Barclays has increased its price target for First American (FAF, Financial) from $69 to $72, maintaining an Equal Weight rating on the stock. This adjustment comes in response to the company's strong first-quarter results and its ongoing positive trajectory in the commercial sector.
Despite these positive developments, Barclays analysts advise investors to remain cautious due to the unpredictable macroeconomic conditions currently influencing the market. This mixed outlook reflects both confidence in First American's immediate performance and caution regarding broader external factors.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for First American Financial Corp (FAF, Financial) is $76.80 with a high estimate of $86.00 and a low estimate of $72.00. The average target implies an upside of 22.68% from the current price of $62.60. More detailed estimate data can be found on the First American Financial Corp (FAF) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, First American Financial Corp's (FAF, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for First American Financial Corp (FAF, Financial) in one year is $62.04, suggesting a downside of 0.89% from the current price of $62.6. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the First American Financial Corp (FAF) Summary page.
FAF Key Business Developments
Release Date: February 13, 2025
- Adjusted Pre-Tax Title Margin (Year): 10.3%
- Title Premiums and Escrow Revenues (Q4): Up double digits
- Commercial Revenue Growth (Q4): 47%
- Investment Income (Title Segment, Q4): $155 million
- Success Ratio (Q4): 51%
- Adjusted Pre-Tax Title Margin (Q4): 11.8%
- Home Warranty Revenue Growth (Q4): 4%
- Adjusted Pre-Tax Margin (Home Warranty, Q4): 18.2%
- GAAP Earnings (Q4): $0.69 per diluted share
- Adjusted Earnings (Q4): $1.35 per diluted share
- Title Segment Revenue (Q4): $1.6 billion, up 22%
- Purchase Revenue Growth (Q4): 18%
- Commercial Revenue (Q4): $252 million, up 47%
- Refinance Revenue Growth (Q4): 75%
- Agency Business Revenue (Q4): $698 million, up 23%
- Information and Other Revenues (Q4): $238 million, up 13%
- Provision for Policy Losses (Q4): $38 million, 3.0% of title premiums and escrow fees
- Home Warranty Total Revenue (Q4): $103 million, up 4%
- Effective Tax Rate (Q4): 27%
- Debt to Capital Ratio (Dec 31): 30.8%
- Debt to Capital Ratio (Excluding Secured Financings): 23.9%
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First American Financial Corp (FAF, Financial) reported a strong fourth quarter with a 47% growth in commercial revenue, driven by broad-based strength across all asset classes.
- The company achieved an adjusted pre-tax title margin of 11.8% for the fourth quarter, reflecting effective expense management and scale benefits.
- Investment income in the title segment exceeded expectations, reaching $155 million, partly due to a strategic portfolio rebalancing project.
- The home warranty segment posted a 4% revenue growth and an adjusted pre-tax margin of 18.2%, with significant contributions from the direct-to-consumer channel.
- First American Financial Corp (FAF) anticipates continued growth in 2025, with early signs of improvement in residential purchase and refinance orders, and a strong start in the commercial business with a 24% revenue increase in January.
Negative Points
- The residential purchase and refinance markets remain challenging due to low inventory, high home prices, and mortgage rates around 7%, impacting overall market conditions.
- Refinance volumes are at trough levels, accounting for just 5% of direct revenue, highlighting ongoing distress in this market segment.
- The effective tax rate for the quarter was 27%, higher than the company's normalized rate of 24%, due to a valuation reserve against deferred tax assets.
- Despite strong commercial performance, there is uncertainty about sustaining growth in the second half of 2025, given the strong comparisons from the previous year.
- The office market, particularly suburban office, is only beginning to show signs of activity, indicating potential volatility in this segment of the commercial business.
