Stewart Information Servs Q3 2026 Earnings Call Transcript

Stewart Information Servs (NYSE:STC) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Stewart Information Servs reported a challenging third quarter due to high mortgage rates, leading to a decline in residential home sales and a decrease in earnings per share compared to last year.

Despite the tough residential market, the company’s commercial services segment showed strength with 9% growth, and strategic acquisitions like Tower Title and Radicon Title are expected to bolster future growth.

The company remains focused on managing expenses while capitalizing on market opportunities, with plans to continue expanding in attractive geographies and enhancing their competitive position in commercial services.

Full Transcript

OPERATOR

Hello and thank you for joining the Stewart Information Servs third quarter 2026 earnings call. At this time all participants are in a listen-only mode. Later you will have an opportunity to ask a question during the question-and-answer session. Instructions will be given at that time. Please note today’s call is being recorded. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn today’s conference over to Brian Glaze, Chief Accounting Officer.

Please go ahead.

Brian Glaze (Chief Accounting Officer)

Thank you for joining us today for Stewart Information Servs’ third quarter 2026 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO Fred Eppinger and CFO David Hisey. To listen online, please go to the stewart.com website to access the link for this conference call. This conference call may contain forward-looking statements that involve a number of risks and uncertainties including Please refer to the company’s press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ materially. During our call we will discuss some non-GAAP measures for reconciliation of these non-GAAP measures.

Please refer to the appendix in today’s earnings release which is available on our website at stewart.com let me now turn the call over to Fred.

Frederick Eppinger (Chief Executive Officer)

Thank you for joining us today for Stewart Information Servs’ third quarter 2026 earnings conference call. Yesterday we released the financial results for the quarter and I will kick off today’s call with an overview of our outlook for housing followed by a review of our performance for the period and strategic direction broadly by business. I will then turn the call over to David so he can provide further commentary on our performance for the quarter.

In the third quarter the market began to set a new lower bar for residential housing market primarily driven by the rapid escalation in the 30 year mortgage rate throughout the quarter. In August the 30 year rates moved higher than the same period year prior and the rapid increase continued rates around 7 and a half into October. As I’ve seen in the past few years. Buyers will very quickly move to the sidelines in a situation where rates meet or exceed 7% when rates move up very quickly.

In Q3, we experienced both these scenarios resulting in a below 4 million existing home sales for two of the three months in the quarter, a decrease of about 3 to 4% year over year in August and September. We believe the residential market conditions will continue to decay into the next quarter. Considering this outlook, we will be very focused on managing our business investments and expenses while continuing to capitalize on some of the market opportunities this disruptive market will create.

In the third quarter, we delivered adjusted earnings per share of $1.33 year to date. Total operating revenue was up 22% and adjusted EPS growth was up 8% for the quarter, growth slowed to 13% and our adjusted EPS delivery was below last year’s third quarter. As we saw decreased margins some of our businesses due to rapidly decreasing residential volume off historic lows. Our national commercial services business continued to deliver solid performance with overall commercial growing 9%.

While the growth was less than our recent run rate, our order growth is strong and our competitive position continues to improve. We did see a number of closing shifts in the fourth quarter which is not uncommon in the changing market. We continue to be very positive on our improving competitive position and our future growth opportunity in the third quarter. We also welcomed Tower Title to the family, expanding our commercial energy and infrastructure team capabilities for servicing the telecommunications space. The acquisition of best in class talent has remained our strategic growth priority for the NAX and commercial services and the addition of Tower Title as well as the strategic we executed last quarter will help us further bolster this business for the long term success as these new hires ramp up in their seats and begin to convert business in the coming quarters.

We have had a lot of momentum in this space in the last three years and we will continue to encounter some tough comparables for ourselves given the outsized growth we’ve had. Overall, we remain positive of the large commercial and continue to see growth across multiple asset classes, though that growth is often lumpy given the timelines and transaction sizes. Our direct operations bear the brunt of the slowing residential market and drove the majority of our margin reduction in title. Overall, our direct title operation business unit grew consolidated residential refinance of Main street commercial by 1% in the second quarter compared to the same time frame last year we saw residential volumes decrease by 3% and refi shrink 7%. That was offset by our Main street commercial delivering 11% growth.

