Summary
- Fidelity National is undervalued on both a relative and intrinsic basis.
- The company, a market leader in title insurance, stands to benefit from the booming housing market.
- With a growing dividend that yields 4.21%, we can benefit from our investment while we wait for the company to grow to fair value.
Fidelity National (FNF) is unquestionably undervalued both on a relative and intrinsic basis. With the booming housing market as a headwind, the company is headed for a long runway of growth.
The company also completed its acquisition of F&G during the quarter, and a snippet of its performance added to the second quarter's performance.
Along with the growth from a market-leading position in title insurance, the company also supports a growing dividend that yields 4.21%.
Let's dive in and take a look, shall we?
Overview
Fidelity National reported its second-quarter earnings ending June 30, 2020. The company specializes in real estate insurance, focusing on title insurance, escrow, and other title-related services.
Founded in 1847 and based out of Jacksonville, FL, the company currently has a market cap of $9.42B and has a market price of $31.46.
Some highlights from the second quarter:
- Total revenue of approximately $2.4 million and an increase of 12.5 over the comparable quarter of 2019.
- Second-quarter earnings of $304 million and adjusted earnings of $305 million compared to the earnings of $266 million and adjusted earnings of $255 million in 2019.
- Diluted second-quarter EPS of $1.09 and diluted adjusted EPS of $1.09 compared to diluted EPS of $0.96 and adjusted EPS of $0.92 for 2019.
- Completion of the FGL Holdings acquisition with the results folded into Fidelity National's financials for one month ending the second quarter.
A little more detail on the quarterly performance of Fidelity National, as the company breaks up its operations into three segments:
- Title
- F&G
- Corporate and other
Title
Let's take a look at the operations of the title segment first.
The title segment had revenues of $$2,224 million, which was a 6% increase over the comparable quarter of 2019. Correspondingly, the segment's earnings increased by 26%, for a total of $528 million.
Title premiums decreased by 1% at quarter's end. The decreases stemmed from a decrease in title premiums from direct operations of $50 or 8%, offset by an increase in title premiums from agency operations of $30 or 4%.
