First American Financial Hits 52-Week High On Solid Q4 Results

Shares of First American Financial (NYSE:FAF) scaled a fresh 52-week high of $66.40 on Feb 14, before closing the day at $65.49. The company’s impressive fourth-quarter earnings performance and its strategic initiatives contributed to this rally. The stock has gained 28.2% in the past year compared with its industry’s 11.8% growth.

This Zacks Rank #1 (Strong Buy) player consistently delivered strong performances on the back of its improving efficiency, better risk profile and solid product offerings.

Let’s delve deeper to analyze the factors responsible for the stock’s upsurge.

What's Driving This Outperformance?

The stock boasts a stellar surprise record, having surpassed estimates in all the last four quarters, the average being 17.7%.

For the fourth quarter of 2019, this property and casualty insurer reported operating income per share of $1.80, which topped the Zacks Consensus Estimate by 33.3%. Moreover, the bottom line rose 41.7%. Also, operating revenues of $1.7 billion increased 22% year over year, beating the Zacks Consensus Estimate by 6.9% as well.

In the fourth quarter, the company's closed title orders increased 27%, attributable to 131% rise in refinance orders. Its Title Insurance and Services as well as Specialty Insurance segments also contributed to its results, which remains impressive to investors. Increase in investment income and improved segmental performance were partially offset by higher expenses.

Investors’ confidence was won by the company’s ability to deliver a solid top line, attributable to its growing premiums and net investment income. In fact, the company’s revenues grew 8% year over year in 2019.

Net investment income, a major component of an insurer’s top line, shows a steady increase of nearly 37% in 2019.

The company has a strong balance sheet. On the back of its financial strength, the company engages in shareholder-friendly moves. It has been consistently hiking its dividend payout each year, witnessing a five-year CAGR of more than 11%.

Its dividend yield is currently 2.6%, way above the industry average of 0.4%. These activities make the stock an attractive pick for yield-seeking investors.

Other Stocks to Consider

Investors interested in the insurance industry can consider some other top-ranked stocks like CNA Financial Corporation (NYSE:CNA) , RLI Corp. (NYSE:RLI) and American Financial Group, Inc. (NYSE:AFG) . While CNA Financial and RLI Corp. currently sport a Zacks Rank of 1, American Financial carries a Zacks Rank #2 (Buy), each of which surpassed respective estimates in the last reported quarter by 6.59%, 28.57% and 0.45%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

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