Our growth plan for this business remains focused on strengthening our position in attractive MSAs through organic and inorganic efforts and continue to grow Main street commercial in 2026 we have seen more opportunities present themselves in attractive geographies. Given market conditions, we will still focus on pursuing these opportunities, but we are sharpening our pencils even further to ensure they fit in our long term financial goals. In the third quarter we announced the acquisition of Radicon Title, one of the oldest and well respected title agencies in Texas servicing Fort Worth. This transaction is a great example of a strong strategic fit for Stewart as it strengthens our position in the Dallas Fort Worth marketplace giving us a Fort Worth strong Our centralized title operations which are included in our direct title revenue summary, includes our centralized refinance, institutional business and remorse business.

In the third quarter we welcomed Pro Title USA and Dockey Solutions USA to this organization. The addition of these companies along with our existing offerings expand our scale in the title services for investors and capital market clients. In the third quarter we grew this business 20% for these businesses. Finally moving to our international operations, we focused on profitably growing our business. In the third quarter we saw a slight deceleration of our non commercial revenue by 1%. However, we have grown our revenue in this business unit by 4% year to date, which is solid given the Canadian residential marketplace has been decelerating the existing home sales since September of 25. On the commercial front, we delivered $7.3 million in revenue consistent sequentially with the second quarter behind 3Q25.

As we had a handful of very large transactions that closed the third quarter last year. We believe we are on the right track in our international operations and we will continue to build on the strong positions in these markets and continue to grow share. Turning to agency Services in the third quarter we saw net revenues by 11% compared to the third quarter of last year. We are pleased with this given that the agents confirmed the same challenged residential market as our direct operations. We are focused on growing this business through winning the business with new agents and expanding wallet share of existing agents.

With the emphasis on 15 target states in addition to the expansion of our commercial footprint for agents, we continue to make good progress on these priorities with residential premiums up 7% and commercial premiums up 25% in the third quarter when compared to the same time frame last year. As mentioned last quarter we took advantage of some market disruption and expanded our agency team which we have and will continue to see the benefit of the benefit of as they ramp up and settle into their positions.

While increasing market challenges will put pressure on future growth we believe our ability to shift share should continue turning to our real estate solutions business. In the third quarter we grew revenue by 68% and 7% after removing the impact of two acquisitions we made this year, MCS and the End. Our adjusted pre tax margin slipped from 11.3% last year to 10.5% this year. The margin was driven by by a significant slowdown in orders and revenue from existing accounts. In informative research our credit data business and in appraisal from a strategic perspective, we remain focused on continuing to expand our coverage and servicing of the top 300 lenders.

Our suite of products and services is in good position in giving us even a great ability to cross sell through business. I am pleased that we are able to maintain our double digit margins in these conditions and believe we will get to low to mid teens margin delivery to the execution of our strategic priorities in a more stable residential market environment over the next two to three quarters. I believe we are setting a new floor in the residential market that will likely continue into the next quarter. We will react to market changes by taking needed actions but will be careful to retain the resources needed to serve our clients and react to opportunities I believe will come from this disruption. We remain focused on being a resilient company that has a growing portfolio of operations that will deliver share growth and improving margin performance over the next two to three years.

Thank you for your time, attention and interest in Stewart Information Servs as an enterprise. We are dedicated to being the premier title real estate services company. I’m proud to share that in the third quarter we delivered our seventh dividend increase in just under six years raising our annual dividend from $2.10 a share to $2.20 per share. We are committed to strengthening and growing the company for continued long lasting success while confronting the current challenging conditions.

To our customers and agents, thank you for your trust and dedication to Stewart Information Servs. We are committed to serving you with excellence. And to the Stewart Information Servs team, I want to thank you for your dedication and perseverance. It takes considerable effort to grow our company and even more so to confront such a challenging residential housing conditions. Thank you for your commitment to the company. I look forward to seeing where we can take this company together.

So David, I’ll now turn it over to you to provide an update on our results.

Brian Glaze (Chief Accounting Officer)

Good morning everyone, and thank you, Fred. I want to thank our employees and customers for their continued support and partnership as we navigate this even more challenging real estate market. With 30-year mortgage rates over 7% since mid-September, yesterday, Stewart reported third quarter 2023 net income of 30 million with diluted EPS of $0.98 compared to the prior year’s quarter net income of 44 million and diluted EPS of $1.55. On an adjusted basis, third quarter net income was 41 million, or diluted EPS of $1.33, compared to net income of 47 million, or diluted EPS of $1.64 last year.

