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    STC
    Earnings call· Jun 2026(Q2 FY26)

    STEWART INFORMATION SERVICES CORP STC

    Jul 23, 2026 Source

    Executive summary

    Stewart Q2 FY26 — Strong Revenue and Earnings Growth Amidst Strategic Investments

    Stewart delivered strong Q2 FY26 results with significant revenue and adjusted pretax income growth, driven by robust commercial and agency performance. The company strategically invested $8 million in talent across its title businesses to capture future organic growth, impacting Q2 earnings growth but positioning for sustained long-term expansion. Management anticipates earnings growth to outpace revenue growth for the full year, despite a softer housing market outlook and increased operating expenses from growth initiatives.

    Highlights

    5

    • Revenue grew over 24% in Q2 FY26.

    • Year-to-date revenue grew 26% and adjusted pretax income grew 45%.

    • National Commercial Services total domestic commercial premiums grew 20% YoY in Q2 and 30% in H1 FY26.

    • Agency Services delivered 25% revenue growth in Q2 FY26, with residential premiums up 30% and commercial net premiums up 16%.

    • Real Estate Solutions revenue grew 75% YoY in Q2 FY26, with adjusted pretax margins improving to 14% from 11%.

    Concerns

    4

    • Q2 earnings growth was slower at 13% due to $8 million in additional investments in individuals and teams.

    • Existing home sales growth forecast reduced from 6%-8% to around 2% for FY26.

    • Centralized title operations (refinance and bulk business) revenue was down 1% YoY in Q2 FY26 due to tough comparables and lumpiness.

    • Operating expense ratios increased due to growth in Real Estate Solutions and commercial activity, with other operating expense ratio increasing to 27% from 25%.

    Guidance & targets

    11
    CategoryTargetConfidence
    Earnings growth vs. revenue growth
    Earnings growth will outpace revenue growth
    high materiality
    High
    Existing home sales growth
    around 2%
    high materiality
    Medium
    Title loss ratio
    mid-3% to 4% range
    medium materiality
    High
    Other operating expense ratio
    27% to 28% range
    medium materiality
    High
    Full year revenue growth
    probably 20%
    high materiality
    Medium
    Full year earnings growth
    30%
    high materiality
    Medium
    Overall company margin improvement
    about 0.5 point
    medium materiality
    Medium
    Capital deployment
    deploy the full amount of what we raised plus some
    high materiality
    High
    Agency Services revenue growth
    grow in the teens
    medium materiality
    Medium
    Commercial revenue
    best year we ever had
    high materiality
    High
    Adjusted margins target
    12%
    high materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    National Commercial Services
    Focused on continued expansion and acquiring industry-leading talent. Made additional investments of $3 million to $4 million in Q2 for hiring teams to address regional and sector opportunities, with full impact expected over the next 2-3 quarters.
    Total domestic commercial premiums growth H1 FY26: 30%Average domestic commercial fee per file: $16,900 (comparable YoY)Largest asset class: EnergyStrong asset classes: Data centers, multifamily, industrial properties
    		—20%——
    Direct Operations
    Focused on strengthening position in attractive MSAs through organic and inorganic efforts. Invested approximately $2 million in incremental organic opportunities to acquire individuals and teams. Centralized title operations (refinance and bulk business) revenue was down 1% YoY due to tough comparables.
    Consolidated residential refinance and Main Street commercial revenues growth: 7%Residential transactions growth: 3%Main Street Commercial revenue growth: >20%Average domestic residential fee per file: $3,200 (up 10%)
    		—7%——
    Agency Services
    Achieved 25% revenue growth for the second consecutive quarter. Focused on winning new agents and expanding wallet share in 15 target states. Invested another $2 million to $3 million in additional customer-facing talent to build share in target markets.
    Gross agency revenues: $377 million (up from $301 million YoY)Net agency revenues growth: 26% ($13 million increase YoY)Residential premiums growth: 30%Commercial net premiums growth: 16%
    		—25%——
    Real Estate Solutions
    Revenue growth driven by acquisitions of MCS (property preservation) and NAN (National Appraisal Network). Focused on expanding coverage and servicing top 300 lenders, leveraging a suite of products for cross-selling.
    Adjusted pretax income: $27 million (more than doubled from $12 million YoY)Adjusted pretax margin improvement: 14% from 11%Legacy RES business growth (excluding acquisitions): ~18%
    		$85 million75%—14%
    International Operations
    Focused on profitably growing across Canada, Australia, and the U.K. Achieved growth in challenged housing markets.
    Noncommercial revenue growth: 4%Commercial revenue growth: 7%
    		————

