Yahoo Finance Upgrade: Analysts Just Made A Captivating Increase To Their First American Financial Corporation (NYSE:FAF) Forecasts
First American Financial Corporation (NYSE:FAF) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The stock price has risen 5.8% to US$65.14 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 latest upgrade, the four analysts covering First American Financial provided consensus estimates of US$8.1b revenue in 2021, which would reflect a small 2.7% decline on its sales over the past 12 months. Statutory earnings per share are supposed to fall 10% to US$8.01 in the same period. Prior to this update, the analysts had been forecasting revenues of US$7.2b and earnings per share (EPS) of US$6.94 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Check out our latest analysis for First American Financial
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$77.00, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic First American Financial analyst has a price target of US$82.00 per share, while the most pessimistic values it at US$72.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 5.4% by the end of 2021. This indicates a significant reduction from annual growth of 6.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.6% annually for the foreseeable future. It's pretty clear that First American Financial's revenues are expected to perform substantially worse 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. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at First American Financial.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for First American Financial 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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