Why Is First American Financial (FAF) Down 1.3% Since Last Earnings Report?

A month has gone by since the last earnings report for First American Financial (FAF). Shares have lost about 1.3% in that time frame, outperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is First American Financial due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for First American Financial Corporation before we dive into how investors and analysts have reacted as of late.FAF Q3 Earnings Top on Solid Investment Income, Dividend RaisedFirst American Financial Corporation reported third-quarter 2025 operating income per share of $1.70, which beat the Zacks Consensus Estimate by 19.7%. The bottom line increased 26.8% year over year.The quarterly results reflect higher premiums, improved net investment income, expanded pretax margin, and a declining claim loss rate.What’s Behind the Headlines for FAF?Operating revenues of $1.9 billion increased 40.7% year over year due to higher direct premiums and escrow fees, agent premiums, information and other, as well as improved net investment income. The top line also beat the Zacks Consensus Estimate by 6.8%.Investment income was $163.8 million in the third quarter, up 11.7% year over year. Our estimate was $146.6 million.Expenses rose 11.7% to $1.7 billion. Our estimate was $1.6 billion.FAF’s Segment ResultsTitle Insurance and Services: Total revenues increased 42% year over year to $1.8 billion. The upside was due to higher direct premiums and escrow fees, agent premiums, information and other as well as improved net investment income. Our estimate was $1.7 billion. Investment income of $153.1 million increased 12.1% year over year. The increase was primarily driven by higher interest income from FAF's investment portfolio. It was partly offset by lower interest income from operating cash due to a decline in balances as well as lower short-term interest rates.Adjusted pretax margin expanded 130 basis points (bps) year over year to 12.9%. Title open orders increased 15.2% to 191,300. Title closed orders increased 16.6% to 141,800. The average revenue per direct title order increased 22% to $16,100.Home Warranty: Total revenues increased 3.3% to $114.6 million, lower than our estimate of $115.8 million. Pretax income of $16 million increased 80% year over year. The claim loss rate declined to 47% in the reported quarter, primarily due to lower claim frequency attributable to favorable weather conditions. The pretax margin was 14.1%, expanding 600 bps year over year.Corporate: Corporate pretax loss (excluding net recognized investment gains and losses) was $25 million in the reported quarter, up $6 million compared with the third quarter of 2024. The increase in the pretax loss was due to $3 million in higher interest expense in the current quarter and a favorable reserve adjustment that reduced the net loss last year.FAF’s Financial UpdateFirst American exited the quarter with cash and cash equivalents of $2.91 billion, up 69.4% from the end of 2024. Notes and contracts payable were $1.5 billion, down 0.07% from the end of 2024.Stockholders’ equity was $5.3 billion, up 8% from the 2024-end level. The debt-to-capital ratio was 33. FAF bought back shares worth $34 million in the quarter. Cash flow from operations was $273 million, up 15.2% year over year.First American Raises DividendThe board of directors raised the dividend by 2 cents to $2.20 per share. Theboard declared a dividend of 55 cents in the third quarter.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a upward trend in fresh estimates.The consensus estimate has shifted 8.94% due to these changes.VGM ScoresAt this time, First American Financial has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a score of A on the value side, putting it in the top 20% for value investors.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise First American Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Performance of an Industry PlayerFirst American Financial is part of the Zacks Insurance - Property and Casualty industry. Over the past month, W.R. Berkley (WRB), a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended September 2025 more than a month ago.W.R. Berkley reported revenues of $3.69 billion in the last reported quarter, representing a year-over-year change of +8.2%. EPS of $1.10 for the same period compares with $0.93 a year ago.W.R. Berkley is expected to post earnings of $1.12 per share for the current quarter, representing a year-over-year change of -0.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.W.R. Berkley has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report First American Financial Corporation (FAF): Free Stock Analysis Report W.R. Berkley Corporation (WRB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks