Fidelity National Financial FNF is well-poised for growth on prudent acquisitions, strategic investments, cost management and solid capital position.
The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 6.6% and 11.3%, respectively in the past 60 days, reflecting analysts’ optimism. Return on equity of 19.9% in the first quarter of 2020 was better than the industry average of 6.5%, reflecting the company’s efficiency in utilizing shareholders’ fund.
The company’s VGM Score of A is also encouraging. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Fidelity National has been generating improved revenues over the last several years given its position as the nation’s largest title insurance and settlement services company. Being a leading player in residential purchase, refinance and commercial markets, the company is poised to benefit from opportunities in the U.S. real estate market
Fidelity National recently acquired FGL Holdings, a life and annuity insurance company, to diversify from its core title insurance business and lower risk and volatility integral to its core title insurance business. The company estimates the acquisition to be more than 10% accretive to 2020 bottom line and more than 20% to 2021 bottom line. Acquisitions have been an important part of the company’s growth strategy.
To control costs during the pandemic, in April, Fidelity National reduced staff count by 18% in field operations and 11% in corporate environment. The company estimates about $200 million annualized savings from these actions. This Zacks Rank #3 (Hold) title insurer boasts the highest margin in the industry.
Last year, the company made investments in its digital platform by expanding the WireSafe and startSafe programs while enhancing core title production system technologies and integrations and advancing automated title and underwriting capabilities.
The stock carries an impressive Growth Score of B. Growth Score analyzes a company’s growth prospects.
Fidelity National boasts a strong capital position which helps it to carry out dividend payout, share buybacks, strategic acquisitions, continued investment in core businesses and debt payment. The company has a credit agreement for $1 billion, 364-day delayed draw term loan, which helps it to maintain adequate liquidity.
Further, its cash and investment portfolio has been improving over last few years. Its debt to capital ratio was 14.1 at first-quarter 2020 end, better than the industry average of 21.8. Times interest earned, identifying how efficiently the company can service debt, of 22.7% is much higher than the industry average of 4.3%.
The company has been increasing dividend for eight straight years. Dividend yield of the company is 3.8%, higher than the industry average of 0.5%, making it an attractive investment option for yield-seeking investors. Though it has 19.9 million shares remaining under its share buyback authorization, the company has temporarily suspended share repurchases due to the pandemic.
The company has a solid history of delivering positive earnings surprise in the last five reported quarters with the average being 18.41%.
Shares of Fidelity National have lost 24.1% year to date compared with the industry's decrease of 11.5%.
Stocks to Consider
Some better-ranked companies in the insurance industry are National General Holdings Corp NGHC, Palomar Holdings, Inc. PLMR, and The Allstate Corporation ALL.
National General, a specialty personal lines insurance holding company, provides various insurance products and services in the United States, Bermuda, Luxembourg and Sweden. Its earnings beat estimates in two of the last four quarters, the average positive surprise being 5.68%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Palomar Holdings provides specialty property insurance. The company surpassed estimates in two of the last four quarters, the average positive surprise being 10.93%.The stock carries a Zacks Rank #2.
Allstate provides property and casualty, and other insurance products in the United States and Canada. The company surpassed estimates in each of the last four quarters, the average positive surprise being 18.45%.The stock carries a Zacks Rank #2.
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