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Fidelity National Tops Earnings, Lags Revs

FAF FNF STC

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Fidelity National Financial, Inc. (FNF - Snapshot Report) reported adjusted earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 61 cents by 11.5%.  Earnings were 28.3% higher than 53 cents earned in the year-ago quarter.

Including a charge of 7 cents related to an employment litigation lawsuit and expenses related to a definitive agreement to acquire Lender Processing Services, Inc. , net income of Fidelity National came in at 61 cents, down 6.1% year over year.

Operational Update

Revenues of Fidelity National grossed $2.3 billion, up nearly 32% year over year. The year-over-year improvement was fueled by higher title premiums, increase in Restaurant as well as Remy revenues.  Results lagged the Zacks Consensus Estimate by a marginal 0.5%.

Total expenses escalated 36.3% year over year to $2.1 billion, attributable to increase in personnel costs, higher cost of Restaurant revenues, cost of Remy revenues, increase in agent commissions and higher interest expenses.

Purchase orders opened and closed in the reported quarter increased a respective of 11% and 13% year over year.

Segment Update

Fidelity National Title Group

Revenues were $1.6 billion, up 15.9% year over year.

Operating pre-tax earnings increased 31.8% year over year to $265 million. Adjusted pre-tax title margin expanded 200 basis points year over year to 16.5%. The quarter marked the best second quarter pre-tax title margin since 2003.

Direct Orders Opened increased 0.7% year over year to 672,000. Direct Orders Closed increased nearly 10% year over year to 504,000.

Commercial title revenues increased 9% year over year to $112 million, attributable to 15% improvement in the commercial fee per file, partially offset by a 6% decrease in closed orders.

Restaurant Group

Revenues improved 7.1% year over year to $347 million.

Adjusted Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) were $23 million in the quarter, up from $12 million in the year-ago quarter.

Adjusted EBITDA margin expanded 200 basis points to 6.7%.

Remy

Revenues totaled $568 million in the reported quarter. Adjusted EBITDA was $65 million, while adjusted EBITDA margin was 11.4%.

Financial Update

Fidelity National exited the quarter with cash and investment portfolio of $5.3 billion, up from $5.2 billion at 2012 end.

Notes payable remained almost flat with 2012-end level of $1.3 billion.

Book value per share increased 1.9% as on Dec 31, 2012 to $21.18 as on Jun 30, 2013.

Cash flow from operations increased 6.3% year over year to $253 million in the reported quarter.

Acquisition

On May 28, Fidelity National inked a deal to acquire Lender Processing Services Inc. for $2.9 billion or $33.25 per share. The acquisition is expected to culminate in the fourth quarter of 2013, subject to regulatory approval.

The acquisition will strengthen the mortgage services business of the company. Fidelity National expects the acquisition to generate cost synergies of more than $100 million as well as be accretive to future earnings. Moreover, addition of Lender Processing Services to its portfolio will ensure a diversified as well as a recurring revenue base for Fidelity National.

Performance of other title insurers

First American Financial Corporation (FAF - Snapshot Report) reported second-quarter 2013 earnings of 77 cents, surpassing the Zacks Consensus Estimate of 65 cents and the year-ago earnings of 21 cents.

Stewart Information Services Corporation (STC - Snapshot Report) reported second-quarter 2013 earnings of $1.09 per share, surpassing the Zacks Consensus Estimate of 63 cents and the year-ago earnings of $1.05.

Zacks Rank

Fidelity National carries a Zacks Rank #3 (Hold).
 

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