What happened
Stewart Information Services(NYSE: STC) had a bumpy ride this week as its stock price fell 11.4% from last Friday's close through 11:40 a.m. ET today, Feb. 10, according to S&P Global Market Intelligence. The stock is currently trading at about $45.65 per share, up about 6.7% year to date as of Feb. 10 at 11:40 a.m. ET.
It was not a great week for the markets either, as the S&P 500 was down 1.5%, the Dow Jones Industrial Average fell 0.5%, and the Nasdaq Composite dropped 2.5% this week, as of Friday morning at 11:40 a.m. ET.
So what
Stewart Information Services is a leader in real estate title insurance and related businesses. Investors reacted negatively to a weak fourth-quarter earnings report, which came out on Feb. 8.
Revenue was down about 32% to $656 million, while net income plummeted to $13.3 million, or $0.49 per share, from $85.5 million, or $3.12 per share. The huge declines are reflective of the difficult real estate market, as home and real estate buying has dried up, given the high mortgage rate environment and still high, but coming down slightly, home prices.
Nonetheless, Stewart did miss on earnings expectations, as the consensus target was $0.82 per share. The company did exceed revenue expectations by almost $30 million.
Said Fred Eppinger, CEO at Stewart Information Services, in a press release:
Our fourth-quarter results were impacted by historically low transaction volumes due to the current economic environment and its impact on the housing industry. We have continued to manage our operations during this challenging environment with a reasonable balance of cost discipline and investment in capabilities that we expect will have a positive impact on our business over the long term.
Now what
The real estate market might be slightly improved in 2023, but it will remain sluggish overall. Mortgage rates have come down from highs in October and November, but with the Federal Reserve still raising rates, they will still remain fairly high. Home prices have also come down a bit from their highs last year, but supply will remain tight. That said, the quarterly year-over-year numbers might look better compared to 2022.
Also, the company acquired BCHH in December, a company that provides real estate title and closing services, specializing in single-family rental (SFR) and build-to-rent (BTR) multiproperty bulk acquisitions. It complements Stewart's offerings and taps into a growing market segment.
The stock is cheap right now, with a price-to-earnings ratio of 6, but it is tough to recommend a buy here given the overall environment right now.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
