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First American Financial Corporation Beat Analyst Estimates: See What The Consensus Is Forecasting For Next Year

First American Financial Corporation (NYSE:FAF) investors will be delighted, with the company turning in some strong numbers with its latest results. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 16% higher than the analysts had forecast, at US$1.9b, while EPS were US$1.62 beating analyst models by 27%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for First American Financial

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After the latest results, the consensus from First American Financial's four analysts is for revenues of US$6.28b in 2021, which would reflect a measurable 5.8% decline in sales compared to the last year of performance. Statutory earnings per share are expected to nosedive 22% to US$4.44 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$6.17b and earnings per share (EPS) of US$4.20 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$62.20, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic First American Financial analyst has a price target of US$66.00 per share, while the most pessimistic values it at US$55.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the First American Financial's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 5.8%, a significant reduction from annual growth of 4.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - First American Financial is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around First American Financial's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that First American Financial's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$62.20, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for First American Financial going out to 2022, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 1 warning sign for First American Financial you should know about.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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