First American (FAF) Rises 15% in 6 Months: Will the Rally Last?

Core Viewpoint - First American Financial (FAF) has shown strong performance with a 14.7% stock price increase over the past six months, significantly outperforming the industry and S&P 500 growth rates, driven by increased demand for first-time home purchases and technological advancements [1] Group 1: Financial Performance - The Zacks Consensus Estimate for FAF's 2024 earnings is $3.89, reflecting a 2.4% increase, with revenues expected to rise by 4% to $6.2 billion [5] - For 2025, the earnings estimate is $5.06, indicating a substantial 30% increase, with revenues projected to grow by 10.9% to $6.9 billion [5] - The top line is expected to grow at a three-year CAGR of 7.8% through 2026, supported by increasing direct premiums, escrow fees, and title agent premiums [3] Group 2: Growth Drivers - Increased demand for first-time home purchases among millennials, along with a strengthening economy and labor market, is expected to drive home price appreciation [2] - First American is enhancing its product offerings and expanding its valuation and data businesses, which are crucial for long-term growth [3][2] - The company is leveraging proprietary data extraction and strong distribution relationships to maintain its leadership in title data [2] Group 3: Shareholder Returns - First American has a strong dividend history, with an eight-year CAGR of 8.2% from 2016 to 2024, yielding 3.4%, which is significantly higher than the industry average of 0.3% [4] - As of June 30, 2024, the company had $169.6 million remaining under its buyback authorization, indicating a commitment to returning wealth to shareholders [4]