Stewart Information Services Earnings: Here’s Why Investors Like These Results

Stewart Information Services Corp. (NYSE:STC) delivered a profit and beat Wall Street’s expectations, AND beat the revenue expectation. The revenue beat is a positive sign to shareholders seeking high growth out of the company. Shares are down 1.57%.

Stewart Information Services Corp. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased 3.81% to $1.09 in the quarter versus EPS of $1.05 in the year-earlier quarter.

Revenue: Rose 6.92% to $517.2 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Stewart Information Services Corp. reported adjusted EPS income of $1.09 per share. By that measure, the company beat the mean analyst estimate of $0.69. It beat the average revenue estimate of $458.15 million.

Quoting Management: “Throughout 2012 and continuing into 2013, we have diligently executed our plan to simplify our operations and align our organization to our customers’ needs. This focus has resulted in improved financial performance over the last several quarters, and the second quarter 2013 continued the trend of solid financial results,” said Matthew W. Morris, chief executive officer. “Our title operations delivered a 15.4 percent pretax margin, up from 9.9 percent in the prior year quarter, driven by improving transaction volume and increasing prices, as well as lower title losses. We have been able to capitalize on Texas being our home market, with strong job growth feeding ongoing population growth and the concurrent demand for housing. We further benefited from a 3.8 percent rate increase in Texas effective May 1, the first rate increase for the Texas title industry in more than 20 years.”

“Although revenues and pretax margins in our mortgage services operations declined compared to the prior year quarter and this year’s first quarter, the decline was anticipated and does not alter our strategy of continuing to invest in new service offerings, diversify our client base and generate sustainable revenues. We believe that we are well positioned to continue offering outsourcing services and solutions to our lending clients to help them manage the challenge of ever-increasing regulations,” continued Morris.

“As always, we are mindful of developing market conditions. Late in the second quarter and continuing so far into the third quarter, we saw newly opened orders begin to decline, largely as a result of fewer refinancing transactions. Even though refinancing transactions continue to represent a lower proportion of our total direct orders than industry averages, we are actively implementing measures to control costs as closings decline. Notwithstanding the potential for a decline in revenues in the third quarter, we are continuing our plans to focus on strong resale volume and expand our direct office presence in select markets, as our new operating model allows for office expansion that is quickly profitable,” concluded Mr. Morris.

Key Stats (on next page)…

Revenue increased 22.06% from $423.71 million in the previous quarter. EPS increased 626.67% from $0.15 in the previous quarter.

Looking Forward: Analysts have a more positive outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has risen from a profit of $0.66 to a profit $0.67. For the current year, the average estimate has moved up from a profit of $2.07 to a profit of $2.29 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)

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