Earnings Miss: First American Financial Corporation Missed EPS By 17% And Analysts Are Revising Their Forecasts

Last week, you might have seen that First American Financial Corporation (NYSE:FAF) released its quarterly result to the market. The early response was not positive, with shares down 4.2% to US$54.22 in the past week. It was not a great result overall. While revenues of US$1.4b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 17% to hit US$0.45 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for First American Financial

Taking into account the latest results, the most recent consensus for First American Financial from four analysts is for revenues of US$6.30b in 2024. If met, it would imply a satisfactory 5.3% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 76% to US$3.71. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$6.36b and earnings per share (EPS) of US$3.90 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target fell 5.1% to US$67.00, with the analysts clearly linking lower forecast earnings to the performance of the stock price. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic First American Financial analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$65.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that First American Financial's rate of growth is expected to accelerate meaningfully, with the forecast 7.1% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 2.7% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 6.0% per year. First American Financial is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 2025, and you can see them free on our platform here..

Before you take the next step you should know about the 1 warning sign for First American Financial that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.