First American Financial (FAF) Down 4.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for First American Financial (FAF). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is First American Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

FAF Q4 Earnings Top, Revenues Rise Y/Y on Strong Title Segment

First American Financial Corporation reported fourth-quarter 2025 operating earnings of $1.99 per share, which beat the Zacks Consensus Estimate by 33.6% and rose 47.4% year over year. Operating revenues climbed 22% to $2 billion, driven by growth in direct premiums, escrow fees, and Information and other revenues. The top line surpassed the consensus estimate by 10%. The quarterly results were supported by higher premiums, stronger net investment income, expanded pretax margin and a lower claim loss rate. These gains were partly offset by elevated operating expenses.

What’s Behind the Headlines for FAF?

Direct premiums and escrow fees reached $789.4 million, marking a 17.3% increase from the prior-year level. The figure exceeded the Zacks Consensus Estimate by 11.4% and our model estimate by 11.3%. Investment income totaled $161.8 million in the fourth quarter, up 3.1% year over year, beating our estimate of $155.7 million and the Zacks Consensus Estimate of $157.3 million.
Expenses increased 7% to $1.8 billion, caused by higher personnel costs, other operating expenses and interest. The figure exceeded our estimate of $1.6 billion.

FAF’s Segmental Results

Title Insurance and Services: Total revenues rose 21% year over year to $1.9 billion, which beat the Zacks Consensus Estimate of $1.7 billion. This was driven by higher direct and agent premiums, escrow fees, information and other revenues, and steady net investment income. Investment income increased 1% to $157 million, supported by higher portfolio interest income, partly offset by lower operating cash balances and reduced short-term rates.

Adjusted pretax margin expanded 220 bps to 14%. Title open orders grew 13.8% to 167,400, closed orders rose 14.2% to 141,500, and average revenue per direct title order increased 3.5% to $4,350, reflecting a 22% jump in commercial order revenues. This was partly offset by a mix shift toward lower-premium refinance and default transactions.

Home Warranty: Total revenues rose 7.3% to $110.3 million, surpassing our model estimate of $109.8 million. Pretax income climbed 25.3% year over year to $23.3 million. The claim loss rate improved to 40.1%, driven by lower claim frequency from favorable weather, partly offset by higher severity. Pretax margin expanded 300 bps to 21.1%.

Corporate: The Corporate segment reported a net pretax loss of $24 million, narrowing from a $45 million loss in the year-ago quarter. This year-over-year improvement was partly driven by a $15 million insurance recovery in the reported quarter.

Full-Year Highlights

Full-year 2025 adjusted income of $6.05 per share increased 37.5% year over year. The figure beat the Zacks Consensus Estimate by 8.8%. Total revenues increased 21.6% year over year to $7.5 billion. The metric beat the Zacks Consensus Estimate by 2.4%.

FAF’s Financial Update

First American exited 2025 with cash and cash equivalents of $1.4 billion, down 19.3% year over year. Notes and contracts payable were $1.5 billion, down 0.1%. Stockholders’ equity was $5.5 billion at the end of 2025, up 12% from the 2024-end level. The debt-to-capital ratio was 30.7. Cash flow from operations was $951 million, up 6% year over year.

Capital Deployment

The board of directors raised the dividend by 2% to an annual rate of $2.20 per share in 2025. FAF repurchased 2.1 million shares for $122 million in 2025 at an average price of $58.54 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in estimates review.

VGM Scores

At this time, First American Financial has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock has a grade of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 Player

First American Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Hanover Insurance Group (THG), has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Hanover Insurance reported revenues of $1.69 billion in the last reported quarter, representing a year-over-year change of +4.3%. EPS of $5.79 for the same period compares with $5.32 a year ago.

For the current quarter, Hanover Insurance is expected to post earnings of $4.44 per share, indicating a change of +14.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Hanover Insurance. Also, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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