Appendix A of our press release shows adjustments to our consolidated segment results primarily related to acquired intangible amortization, acquisition-related expenses, and net realized and unrealized gains, which we use to evaluate operating performance. In the title segment, operating revenues increased 31 million, or 5%, primarily driven by higher agency and direct commercial revenues. Title operating expenses increased 6% primarily due to higher revenues and higher employee costs related to select growth investments while beginning to address the market transition that Fred spoke about. Title pre-tax income in the third quarter was 47 million compared to 62 million last year, while on an adjusted basis pre-tax income was 52 million compared to 61 million last year.

In our direct title business, direct title revenues increased 6 million, or 2%, primarily due to increased commercial transactions. Domestic commercial revenues increased 7 million, or 9%, as closed orders improved 18% across multiple asset classes, while average fee per file decreased 8% to 16,300 due to reduced transaction sizes with less data center and energy activity. Domestic non-commercial revenue increased slightly by 3 million, or 2%. International revenues were down 4 million, or 10%, due primarily to a large commercial transaction last year.

On our agency operations, agency revenues increased 25 million, or 7%, reflecting growth across a majority of our key agency states including Florida. Net of agent retention, agency revenues improved 5 million, or 8%, compared to last year. On title losses, title loss expense for the third quarter increased primarily due to higher title revenues, while the title loss ratio was 3.4%, comparable to last year. We expect our title losses to average from mid-3 to 4% over a year.

In our real estate solutions segment, total revenues increased 80 million, or 68%, primarily driven by the MCS acquisition and growth in our credit information and valuation services operations. Adjusted pre-tax income increased by 7 million to 20 million compared to 13 million last year, while adjusted pre-tax margin was 10.4% compared to 11% last year. On our consolidated operating expenses, our employee cost ratio improved to 26% compared to 27% last year primarily due to higher operating revenues, while the other operating expense ratio increased to 29% compared to 24% primarily due to revenue growth in our real estate solutions segment, which typically incurs higher service cost as a percent of revenue. And as our real estate solutions segment grows as a percentage of total revenue, our financial position remains solid and well-positioned to support our customers and employees in the real estate market.

Total cash and investments is approximately 300 million in excess of statutory reserve fund requirements. Total Stewart stockholders’ equity was approximately 1.7 billion, representing book value of approximately 55 per share. Net cash provided by operations was 47 million compared to 93 million last year primarily due to lower net operating income and timing of payments related to operating liabilities. Again, thank you to our customers and employees for their continued support. We remain confident in our ability to serve the real estate markets. I will now turn the call over to the operator for questions.

OPERATOR

Thank you. If you’d like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. Our first question today comes from Bose George with KBW. Your line is open.

Bose George (Analyst)

Good morning. Good morning. Actually first, just on the commercial side, so you guys noted some timing with in terms of deals getting pushed out. Can you help quantify that? And also, are you seeing any broader signs, that slowdown in the commercial pipeline, either on higher rates or specifically for the data centers, anything just related to political opposition at the local levels?

Frederick Eppinger (Chief Executive Officer)

Yeah, so it’s multiple millions that pushed. So it was meaningful to the quarter, and again there’s no indication it won’t close in the fourth quarter, but there was some movement. Interesting enough, our pipeline, and you can see from the open orders and stuff, our commercial has been really strong for us. I have heard in the marketplace and clearly among agents I’ve heard of a slowdown in the small commercial market. We have not seen it in our numbers yet.

But there is talk that particularly the small is more debt oriented. There is some slowing of the data center thing. We have not seen any slowdown at all. And so again it’s hard to know with all the noise you see in the marketplace. But it’s a pretty robust portfolio that we see, and again we haven’t seen any slowdown for us. What’s odd about us, as you know, the last two years we’ve doubled commercial, so we have a lot of quarters. Last year we grew over 40–50%. So some of our comparisons are a little odd for growth.

But I really like the flow we’re seeing. We have the best team we’ve ever had, been able to make some investments over the last year here. So I continue to see growth opportunity there for the company in the next couple of years.

Bose George (Analyst)

Okay, great, thanks. Actually, and just—I might have missed the first part—but just on the amount that got pushed, did you give a dollar amount?

Frederick Eppinger (Chief Executive Officer)

But it’s multiple—it’s a handful of million, so it’s not a small amount, and it’s a handful of transactions.

