First American Financial (NYSE:FAF) Q3 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

First American Financial Corporation (NYSE:FAF) is scheduled to report Q3 earnings results on October 22, 2020.

The company is expected to report earnings of $1.25/share on revenue of $1.614 billion. The consensus earnings per share (EPS) of $1.25/share is based on a poll of 5 analysts and represents a decline in eps of −24.0% over the same quarter last year, when the company reported earnings of $1.64/share.

The revenue forecast of $1.614 billion based on a poll of 4 analysts implies a year-over-year (YoY) decline in revenue of −3.4%. Last year the company reported $1.671 billion in revenue for the quarter.

Expected to report EPS contraction of −24.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,614.05 $1,671.20 −3.4%
EPS $1.25 $1.64 −24.0%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from First American Financial Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.85 $1.05 23.2% Beat
Q1, 2020 $1.21 $1.06 −12.3% Missed
Q4, 2019 $1.47 $1.80 22.6% Beat
Q3, 2019 $1.44 $1.64 14.2% Beat
Q2, 2019 $1.37 $1.58 15.0% Beat
Q1, 2019 $0.68 $0.74 8.6% Beat
Q4, 2018 $1.14 $1.27 11.2% Beat
Q3, 2018 $1.29 $1.26 −2.0% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 23, 2020 $55.72 $54.34 −2.5% Decline
April 23, 2020 $40.61 $44.92 10.6% Increase
February 13, 2020 $62.40 $65.49 5.0% Increase
October 24, 2019 $60.45 $62.22 2.9% Increase

Fundamentals And Technical Analysis

First American Financial Corporation is currently trading at $52.17/share, down −4.2% for the day. The company is trading at approximately 78.1% of its 52-week high of $66.78/share. The company’s stock price is down −4.0% since the last earnings report and down −1.9% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 47.69 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:FAF Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 9.02 and a forward P/E multiple of 12.02.

First American Financial Corporation’s current share price also implies a price-to-book (P/B) multiple of 1.27. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $52.17
P/E Ratio 9.0x
P/E Ratio (Fwd) 12.0x
PEG Ratio 0.5
Total Debt / Total Capital 22.9%
Levered Free Cash Flow $868.9 million
EV / EBITDA −0.4x

Finbox

First American Financial Corporation is a mid-cap stock with a market capitalization of $5.818 billion and a total enterprise value of $6.104 billion. The company operates in the Financials sector and the Insurance industry.

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Specialty Insurance segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services. This segment also provides closing and/or escrow services; products and services involving the use of real property related data to mitigate risk or facilitates real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, and title evidence services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant records and images. This segment offers its products through a network of direct operations and agents in 49 states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, South Korea, and internationally. The Specialty Insurance segment provides property and casualty insurance comprising coverage to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism, and other types of property damage. It also offers residential service contracts that cover residential systems, such as heating and air conditioning systems, and appliances against failures that occur as the result of normal usage during the coverage period; and auto insurance products. This segment markets its property and casualty insurance products through direct distribution channels, including marketing through its existing closing-service activities, as well as through a network of independent brokers in 36 states. First American Financial Corporation was founded in 1889 and is headquartered in Santa Ana, California.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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