Fidelity National (FNF) Q3 Earnings Miss Estimates, Up Y/Y

Fidelity National Financial, Inc.’s FNF third-quarter 2016 adjusted earnings from continuing operations of 69 cents per share missed the Zacks Consensus Estimate of 75 cents by 8%. Share price declined 4.2% in the last two trading sessions, reflecting the underperformance. However, the bottom line improved 15% year over year.

In the third quarter, Fidelity National continued with its mid-single-digit growth in the purchase market and displayed strength in the residential refinance market. Despite a slowdown in commercial revenues, the company remains confident that its title insurance business will have a solid finish this year.

Behind the Headlines

Revenues of about $2.2 billion increased 10% year over year. Improvement in both Direct and Agency title premiums, and Escrow, title related and other fees drove the year-over-year growth.

Title segment revenues rose about 7% year over year to $1.9 billion from $1.7 billion. Adjusted pre-tax earnings increased 10.5% year over year to $295 million. Total commercial revenue decreased 10% year over year to $233 million. Average fee per file declined 6% from the year-ago quarter, while title claim decreased 20% year over year.

For the other segment known as Black Knight Financial Services, Inc. BKFS the company reported revenues of $267 million, of which Servicing Technology revenues contributed approximately $176 million. Pre-tax earnings decreased 3% to $38 million.

Total expense for the third quarter came in at $1.9 billion, up 8.7% from $1.8 billion in the year-ago quarter. Higher personnel cost, agent commissions, other operating expenses, and claim loss expenses were primarily responsible for the increase in expenses.

Adjusted earning before interest, taxes, depreciation and amortization (EBITDA) was $417 million as against $373 million in the year-ago period. EBITDA margin in the third quarter was 18.9% compared with 18.4% in the prior-year quarter.

Financial Update

Adjusted cash flows from operations jumped 29.3% year over year to $362 million. Capital expenditure decreased 29.8% year over year to $33 million. Free cash flow surged 41.2% year over year to $329 million.

Share Repurchase Update

The company spent $41 million to buy back 1.1 million shares in the quarter.

FNF GROUP Price, Consensus and EPS Surprise

FNF GROUP Price, Consensus and EPS Surprise | FNF GROUP Quote

Zacks Rank

Currently, Fidelity National carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among the other players from the insurance industry that have reported their third-quarter earnings so far, the bottom line at Progressive Corp.PGR and The Travelers Companies Inc. TRV beat their respective Zacks Consensus Estimate.

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