Yahoo Finance Reasons Why Investors Should Retain First American (FAF)
First American Financial Corporation FAF has been gaining momentum on the back of higher interest rates in the cash and investment portfolio, improved agent premiums, stronger net realized investment gain and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for First American’s 2024 earnings per share indicates a year-over-year increase of 8.1%. The consensus estimate for revenues is pegged at $6.55 billion, implying a year-over-year improvement of 9.1%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 27.9% and 8.7%, respectively, from the corresponding 2024 estimates.
Earnings Surprise History
First American surpassed earnings estimates in two of the last four quarters and missed twice, the average being 2.93%.
Zacks Rank & Price Performance
First American currently carries a Zacks Rank #3 (Hold). The stock has gained 1.6% in the past year compared with the industry’s growth of 24.7%.
Image Source: Zacks Investment Research
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, as well as increased domestic residential purchase and commercial transactions.
Higher operating revenues in the home warranty business and stronger 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, an increase in average revenue per order, a 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.
FAF has been focusing on strategic initiatives to strengthen its product offerings and core business. The company pursued small title agency buyouts in the regions that it identifies as growth markets.
Net investment income has been an important component of the company’s top-line growth. The metric should continue to grow riding on higher short-term interest rates in the company’s cash and investment portfolio and improved escrow and tax-deferred property exchange balances. Higher earnings on investments associated with the insurer’s deferred compensation plan also contributed to the increase.
Given a strong operational performance, the company engages in shareholder-friendly moves. The board of directors increased dividend by 2% to an annual rate of $2.12 per share in the first quarter of 2024. The company’s quarterly dividend witnessed a nine-year (2016-2024) CAGR of 8.2%. FAF has a buyback program with an authorization of up to $400 million worth of shares. It bought back $3.5 million worth of shares in the first quarter of 2024 and had $210.4 million remaining as of Mar 31, 2024. These make the stock an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, RLI Corp. RLI and NMI Holdings Inc NMIH. While Arch Capital and RLI Corp. sport a Zacks Rank #1 (Strong Buy) each, NMI Holdings carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 28.41%. In the past year, shares of ACGL have climbed 34%.
The Zacks Consensus Estimate for ACGL’s 2024 and 2025 earnings has moved 5.1% and 3.3% north, respectively, in the past 30 days.
RLI Corp. has a solid track record of beating earnings estimates in three of the trailing four quarters and missing in one, the average being 132.39%. In the past year, shares of RLI have gained 12.3%.
The Zacks Consensus Estimate for RLI’s 2024 and 2025 earnings implies year-over-year growth of 16.1% and 3.2%, respectively.
NMI Holdings has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 8.60%. In the past year, shares of NMIH have jumped 35.4%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings implies year-over-year growth of 9.1% and 8.3%, respectively.
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