    Operational metrics

    21
    Total revenues
    $177 millionup 25%
    Q2 FY26

    Consolidated total revenues for the quarter.

    Net income
    $5 millionimproved 17%
    Q2 FY26

    Consolidated net income for the quarter.

    Diluted EPS
    $1.21vs $1.13
    Q2 FY26

    Diluted earnings per share for the quarter.

    Adjusted net income
    $43 millionvs $38 million
    Q2 FY26

    Adjusted net income for the quarter.

    Adjusted diluted EPS
    $1.39vs $1.34
    Q2 FY26

    Adjusted diluted earnings per share for the quarter.

    Title operating expenses growth
    17%
    Q2 FY26

    Primarily due to expenses related to revenue growth and higher employee costs from talent investments.

    Employee cost ratio
    27%improved from 30%
    Q2 FY26

    Primarily due to revenue growth.

    Other operating expense ratio
    27%increased from 25%
    Q2 FY26

    Primarily due to higher costs associated with increased revenues in the Real Estate Solutions segment.

    Net cash provided by operations
    $60 millionincreased from $53 million
    Q2 FY26

    Primarily driven by higher net income.

    Investments in individuals and teams
    $8 million
    Q2 FY26

    Additional investments made to boost organic growth initiatives in three title businesses.

    Investments in commercial teams
    $3 million to $4 million
    Q2 FY26

    Additional investments in hiring teams to address regional and sector opportunities.

    Investments in direct operations
    $2 million
    Q2 FY26

    Incremental organic opportunities to acquire individuals and teams.

    Investments in agency talent
    $2 million to $3 million
    Q2 FY26

    Additional customer-facing talent to build significant share in target states.

    Headcount increase
    17%
    YTD FY26

    Increase in employee costs due to staffing in line with organic growth initiatives and acquisitions.

    Commercial business size
    $450 milliondoubled from $208 million
    Last 4 quarters

    Significant growth in the commercial business over time.

    Commercial market share
    13.5%-14%up from 9%
    Current

    Market share gain in the commercial segment.

    Agent revenue
    under $10 million
    Annual

    Typical revenue for most agents in the industry.

    Acquisition pricing (title)
    4 to 6x
    Typical

    Typical pricing multiple for title acquisitions.

    Acquisition pricing (higher-margin services)
    up to 8x
    Typical

    Typical pricing multiple for higher-margin service business acquisitions.

    IRR target for acquisitions
    15%+
    Target

    Internal Rate of Return target for acquisition deals.

    Commercial growth
    46% or 47%YoY
    Q2 FY25

    Commercial growth rate in the prior year, making current comparables tough.

    Industry KPIs

    4
    MetricValueDetails
    Capital returns$400 millionUSD
    Book value per share$55USD
    Net investment income—
    Net premiums written earned20%%

    Deals & partnerships

    3
    MCSProperty preservation business

    Acquisition contributed to 75% YoY revenue growth in Real Estate Solutions segment.

    NANNational Appraisal Network

    Acquisition contributed to 75% YoY revenue growth in Real Estate Solutions segment.

    RattkinAgent in Texas (Fort Worth side of Dallas)small

    A 'micro deal' filling a gap in the Dallas market, recognized for its strong brand and commercial position.

    Risks & headwinds

    5
    Challenging residential real estate marketFull Year FY26

    Existing home sales growth revised to ~2% for FY26 (from 6%-8%), hovering around 4 million annual units.

    Mitigation: Strategic investments in talent and acquisitions to drive organic growth and market share gains; focus on commercial and agency businesses.

    High interest ratesOngoing

    Hovering around 6.5% in Q2 FY26.