Bose George (Analyst)

Okay, okay, great. And then actually just switching over to the services segment, can you just help us think about the drivers of the, you know, the increase in expense relative to the revenues? Can you remind us how much of the segment is impacted by rates? And then you mentioned just the margin outlook for that segment, and to the extent we have, say, you know, the market remains at this level next year, does that change that? Can you just remind us what you said for margins for next year for—

Frederick Eppinger (Chief Executive Officer)

So what I’ve been saying: the portfolio we have, as you know, that portfolio is really made up of three pieces. It’s made up of the appraisal business, the credit data, and then the default business. In all three of those now we’re the top three, four players. So we have critical mass. And again there’s some things happening in all those spaces around the importance of technology, and I feel good that we’re going to continue to see consolidation and share growth there.

The two that are very sensitive to kind of the residential rate environment are appraisal and the data, and the complicating factor, by the way, is that it’s worse than just closes. So we’ve had historical cancellations this quarter—probably up to 15% of the transactions. And we’ve had a big decrease in kind of mortgage applications. So in data, for example, in credit data we get paid both when the mortgage application gets opened, right, because some of our work is done in verification of kind of the quality of the credit, et cetera, and then we get paid again at the close, right.

So as the market goes down you obviously have less revenue. So our same, what I call same-store growth—so we’ve had some new accounts, so we’ve still continued to grow a little bit—but we’ve seen, you know, 6–7% reduction in same-store volume, which is the combination of the non-closed files, as you can imagine, but also more cancellations. And so we’ve seen a decrease in just the opening of mortgage apps. So that’s where your margin goes, because if you lose two-thirds of your revenue, which is kind of how to think about it between the opening of the application and then the closing, as those things cancel, you can see that your revenue is going to go down.

On appraisal, although we don’t do a lot of pre-work in appraisal—most of that work is done afterwards—so you don’t have a lot of wasted costs. But we’ve seen in those two businesses, you know, 4–5%—the appraisal part—reduction of volume with our current customers. So that’s why the volume… so the margin. So the margin is in that, you know, that 10, 10.5. Right. What I need is a normalized market. I don’t need it to go all the way back. I just need it to stabilize so you don’t have these deltas and changes, because the changes are what cost. You’ve got to, because you carry the expenses because you’re doing some of the work and then it goes away.

So again, what I’ve said is that business, even at a 4.1–4.2 kind of existing home sales, that’s going to be about a 13–14% margin business. We built the scale, we got the nice mix between the three businesses. And so this dip is going to—for the next couple of quarters we’re going to see this kind of, in my view, kind of at this level of margin in that business. But I like the long term. It’s a more stable part of our portfolio because of the mix we have now.

So again, that’s why I say it’ll migrate back up, I would say after the next couple two quarters.

Bose George (Analyst)

Sorry, go ahead.

Brian Glaze (Chief Accounting Officer)

You put out that information on FHA delinquencies, and some of your reports they were like 11%, although they’ve been stabilizing. But the rolls to foreclosure are just sort of getting started, and that’s where the property preservation business helps. So it’s a bit of an offset to what Fred was talking about.

Bose George (Analyst)

Okay, okay, great. But even in a flattish market next year, the margins go back up a few points as it’s lagged and it

Frederick Eppinger (Chief Executive Officer)

Goes away, I believe. So again, there’s a bunch of interesting changes with VantageScores, which we could get in at some point, that is going to position us really well to consolidate and grow share in that market because we have a very unique product and solution for those that transition to them. So I feel very good about kind of the credit data business over the long haul.

Bose George (Analyst)

Okay, great, thanks.

OPERATOR

Thank you. And once again, if you’d like to ask a question, please press star and one on your keypad. Now, we’ll go next to Oscar Neves with Stephens Inc. Your line is now opening.

Oscar Neves (Analyst)

My first one is on the recent acquisitions that you announced, the one at the end of the Q or at the beginning of pre-Q and the ones at the beginning of September. Just wondering if you could walk us through those acquisitions and what we should expect them to add to revenue and earnings and how big those deals were and when they closed, or if they closed already.

Frederick Eppinger (Chief Executive Officer)

So we… Go ahead, Mitch.

Brian Glaze (Chief Accounting Officer)

Hey, Oscar. So we did three so far of size this year. We did the appraisal one back in, I think it was April, nationwide appraisal. And that just rolls into our Stewart Valuation Intelligence business. So the appraisal business that Fred talked about, and it just gives us scale. That’s one of the things that got us up to now being like a top three player there. The other two are in title. So ProTitle goes into the CTS segment that Fred talked about.

