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First American (FAF) Rises 15% in 6 Months: Will the Rally Last?
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Shares of First American Financial (FAF - Free Report) have gained 14.7% in the past six months, outperforming the industry’s growth of 9.1% and the Zacks S&P 500 composite’s increase of 5.9%. In contrast, the Finance sector declined 0.5% in the said time frame.
Increased demand among millennials for first-time home purchases, the expansion of valuation and data businesses, as well as strength in commercial business and technological upgrades drive this Zacks Rank #3 (Hold) insurer.
The Zacks Consensus Estimate for 2024 has moved up by 2 cents in the past seven days, reflecting analyst optimism.
Image Source: Zacks Investment Research
Can FAF Retain the Momentum?
Growing leadership in title data, courtesy of proprietary data extraction, sturdy distribution relationships, prudent underwriting and continued investments in technology poise First American well for long-term growth. This insurer stands to gain from an increased demand for first-time home purchases among millennials. FAF expects housing demand, improving economy and labor markets to drive home price appreciation.
Growing direct premiums, escrow fees and title agent premiums should continue to drive the top line for First American. We expect the 2026 top line to increase at a three-year CAGR of 7.8%.
The insurer stays focused on strengthening its product offerings, enhancing core business and expanding valuation and data businesses. Also, the expansion of title plant assets and the upgrade of technology solutions drive increased efficiency.
Banking on efficient cash flow, First American distributes wealth to shareholders via dividend hikes and share buybacks. FAF’s dividend history is impressive. Dividends witnessed an eight-year (2016-2024) CAGR of 8.2%, yielding 3.4% and outperforming the industry average of 0.3%. The insurer had $169.6 million remaining under its buyback authorization as of Jun 30, 2024.
The Zacks Consensus Estimate for 2024 earnings is pegged at $3.89, indicating an increase of 2.4% on 4% higher revenues of $6.2 billion. The consensus estimate for 2025 earnings is pegged at $5.06, indicating an increase of 30% on 10.9% higher revenues of $6.9 billion.
We expect 2026 EPS to witness a three-year CAGR of 11.2%.
Heritage Insurance’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 49.15%. Year to date, HRTG has rallied 132.4%.
The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings implies 10.3% and 18.1% year-over-year growth, respectively.
Axis Capital’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 94.62%. Year to date, AXS’ stock has surged 35.1%.
The Zacks Consensus Estimate for AXS’ 2024 and 2025 earnings indicates 8.3% year-over-year growth each.
ProAssurance’s earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 2.6%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 457.1% and 49.2% year-over-year growth, respectively.
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First American (FAF) Rises 15% in 6 Months: Will the Rally Last?
Shares of First American Financial (FAF - Free Report) have gained 14.7% in the past six months, outperforming the industry’s growth of 9.1% and the Zacks S&P 500 composite’s increase of 5.9%. In contrast, the Finance sector declined 0.5% in the said time frame.
Increased demand among millennials for first-time home purchases, the expansion of valuation and data businesses, as well as strength in commercial business and technological upgrades drive this Zacks Rank #3 (Hold) insurer.
The Zacks Consensus Estimate for 2024 has moved up by 2 cents in the past seven days, reflecting analyst optimism.
Image Source: Zacks Investment Research
Can FAF Retain the Momentum?
Growing leadership in title data, courtesy of proprietary data extraction, sturdy distribution relationships, prudent underwriting and continued investments in technology poise First American well for long-term growth. This insurer stands to gain from an increased demand for first-time home purchases among millennials. FAF expects housing demand, improving economy and labor markets to drive home price appreciation.
Growing direct premiums, escrow fees and title agent premiums should continue to drive the top line for First American. We expect the 2026 top line to increase at a three-year CAGR of 7.8%.
The insurer stays focused on strengthening its product offerings, enhancing core business and expanding valuation and data businesses. Also, the expansion of title plant assets and the upgrade of technology solutions drive increased efficiency.
Banking on efficient cash flow, First American distributes wealth to shareholders via dividend hikes and share buybacks. FAF’s dividend history is impressive. Dividends witnessed an eight-year (2016-2024) CAGR of 8.2%, yielding 3.4% and outperforming the industry average of 0.3%. The insurer had $169.6 million remaining under its buyback authorization as of Jun 30, 2024.
The Zacks Consensus Estimate for 2024 earnings is pegged at $3.89, indicating an increase of 2.4% on 4% higher revenues of $6.2 billion. The consensus estimate for 2025 earnings is pegged at $5.06, indicating an increase of 30% on 10.9% higher revenues of $6.9 billion.
We expect 2026 EPS to witness a three-year CAGR of 11.2%.
Stocks to Consider
Some top-ranked stocks from the insurance industry are Heritage Insurance (HRTG - Free Report) , Axis Capital Holdings (AXS - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heritage Insurance’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 49.15%. Year to date, HRTG has rallied 132.4%.
The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings implies 10.3% and 18.1% year-over-year growth, respectively.
Axis Capital’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 94.62%. Year to date, AXS’ stock has surged 35.1%.
The Zacks Consensus Estimate for AXS’ 2024 and 2025 earnings indicates 8.3% year-over-year growth each.
ProAssurance’s earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 2.6%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 457.1% and 49.2% year-over-year growth, respectively.