Following are the catalysts provided by Barclays:
- "First, we estimate a potential BKFS spin would unlock ~15 percent of hidden sum-of-the-parts value.
- "Second, accretive deployment of the current ~$500 million HoldCo dry powder should translate into considerable EPS upside.
- "Third, near-term core title margins could continue to beat forecasts if July's significant refi activity persists and announced headcount reductions fully fall to the bottom line.
- "Finally, further purchase market strength could more than offset an expected commercial pullback and benefit EPS."
Barclays expects Fidelity National Financial to announce a tax-free spin of BKFS toward the end of the year; however, the distribution would likely occur in 2017.
The brokerage noted that the BKFS stake is worth about $11.50 per Fidelity share, implying that the earnings ex-BKFS are trading at a 2x–3x P/E discount to FAF.
According to Barclays, Fidelity's stock currently trades at the same about 14x forward P/E multiple as its closest competitor, ignoring the fact that $0.30–$0.35 of the stock's EPS comes from the fintech company BKFS, which trades at about 30x earnings.
At time of writing, shares were seen up 1.84 percent to $38.20. Barclays has a price target of $48 on the stock.
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