Weak mortgage market sinks Fidelity title insurance revenue

Analysts say the title insurer is managing well in a tough environment.

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  • | 12:05 a.m. August 17, 2023
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Fidelity National Financial Inc.
Fidelity National Financial Inc.
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Fidelity National Financial Inc.’s second-quarter earnings were cut in half from last year as a weak mortgage market lowers demand for its core title insurance business.

However, company officials said they are happy with Fidelity’s performance in this environment and analysts also said it was a good quarter under the circumstances.

Jacksonville-based Fidelity reported adjusted earnings of $1.01 a share, down from $2 in the second quarter of 2022 with title insurance revenue dropping 27%.

“We are very pleased with this result, which reflects strong sequential margin improvement across our title-related businesses,” CEO Mike Nolan said in an Aug. 9 conference call with analysts.

“This strong performance really demonstrates our approach to running the business, highlighting our ability to manage through economic cycles and react quickly to changing order volumes,” he said.

Analysts generally agreed with Nolan’s assessment.

“The strong pre-tax title margin in the quarter (15.8%) suggests the company is well positioned to navigate the current challenging (but improving) mortgage volume backdrop,” Keefe, Bruyette & Woods analyst Bose George said in a research note.

“We are maintaining our Outperform rating given the strong execution in 2Q, an improving outlook for the mortgage market, and the discounted valuation compared to peers,” he said.

“FNF’s title business is being managed well through a tough mortgage market and F&G’s annuity/fee-based revenue stream is providing meaningful earnings support in the current environment,” BTIG analyst Soham Bhonsle said in his note.

Fidelity spun off 15% of annuity and life insurance subsidiary F&G Annuities & Life Inc. as a separate public company in December 2022. Bhonsle expects Fidelity to eventually spin off its remaining majority interest in F&G.

Stephens analyst John Campbell said in a note the F&G results make Fidelity’s earnings “fairly hard to unpack at the surface.”

“However, zeroing in on the core Title business, FNF delivered impressive results with an approximate 24% beat vs. our Title adjusted pretax income” estimate, he said.

RYAM considering options for non-core operations

Rayonier Advanced Materials Inc., or RYAM, reported a second-quarter loss and CEO De Lyle Bloomquist said the Jacksonville-based company is considering strategic options for some non-core operations.

The Jacksonville-based cellulose specialty products company, which has recorded losses from continuing operations for the last four years, reported a second-quarter loss from continuing operations of $16 million, or 24 cents a share.

“The results were below our expectations, mainly due to destocking in certain cellulose specialties and paperboard market sectors and ongoing declines in commodity prices, in particular for viscose and paper pulp,” Bloomquist said in an Aug. 9 conference call.

RYAM’s cellulose specialties business produced $300 million of the company’s $385 million in total revenue and paperboard products produced another $48 million.

Those businesses are expected to produce nearly $300 million in earnings before interest, taxes, depreciation and amortization this year but RYAM’s non-core viscose and paper pulp businesses are expected to subtract $50 million from EBITDA, Bloomquist said.

“The production and sales of (the non-core) commodity products have masked the strength and profitability of our cellulose specialty segment and, in times like these, only provide marginal financial benefit,” he said.

So, RYAM will review options for those businesses in the next couple of months, Bloomquist said.

“We’ll look to optimize our asset base to reduce cost and minimize exposure to these commodity businesses to ensure the long-term success and sustainable growth of our overall enterprise,” he said.

Firehouse Subs still lagging company’s other brands

Sales growth at Firehouse Subs continues to lag behind the other three chains owned by Restaurant Brands International Inc.

RBI reported Firehouse’s total sales rose 5.1% in the second quarter to $307 million and comparable sales at restaurants open more than one year rose 2.1%.

Total sales at RBI restaurants, which also include the Burger King, Popeyes and Tim Hortons chains, rose 14% to $10.95 billion with comparable sales rising 9.6%.

Firehouse’s sales growth has trailed the other three brands since Toronto-based RBI bought Jacksonville-based Firehouse in December 2021.

In an Aug. 8 conference call, RBI Chief Executive Josh Kobza said developing new markets for Firehouse is a priority for the company. Firehouse opened its first European restaurant in Switzerland in June and reached a development deal to open restaurants in Mexico, he said.

The company is “working hard to bring this iconic brand to even more countries all around the world,” Kobza said.

Redwire Corp. Q2 revenue jumps 64%

Jacksonville-based space technology company Redwire Corp. reported second-quarter revenue rose 64% to $60.1 million, and it projects revenue for the full year of $220 million to $250 million.