Those both closed on 9/1. And then Tower Title that he also talked about. They just basically go into their respective businesses. Right. So CTS will get ProTitle, Tower will get, you know, commercial will get Tower, and, you know, they just add to those businesses. But, you know, we said that we typically buy those kind of businesses, that these are title businesses, 4 to 6 EBITDA. These are higher margins. So, you know, think you’re maybe on the higher end.

So if you just think about all the money we had to deploy at year-end between that and these other two, we basically deployed 150 million. And so you can sort of back into what economics you might be able to get out of that. And, you know, you’ll see the acquisitions number in our 10-Q. So it’ll all be public.

Frederick Eppinger (Chief Executive Officer)

And I think it’s. And I would say to you the last two were kind of late in this quarter. And so it was marginal, marginal impact at all in the quarter. But in both cases, again, to me, they’re really important because Tower gives us this additional capability infrastructure where I think we’re going to have sustained growth in the business. And it covers an area that we rely. And on the ProTitle, it’s the whole institutional business. One of the things I’m doing in the centralized title businesses is to create a less volatile.

I’m not a big refi guy, but our centralized title is really specialty portfolio, specialty centralized title. And these bring the institutional or the institutional business to us. And I feel good about all of these.

Oscar Neves (Analyst)

Super helpful. My next one is, you know, Bill Polby has made some tweaks recently that have impacted title stocks. There’s a lot of nervousness around potential expansion to title waivers. Any incremental commentary on that point?

Frederick Eppinger (Chief Executive Officer)

Yeah, I think what’s been said about the pilot is kind of old news. And essentially what they did is they expanded the number of lenders that are in it. The coverage is roughly the same. It’s a very small subset of refi that is included in the title space. And again, we’ll see how it plays out. I keep saying if it tests out, the whole thing is going to be pricing because if it makes sense, we are not really big in the refi market. And I don’t think there’s many scenarios that want to be big in the refi market given the volatility of that business and the low margins that are in it.

But again, I don’t see it. There’s no big expansion from where we are, but the number of, again, lenders that are participating is a little bit bigger. So again, it doesn’t have much impact.

Brian Glaze (Chief Accounting Officer)

And Oscar, another thing to keep in mind is if you look at our refi orders, like Fred said, we don’t really have much in that centralized lender. So most of our refi orders came from customers that we issued a prior Stewart policy on, and they’re out in our field operations. So stuff like this doesn’t really impact them that much, I guess.

Oscar Neves (Analyst)

My last one. Are you seeing any AI and automation show up in margins yet? Especially as you mentioned earlier, that you expect a challenged market over the next few quarters?

Frederick Eppinger (Chief Executive Officer)

Yeah, it’s interesting, it’s a great question because I’m feeling pretty bullish on our initiatives. I think the financial impact is going to take 18 months to kind of see kind of the robust financial impact, although we are seeing it today, particularly in the search area. And again, we’ve got some really interesting things that we’re doing there. And I think, you know, I think the search area is the place where there’s the greatest opportunity for efficiency and accuracy and what I consider better turnaround time, for instance, for our agents, which I think matters to the combined economics.

So yeah, the other thing, obviously we did the virtual underwriter and we have now limited it to our agents, which actually helps their efficiency in the work where they do the clearing of title and the underwriting of policies for the agent. But again, it’s probably, I think I mentioned to you, we have over 100 initiatives and, frankly, there’s like 50 that are penciling already operationally that we track returns on, and it’s early days. But, you know, it is, in my view, going to be helpful, particularly if, you know, if you see the residential market sit for a while, which I think people are talking about.

I think over the next, you know, four to six quarters it’s going to be very helpful to us to manage expenses. And, but again, I think it also is really good about quality, some of the quality of delivery and some of the consistency of turnaround, which is really what, you know, particularly the agency channel, they really appreciate. Very helpful.

OPERATOR

Thank you. And once more, if you would like to ask a question, please press star and one on your keypad now. And at this time, there are no additional questions in queue. I will now turn the meeting back to Fred for any additional or closing remarks.

Frederick Eppinger (Chief Executive Officer)

I want to thank everybody for their interest in Stewart and appreciate you joining us on the call.

OPERATOR

Thank you. That brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.