Yahoo Finance Why You Should Stay Invested in First American Financial (FAF)
First American Financial Corporation FAF is well-poised for growth, driven by higher direct premiums and escrow fees, solid performance of the commercial market, effective capital deployment and strong liquidity position.
Growth Projections
The Zacks Consensus Estimate for First American’s 2024 earnings is pegged at $5.83, indicating a 15.7% increase from the year-ago reported figure on 9.6% higher revenues of $7.19 billion.
Earnings Surprise History
First American has a decent earnings surprise history. It beat estimates in two of the last four quarters and missed in the other two, with the average being 4.85%.
Zacks Rank & Price Performance
First American currently carries a Zacks Rank #3 (Hold). The stock has gained 10.1% year to date, outperforming the industry’s growth of 2.7%.
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Return on Equity (ROE)
The insurer’s trailing 12-month return on equity is 13.4%, which compares favorably with the industry average of 6.6%. ROE reflects its efficiency in using shareholders’ funds.
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.
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 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 short-term interest rates in the company’s investment portfolio and escrow and like-kind exchange deposits. FAF boasts a strong liquidity position to enhance operating leverage, implying that its cash reserves are sufficient to meet debt obligations.
Given the solid operational performance, First American engages in shareholder-friendly moves. First American has raised dividends at an eight-year (2016-2023) CAGR of 9%. Its dividend yield is currently 3.6%, which is way above the industry average of 0.3%. The insurer also engages in share buybacks.
The Zacks Consensus Estimate for FAF’s 2024 earnings has moved 8.5% north in the past 60 days.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. KNSL, Everest Re Group, Ltd. RE and Selective Insurance Group, Inc. SIGI, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. Year to date, KNSL has gained 22.6%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $9.92 and $11.94, indicating a year-over-year increase of 27.1% and 20.4%, respectively.
Everest Re beat estimates in each of the last four quarters, the average being 18.41%.
The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $44.28 and $53.54, indicating a year-over-year increase of 63.5% and 20.9%, respectively. Year to date, RE has gained 11.5%.
The Zacks Consensus Estimate for Selective Insurance’s 2023 and 2024 earnings per share is pegged at $6.62 and $7.60, indicating a year-over-year increase of 31.6% and 14.8%, respectively. Year to date, SIGI has gained 8.1%.
The Zacks Consensus Estimate for SIGI’s 2023 and 2024 revenues is pegged at $4.17 billion and $4.60 billion, indicating a year-over-year increase of 13.6% and 10.1%, respectively.
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Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
First American Financial Corporation (FAF) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