    Mitigation: Focus on life events driving some buyers into the market; adapting to a 'higher for longer' rate environment.

    Lumpy bulk business performanceQ2 FY26

    Centralized title operations (including bulk business) revenue down 1% YoY in Q2 FY26.

    Mitigation: Acknowledged as inherent nature of the business; open orders indicate potential rebound for next quarter.

    Increased operating expense ratiosOngoing

    Other operating expense ratio increased to 27% from 25% in Q2 FY26.

    Mitigation: Driven by growth in Real Estate Solutions and commercial activity, which have higher associated costs; management aims for overall company margin improvement.

    Political environment affecting data centersOngoing

    Discussion of permitting difficulties in some states (e.g., Maine).

    Mitigation: Belief that demand will drive solutions; potential for smaller, distributed data centers if large-scale permitting becomes too difficult.

    What to watch in Q3 FY26

    5

    Impact of strategic talent investments

    Next 2-4 quarters
    Current$8 million invested in Q2 FY26, 13% earnings growth.
    TargetFull impact on organic growth and earnings over the next 2-4 quarters.

    Why it matters

    These investments are expected to drive future organic growth and improve earnings power, crucial for sustaining momentum in a challenging market.

    I'm excited about these opportunities and believe we should see the full impact of these hires over the next 2 to 4 quarters.

    Q&A highlights

    7

    Can you discuss the annualized margin outlook, especially if mortgage rates remain high?

    Management expects full-year revenue growth of approximately 20% and earnings growth of 30%, leading to about a 0.5 point improvement in overall company margin, despite increased investments and tough commercial comparables.

    “I believe that we'll grow earnings -- revenue probably 20% and earnings 30%.”

    asked by Bose George · answered by Frederick Eppinger

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Investments for Growth

    The company made significant investments totaling approximately $8 million in Q2 FY26 to hire additional teams and talent across its National Commercial Services, Direct Operations, and Agency Services segments. These investments are aimed at boosting organic growth initiatives, addressing regional and sector opportunities, and expanding market share, with full impact expected over the next 2-4 quarters. This strategic spending contributed to slower Q2 earnings growth but is intended to propel the company's future earnings power.

    02

    Housing Market Dynamics

    The existing home sales market remains challenging, with the full-year FY26 growth forecast revised down to around 2% (low 4 million annual units) from an initial 6%-8% expectation, primarily due to persistent high interest rates hovering around 6.5%. Home prices continue to slightly increase by about 1.5% for the quarter, and the percentage of homeowners with sub-3% mortgage rates is slowly shrinking from 25% to 19.5%, indicating some market activity driven by life events despite the overall slump.

    03

    Real Estate Solutions Segment Expansion

    The Real Estate Solutions segment demonstrated exceptional growth, with revenues increasing 75% year-over-year to $85 million in Q2 FY26, largely benefiting from the acquisitions of MCS (property preservation) and NAN (National Appraisal Network). The legacy RES business also grew approximately 18% when excluding these acquisitions. Adjusted pretax margins for the segment improved to 14% from 11%, driven by efforts to expand coverage and cross-selling to top lenders.

    04

    Acquisition Pipeline and Capital Deployment

    Stewart has a meaningful pickup in attractive acquisition opportunities, with transactions anticipated to close in the next 60-120 days, funded by excess capital raised in late 2025. These acquisitions are expected to be smaller, strategic deals focused on consolidating RES services and expanding agency presence in target MSAs, rather than large-scale transactions. Management aims to deploy the full amount of capital raised, plus some, by the end of the year, leveraging a less competitive acquisition environment.

    05

    Operating Expense Management

    The company's operating expense ratios have increased due to the growth mix, particularly in Real Estate Solutions and commercial transactions, which inherently carry higher costs for outside services, data, and contract workforce. The other operating expense ratio increased to 27% from 25% in Q2. Despite these increases and a 17% year-to-date rise in employee costs from staffing and acquisitions, Stewart has grown year-to-date revenues by 26% and adjusted pretax income by 45%, maintaining a focus on improving margins even in a challenging market.

    AI-generated summary of the company’s earnings call. Not investment advice.