Shares of Fidelity National Financial FNF have rallied 24.5%  year to date, outperforming the Finance sector’s increase of 22.8%. It, however, underperformed the industry’s increase of 35.3% as well as the S&P 500 composite’s rise of 26%. 

FNF stock is trading well above the 50-day moving average, indicating a bullish trend, and is near its 52-week high. 

With a capitalization of $17.4 billion, FNF has a market-leading position in residential purchase, refinance and commercial markets.  Market share growth, solid margin, competitive advantages, strong track record of technology innovation and wealth distribution are driving this title insurer.

FNF vs. Industry, Sector, S&P 500

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Average Target Price for FNF Suggests an Upside

Based on short-term price targets offered by five analysts, the Zacks average price target is at $66.20 per share. The average suggests a potential 4.2% upside from Wednesday’s closing price of $65.01.

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Mixed Analyst Sentiments

One of the three analysts covering the stock lowered estimates for 2024, while one increased the same for 2025 over the past 30 days. The consensus estimate for 2024 has moved 0.7% south for 2024 and 0.9% north for 2025 in the past 30 days.

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The Zacks Consensus Estimate for 2024 implies a 26.7% year-over-year increase, while the same for 2025 suggests a 28% increase.

Factors Impacting FNF Stock

Fidelity National, by virtue of its strong market presence, enjoys a scale advantage. Its scale and volume fuel revenues and lower costs provide a competitive advantage. It is also investing in technology to widen its market-leading position.

FNF expects higher commercial volumes as the office sector begins to transact and continued strength in the industrial, multifamily and energy sectors, among others, in 2025.

Real estate-related businesses complement its core title business. The title insurer’s strategic move to buy F&G Annuities & Life, a leading provider of annuity and life insurance concentrated in the middle-income market with a diversified growth strategy, shields it from the volatility integral to the core title insurance business. 

The assets under management should benefit from solid retail annuity sales and F&G's presence in institutional markets benefit. F&G invests in a high-quality and well-diversified portfolio and its average assets under management growth drives earnings.

Banking on operational expertise, FNF has a solid capital position that supports wealth distribution, mergers and acquisitions, organic growth initiatives and debt payments.

With the Federal Reserve cutting interest rate, FNF estimates quarterly interest and investment income to trend down. Anticipating Fed funds rate cuts of 100 basis points over the next nine months, this title insurer estimates net investment income to be down to $95 million in the fourth quarter of 2024 to $85 million in the third quarter of 2025. In fact, FNF stated that every 25-basis point decrease in Fed funds is expected to result in an approximate $15 million annualized decline in its interest and investment income.

Notes payable increased 7.7% as of Sept. 30, 2024. Though leverage of 52 improved 447 basis points, it compared unfavorably with the industry average of 1.4. Times interest earned too compared unfavorably with the industry average.

FNF’s Dividend History Impressive

FNF’s distribution of wealth to shareholders via dividend hikes is impressive. Fidelity National has increased dividends at a 10-year CAGR of 9.7%. The dividend yield is 3.3%, better than the industry average of 0.3%.

FNF’s dividend yield betters other industry players like Stewart Information Services STC and Old Republic International ORI.

Fidelity National’s Return on Capital

FNF’s return on equity in the trailing 12 months was 13.7%, better than the industry average of 7.6%, reflecting efficiency in utilizing shareholders’ funds.

However, its return on invested capital (ROIC), which reflects a company’s efficiency in utilizing funds to generate income compares unfavorably with the industry. FNF’s ROIC in the trailing 12 months was 5.9%, lower than the industry average of 5.8%.

FNF Shares Are Overvalued

FNF shares are trading at a price-to-book multiple of 1.95, higher than the industry average of 1.63. Yet, it has a Value Score of A.

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To Conclude

FNF is set to grow on higher direct and agency premiums, strong origination demand and effective capital deployment. As the nation’s largest title insurance company, Fidelity National should benefit from solid long-term fundamentals for U.S. residential and commercial real estate markets, given its largest and deepest real estate data networks. 

An impressive dividend history and a VGM Score of B are other positives for the stock. 

Yet, premium valuation, unfavorable leverage and times interest earned, and interest rate cut weigh on interest and investment income.  

It is thus wise to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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