In an Aug. 8 conference call, CEO Peter Cannito said the company expects more growth.

“We continue to have a healthy pipeline with an estimated $3.7 billion of identified opportunities, including $512 million in proposals submitted and currently under review by our customers,” he said.

Treace Medical metrics pointing up

Treace Medical Concepts Inc. is at least a couple of years away from profitability, but financial metrics for the Ponte Vedra-based company are pointing up.

Treace Medical, which developed and is marketing a surgical procedure to treat bunions, reported second-quarter revenue rose 40% to $42 million.

The company’s market share of the estimated 450,000 annual surgical bunion procedures in the U.S. reached 6.2% in the second quarter, up from 5.8% in the first quarter and 4.6% in the second quarter of 2022.

The number of surgeons using the procedure reached 2,581 in the second quarter, 26% more than last year.

“Our strategic investments and commercial focus have continued to support the growth of our business, giving us confidence that we have a well-defined, proven, and scalable commercial strategy,” CEO John Treace said in an Aug. 8 conference call with analysts, according to a company transcript.

The company is projecting full-year revenue of $191 million to $197 million, up 35% to 39% from 2022.

“The implied 2H (second half of the year) guide looks conservative, in our view, given favorable adoption, utilization and ASP (average sales price) trends continuing in the right direction unlocking further upside,” Morgan Stanley analyst Drew Ranieri said in a research note.

Treace Medical reported a net loss of $12.3 million, or $0.20 per share, in the quarter. 

Cadrenal Therapeutics sees additional drug uses

Cadrenal Therapeutics Inc., which went public in January, is a pharmaceutical research company that does not yet have a product on the market.

However, the Ponte Vedra Beach-based company said in its second-quarter update that it sees an additional potential use for its drug under development, called tecarfarin.

The drug is an anticoagulant designed to prevent heart attacks, strokes and deaths due to blood clots in patients with certain medical conditions.

“Over the past few months, it has become increasingly clear that the opportunity for tecarfarin reaches beyond patients with end-stage kidney disease and atrial fibrillation,” CEO Quang Pham said in an Aug. 10 news release.

“Based on our clinical data, extensive market research, and insights from key industry experts, we believe implanted medical devices for heart diseases, such as LVADs, could be a potential additional indication for tecarfarin,” he said.

Cadrenal estimates there are more than 14,000 patients in the U.S. with left ventricular assist devices, or LVADs, which could benefit from the drug, creating a market opportunity of about $600 million per year.

The company estimates its other addressable markets for tecarfarin could produce $1 billion per year in revenue.

Cadre still pursuing acquisition opportunities

Cadre Holdings Inc. reported higher second-quarter earnings as the Jacksonville-based maker of safety and survivability equipment for first responders continues to pursue acquisition opportunities.

Cadre reported earnings of 29 cents a share, up from 12 cents in the second quarter of 2022, with revenue rising 2.4% to $121.1 million.

The company said earnings benefited from higher profit margins.

In an Aug. 8 conference call, CEO Warren Kanders said Cadre made 10 acquisition proposals in the past year for companies valued between $25 million and $200 million.

None of them came to fruition, possibly because of a disconnect between the seller’s and Cadre’s price expectations or “a lack of confidence on the seller’s part that business would hold up to the due diligence scrutiny,” Kanders said.

“While we would like to have something to announce by this point in the year, we remain confident based on our activity we should be able to announce or close one to two transactions this year,” he said.

FRP Holdings facing obstacles from inflation, rates

FRP Holdings Inc. reported second-quarter revenue rose 11% to $10.7 million, but earnings fell by a penny to 6 cents a share.

The Jacksonville-based real estate development company said in an Aug. 9 news release that inflation and higher interest rates “remain an obstacle” for developers.

“In (relatively) less capital-intensive projects like warehouse construction, this situation is potentially beneficial, because we can use our cash on hand to finance construction on an all equity basis and develop in-demand industrial product while the interest rates on construction loans keep most development on the sidelines,” FRP said.

“But in the instance of multi-family development, where a construction loan is an absolute necessity, we will in all likelihood sit tight for the time being,” it said.

Jacksonville-based Ameritape acquired

Sur-Seal, a Cincinnati-based sealing solutions company, announced Aug. 8 it acquired Jacksonville-based Ameritape, which provides die cutting, slitting, laminating and computer numerical control cutting services.

Terms of the deal were not announced.

Sur-Seal said in a news release that adding Ameritape expands its engineering capabilities and expands its customer relationships in the Southern U.S. 



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