On Monday, Keefe, Bruyette & Woods made an adjustment to the price target for shares of First American Financial (NYSE:FAF), reducing it to $67 from the previous target of $69. Despite this change, the firm has maintained its Outperform rating on the stock.
The decision to lower the price target follows First American Financial's first-quarter earnings miss, as well as expectations of reduced forward investment income and residential order volumes.
This update was based on the recent commentary from the company's management during the earnings call. The management team at First American Financial has indicated that they anticipate the margin to remain flat or possibly increase slightly year-over-year in 2024, despite the results from the first quarter.
Keefe, Bruyette & Woods also revised its earnings per share (EPS) estimates for the years 2024 and 2025. The new estimates are set at $4.03 and $5.08, respectively, marking a decrease from the previously projected figures of $4.10 and $5.25. This revision takes into account the recent performance and forward-looking expectations mentioned by the company's management.
Furthermore, the firm's margin estimates for First American Financial have been slightly lowered to 10.1% for 2024 and 11.3% for 2025. These updated figures are a slight decline from the earlier estimates of 10.3% and 11.7%, respectively. The revised price target of $67 is based on a valuation of 12.5 times the estimated 2025 earnings per share of $5.08, plus an additional $3 per share attributed to the value of venture investments.
The Outperform rating reflects Keefe, Bruyette & Woods' positive outlook on First American Financial's stock, despite the adjustments made following the first-quarter performance and the updated earnings projections.
InvestingPro Insights
As investors consider the revised outlook by Keefe, Bruyette & Woods on First American Financial (NYSE:FAF), real-time data and metrics from InvestingPro can provide further context. The company currently holds a market capitalization of approximately $5.7 billion and exhibits a P/E ratio standing at 26.32, indicating a valuation that may be seen as high relative to near-term earnings growth. Notably, the P/E ratio has slightly decreased to 26.22 when looking at the last twelve months as of Q1 2024.
First American Financial's commitment to shareholder returns is evident with its track record of raising dividends for 15 consecutive years, a testament to its financial stability and a point of interest for income-focused investors. This is complemented by a substantial dividend yield of 3.91% as of the first quarter of 2024, which remains attractive in the current investment landscape.
InvestingPro Tips also highlight that analysts have recently revised their earnings estimates downwards for the upcoming period, which may warrant attention from those closely monitoring the company's performance. However, it's worth noting that the company has been profitable over the last twelve months, and analysts predict profitability will continue this year. For investors seeking a deeper analysis, there are additional InvestingPro Tips available for First American Financial, which can be accessed through a subscription. To enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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