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Here's Why First American (FAF) Stock is an Attractive Bet
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First American Financial Corporation (FAF - Free Report) has been gaining momentum, given higher direct premiums and escrow fees, solid home warranty business and sufficient liquidity.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 2.1% and 0.7% north, respectively in the past 30 days. This should instill investors' confidence in the stock.
Earnings Surprise History
First American has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 29.4%.
Zacks Rank & Price Performance
First American currently carries a Zacks Rank #2 (Buy). The stock has rallied 22.3% in the past year, outperforming the industry’s increase of 15.8%.
Image Source: Zacks Investment Research
Return on Equity
First American’s trailing 12-month return on equity (ROE) was 16.9%, which expanded 350 basis points year over year. ROE reflects its efficiency in using shareholders’ funds.
Style Score
First American has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.
The title insurer also has an impressive Value Score of A, which reflects the attractive valuation of the stock.
Back-tested results show that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.
Business Tailwinds
The Title Insurance and Services business is expected to gain momentum from higher direct premiums and escrow fees, higher average deal size in commercial business and the impact of strong home price appreciation on residential purchase transactions as well as the acquisition of ServiceMac.
Higher operating revenues in the home warranty business and higher net realized investment gains in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
In line with its strategic initiatives, First American actively pursues acquisitions to boost and expand its core business. In the first quarter of 2022, First American inked a deal to acquire Mother Lode Holding Company in an effort to enhance its capabilities to better serve customers across the strongest housing markets as well as strengthen its presence in the United States.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $7.25, indicating a year-over-year increase of 9.3% on 1.9% higher revenues of $8.3 billion.
Capital Position
First American boasts a strong liquidity position to enhance operating leverage, which implies that its cash reserves are sufficient to meet debt obligations. Cash flow from operations increased at a four-year CAGR (2018-2021) of 11.4%.
Solid Capital Deployment
In August 2021, First American increased dividends by 11% and the board approved an increase in the size of the repurchase plan from $300 million to $600 million, of which $443 million remained as of Dec 31, 2021. The dividend hike and increase of repurchase authorization reflect the insurer’s strong financial condition, liquidity, and long-standing commitment to return capital to stockholders.
United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, United Fire has declined 20.2%.
The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 30 days.
The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 23%.
The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 30 days.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has gained 23.9%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.
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Here's Why First American (FAF) Stock is an Attractive Bet
First American Financial Corporation (FAF - Free Report) has been gaining momentum, given higher direct premiums and escrow fees, solid home warranty business and sufficient liquidity.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 2.1% and 0.7% north, respectively in the past 30 days. This should instill investors' confidence in the stock.
Earnings Surprise History
First American has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 29.4%.
Zacks Rank & Price Performance
First American currently carries a Zacks Rank #2 (Buy). The stock has rallied 22.3% in the past year, outperforming the industry’s increase of 15.8%.
Image Source: Zacks Investment Research
Return on Equity
First American’s trailing 12-month return on equity (ROE) was 16.9%, which expanded 350 basis points year over year. ROE reflects its efficiency in using shareholders’ funds.
Style Score
First American has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.
The title insurer also has an impressive Value Score of A, which reflects the attractive valuation of the stock.
Back-tested results show that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.
Business Tailwinds
The Title Insurance and Services business is expected to gain momentum from higher direct premiums and escrow fees, higher average deal size in commercial business and the impact of strong home price appreciation on residential purchase transactions as well as the acquisition of ServiceMac.
Higher operating revenues in the home warranty business and higher net realized investment gains in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
In line with its strategic initiatives, First American actively pursues acquisitions to boost and expand its core business. In the first quarter of 2022, First American inked a deal to acquire Mother Lode Holding Company in an effort to enhance its capabilities to better serve customers across the strongest housing markets as well as strengthen its presence in the United States.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $7.25, indicating a year-over-year increase of 9.3% on 1.9% higher revenues of $8.3 billion.
Capital Position
First American boasts a strong liquidity position to enhance operating leverage, which implies that its cash reserves are sufficient to meet debt obligations. Cash flow from operations increased at a four-year CAGR (2018-2021) of 11.4%.
Solid Capital Deployment
In August 2021, First American increased dividends by 11% and the board approved an increase in the size of the repurchase plan from $300 million to $600 million, of which $443 million remained as of Dec 31, 2021. The dividend hike and increase of repurchase authorization reflect the insurer’s strong financial condition, liquidity, and long-standing commitment to return capital to stockholders.
Other Stocks to Consider
Some other top-ranked insurers include United Fire Group (UFCS - Free Report) , Cincinnati Financial (CINF - Free Report) and Kinsale Capital Group (KNSL - Free Report) . While United Fire sports a Zacks Rank #1, Cincinnati Financial and Kinsale Capital carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, United Fire has declined 20.2%.
The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 30 days.
The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 23%.
The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 30 days.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has gained 23.9%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.