First American Financial (FAF) Up 4.4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for First American Financial (FAF). Shares have added about 4.4% in that time frame, outperforming the S&P 500.

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

FAF Q2 Earnings Top Estimates on Title Strength, Investment Income

First American Financial Corporation reported second-quarter 2026 operating earnings of $2.08 per share, which beat the Zacks Consensus Estimate by 15.6% and rose 35.9% year over year. Operating revenues climbed 15% to $2.1 billion, driven by growth in direct premiums, escrow fees, and Information and other revenues. The top line surpassed the consensus estimate by 4.4%.

The quarterly results benefited from robust commercial title business, higher average revenue per order, solid investment income growth and continued strength in information and subservicing businesses. Elevated operating expenses partly offset these gains.

What’s Behind the Headlines for FAF?

Direct premiums and escrow fees reached $794.1 million, marking a 14.8% increase from the prior-year level. The figure exceeded the Zacks Consensus Estimate and our model estimate by 2.3%. Investment income totaled $183.7 million in the second quarter, up 14.7% year over year, supported by higher interest income from the investment portfolio. The title segment increased 12% in investment income, partially offset by losses at the corporate level. The figure was above our estimate and the Zacks Consensus Estimate of $182.3 million.

Expenses increased 11.4% to $1.83 billion, primarily due to higher personnel costs, production expenses, premiums retained by agents and a rise in interest expense. The figure was above our estimate of $1.80 billion.

FAF’s Segmental Results

Title Insurance and Services: Total revenues rose 16.9% year over year to $2 billion, which beat the Zacks Consensus Estimate by 6.2%. This was driven by 15% growth in direct premiums and escrow fees, agent premiums and steady net investment income. Investment income increased 11% to $164 million, supported by higher interest income from the company's investment portfolio.

Adjusted pretax margin expanded 310 bps to 15.7%. Title open orders increased 0.7% to 188,200, while closed orders declined 0.7% to 137,300. Average revenue per direct title order increased to $4,572, reflecting a 31% increase in commercial average revenue per order, partially offset by a mix shift toward lower-premium refinance transactions.

Home Warranty: Total revenues rose 3.3% to $113.8 million, exceeding our model estimate of $111 million. Pretax income climbed 8.5% year over year to $24.2 million. The claim loss rate improved to 40%, due to lower claim frequency, partly offset by higher claim severity. Pretax margin expanded 110 basis points to 21.3%.

Corporate: The Corporate segment reported a net pretax loss of $56.2 million, narrowing from a $43.8 million loss in the year-ago quarter.        

FAF’s Financial Update

First American exited the second quarter of 2026 with cash and cash equivalents of $2.6 billion, up 89.6% from the 2025-end level. Notes and contracts payable were $1.5 billion, remaining flat from the 2025-end level. Stockholders’ equity was $5.6 billion at the end of the second quarter of 2026, up 2.2% from the 2025-end level. The debt-to-capital ratio was 31.4.

Capital Deployment

The board of directors paid a dividend of 55 per cent per share in the second quarter. FAF repurchased 0.3 million shares for $20 million in the reported quarter at an average price of $61.99 per share.

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 6.84% due to these changes.

VGM Scores

Currently, First American Financial has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock has a score of A on the value side, putting it in the top quintile for this investment strategy.

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

Estimates 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 Player

First American Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Progressive (PGR), has gained 6.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

Progressive reported revenues of $23.01 billion in the last reported quarter, representing a year-over-year change of +6.4%. EPS of $4.85 for the same period compares with $4.88 a year ago.

Progressive is expected to post earnings of $3.77 per share for the current quarter, representing a year-over-year change of -6.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +3.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Progressive. 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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