Oscar Nieves

Oscar Nieves asked for specifics on Stewart's cautious optimism for the 2026 housing market, including any geographic concentrations. He also sought quantification of the revenue and earnings impact if mortgage rates drop below 6%, and how the finalized 6% reduction in Texas title payment rates would affect Stewart's financials. Additionally, he asked for more detail on Stewart's M&A strategy for share gains in key MSAs, including target capital deployment for title and real estate solutions businesses.

Answer

CEO Fred Eppinger attributed cautious optimism for 2026 housing to a slight decrease in under-3% mortgages, improved inventory quality (up 8% in Q4 2025 year-over-year), and increased activity, projecting modest growth of 6-8%. He emphasized that existing home sales, particularly reaching 5 million units, are the primary driver for margin expansion to 12% due to fixed-cost leverage. Regarding the Texas rate reduction, he stated it would have a low single-digit impact on earnings this year, managed through fee adjustments, and would not alter growth expectations. He outlined a three-year M&A strategy targeting roughly $300 million in direct channel acquisitions (small, $10M-$30M) in 30 key MSAs to improve local share and margins, with additional opportunistic, smaller acquisitions in lender services and for specialized tool sets, largely self-funded.

Oscar Nieves sought specifics on Stewart's cautious optimism for the 2026 housing market, including any geographic concentrations. He also asked for a quantification of the revenue and earnings impact if mortgage rates drop below 6%, and how the Texas Department of Insurance's 6% rate reduction would affect Stewart's financials. Finally, he inquired about the strategy for M&A in key MSAs and capital deployment targets for title and real estate solutions.

Answer

CEO Fred Eppinger attributed cautious optimism for 2026 housing to a slight tick down in under-3% mortgage rates and an 8% year-over-year increase in Q4 inventory, expecting modest 6-8% growth. He noted that existing home sales, stuck at 4 million for three years, are the primary economic driver, with a potential 12% margin if sales reach 5 million. Regarding the Texas rate reduction, Eppinger stated it would have a low single-digit impact on earnings this year, managed through fee adjustments, and would not alter growth expectations. He outlined a strategy to deploy approximately $300 million in direct channel acquisitions over the next three years in 30 target MSAs to improve margins, with smaller, opportunistic acquisitions in lender services and for "tool sets," largely self-funded.