On May 13, 2014, Fidelity National Financial, Inc. (FNF) reached a new 52-week high of $34.78 after posting impressive first-quarter 2014 earnings that included a positive earnings surprise of 23.81%. With respect to earnings trend, this financial services company delivered positive earnings surprises in all of the last four quarters with an average beat of 14.19%
In fact, shares of Fidelity National climbed almost 7% to $34.43 per share since the company reported first-quarter results on April 30, 2014. Also, the year-to-date return of the stock is 6.09%, much above the S&P 500’s return of 2.66% as well as that of another player in the industry, First American Financial Corp. (FAF) that generated a return of (2.23)% over the same period.
During the first quarter, Fidelity National’s top line improved on account of strong revenues by the Remy and FNFV units. Purchase orders and margins also showed improvement during the quarter. Moreover, book value increased, reflecting the company’s decent financial position.
Fidelity National has successfully integrated Lender Processing Services (LPS.V), which helped it to achieve cost synergies in the first quarter and improved margins as well. Moreover, this acquisition has enabled the company to raise its cost synergy target for the upcoming period. Given these positives, Fidelity National is expected to witness core business growth and margin improvement going forward.
Although the near-term prospects of Fidelity National do not seem promising enough, the long-term prospects remain impressive. The Zacks Consensus Estimate for full-year 2014 has decreased 7.8% to $1.88 since the company reported its first-quarter results owing to the downward movement of estimates. This also translates into a year-over-year decline of 13.13%.
However, over the same period, the Zacks Consensus Estimate for full-year 2015 increased 1.2% to $2.45, also translating into a year-over-year improvement of 29.97%. The expected long term growth for the stock is 14.7%.
Fidelity National currently caries a Zacks Rank #3 (Hold). However, better-ranked stocks in the financial services space that are worth considering include Allied World Assurance Company Holdings, AG (AWH), First American Financial and ACE Ltd. (ACE). While Allied World and First American sport a Zacks Rank #1 (Strong Buy), ACE carries a Zacks Rank #2 (Buy).