LandAmerica Financial Group Inc. shares rose to an all-time high Wednesday after a Keefe Bruyette & Woods analyst said the title insurance company will improve its margins and may buy back more shares of its stock.
Nathaniel Otis raised his price target for LandAmerica stock to $84 per share from $80, and maintained his "Outperform" rating. He said LandAmerica, after paying off $100 million in debt and $80 million in interest and dividends over the next two years, will have $400 million in available capital, enough to repurchase up to a third of its outstanding shares, and expects it will use most of the money for that purpose.
Margins will improve as a result of Project Fusion, an effort to standardize the company's operating platforms, Otis said. It is also working to become more cost-efficient by unifying its subsidiaries.
"Given our positive view of the company's operations and strategic direction as well as almost 14 percent total return upside in shares of LandAmerica over the next year, we would be buyers of the stock at the present time," he said.
Otis raised his estimates and now predicts $7.53 in earnings per share for 2007, and $8.14 per share in 2008, up from $7.13 and $7.30, respectively.
LandAmerica shares gained $3.56, or 4.8 percent, to $78.20 in afternoon trading on the New York Stock Exchange. The stock peaked Wednesday at $78.82. Its previous high was $76.26, set on March 21. It closed Thursday also at $76.26. Its 52-week low was $58.75 on July 21, 2006.
LandAmerica's board of directors approved the program to purchase up to 1.5 million shares between now and the end of October 2008, or approximately 8.5 percent of its fully diluted outstanding shares as of Dec. 31, 2006. Purchases of stock will be accomplished primarily in the open market, with the timing of such transactions subject to market conditions and SEC regulations.
"We are pleased to establish an additional share repurchase program based on the cash generated from our operating cash flows as well as the recent redomestication of our principal insurance subsidiaries," LandAmerica CEO Ted Chandler said during the company's 2007 fourth-quarter earnings call. "This program further demonstrates our commitment to improving our return on equity."
The company anticipates funding for this program will come from available corporate funds and future excess cash flow. The program would be in addition to purchases made under the share repurchase plan publicly announced in October 2005 that provides for the purchase of up to 1.25 million shares and expires in July 2007.