as of Jun 30, 2022.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $6.48, indicating a year-over-year increase of 1.6%.
The stock has lost 35.7% in the past year compared with the industry’s decline of 1.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the insurance industry are Radian Group Inc. (RDN - Free Report) , Berkshire Hathaway Inc. (BRK.B - Free Report) and Root, Inc. (ROOT - Free Report) . While Radian and Berkshire Hathaway sport a Zacks Rank #1 (Strong Buy), Root carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Radian Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 29.51%.
The Zacks Consensus Estimate for RDN’s 2023 earnings has moved 5.3% north in the past 60 days. In the past year, the insurer has lost 19.8%.
The bottom line of Berkshire Hathaway surpassed earnings estimates in three of the last four quarters and missed in one, the average being 17.55%. In the past year, BRK.B has lost 3%.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings has moved 2% and 0.6% north, respectively, in the past 30 days.
The bottom line of Root surpassed earnings estimates in each of the last four quarters, the average being 22.4%. In the past year, ROOT has lost 90.6%.
The Zacks Consensus Estimate for Root’s 2022 and 2023 earnings indicates a 39.1% and 25.2% increase, respectively, from the year-ago reported figure.