Stewart Information Services Corporation (STC) Q3 2026 earnings review
Stewart's revenue rises on acquisitions, but its profit drops
Stewart Information Services, the title insurer and mortgage services provider, grew revenue through acquisitions while its profit fell. Third-quarter revenue rose 13% to $901 million, but profit per share excluding one-offs dropped 19% to $1.33 because service costs, new hires and a larger share count weighed on results. Chief executive Fred Eppinger warned that industry headwinds increased this quarter and will continue into next year.
| Revenue, excluding investment gains | $900.7M +14% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.33 -19% from a year ago |
| Pretax profit margin, excluding one-offs | 6.7% 8.1% a year ago |
| Industry outlook | Cut headwinds now expected to continue into 2027 |
⚖️ Verdict: 🔴 Bearish
The story got worse because commercial title growth slowed and the cost base expanded faster than revenue. Smaller data center and energy deals pushed the average commercial fee down 8%, while service expenses broke above the 28% ceiling set last quarter. The good news: Stewart put about $103 million of its idle cash to work on acquisitions by our math, and its mortgage services division held its revenue steady.
The question now is whether recent team hires and new acquisitions can lift profit in a weak housing market. Either the new producers bring in enough commercial and agency deals to cover their payroll, or the higher expenses keep squeezing margins into 2027. Fourth-quarter commercial fees and pretax margin will tell.
🐂 Bull Case
Mortgage Services Held Steady while Agency Grew
Stewart's Real Estate Solutions division sells credit reports, property valuations and mortgage services to lenders. Revenue in this unit rose 68% from a year ago to $196.5 million, "primarily driven by the recent MCS acquisition and higher revenues from credit information and valuation services". Even after stripping out the estimated $40 million quarterly run-rate of MCS at close, underlying division sales grew about 34% by our math.
- Real Estate Solutions revenue: $196.5 million, holding steady against $197.4 million last quarter
- Real Estate Solutions pretax profit excluding one-offs: $20.6 million, up 56% from a year ago
- Independent agency title revenue after commissions: up 8% from a year ago to $65.7 million
- Other domestic closed orders, which include bulk investor deals: 10,694, up 83% from a year ago
Holding the division near $197 million for two straight quarters shows the acquired business is keeping its customers. Meanwhile, the independent agency network kept growing and specialty bulk orders bounced back from last quarter's drop.
What to watch: Real Estate Solutions revenue in the fourth quarter, when MCS passes its one-year anniversary. That reading will show how fast the division grows without acquisition help.
Acquisitions Deployed Cash While Share Count Rose
Stewart raised equity capital in late 2025 to buy local title agencies and real estate service firms, and bears worried the cash was sitting idle while debt and share count costs piled up. This quarter the balance sheet showed the company put that money to work.
Goodwill—the premium paid for acquisitions above tangible book value—climbed by $124.2 million from last quarter to $1.42 billion by our math. Over the same three months, cash and short-term investments fell by $102.5 million to $206.0 million, and the title segment booked $1.5 million in third-party acquisition consulting fees. Putting the cash into operating businesses starts generating revenue to cover the 8.7% rise in diluted shares.
What to watch: the acquisitions note in the upcoming quarterly filing. It will name the acquired companies and show how much revenue they bring against the $124.2 million goodwill addition.
🐻 Bear Case
Higher Costs and Hiring Pushed Profit Down
Chief executive Fred Eppinger said Stewart is "maintaining disciplined operational execution in this challenging market environment". The income statement tells a harder story, because profit fell while revenue grew 13%.
- Pretax profit margin excluding one-offs: 6.7%, down 1.4 percentage points from a year ago
- Other operating expenses (service fees, title search, overhead): 28.7% of operating revenue, up 4.9 percentage points
- Employee costs: up 9% from a year ago on a 12% larger workforce, at 26.0% of operating revenue
- Title segment pretax profit excluding one-offs: $51.9 million, down 15% from a year ago
Other operating expenses broke above the 27% to 28% ceiling management set last quarter because Real Estate Solutions carries heavier third-party service costs. At the same time, recent team hires lifted the payroll before bringing in enough title business to pay for themselves.
What to watch: fourth-quarter pretax profit excluding one-offs. By our math, Stewart needs 53% profit growth in the fourth quarter to hit its full-year target of 30% earnings growth, and missing it would show the higher cost base is sticking.
Smaller Data Center Deals Slowed Commercial Title
Domestic commercial title insurance—which covers office, industrial, energy and data center sales—has been Stewart's main profit driver, growing 35% in the first quarter and 20% in the second. Bulls counted on a rising order book to keep that pace going, while bears warned that mega-deals were lumpy and facing tough late-year comparisons.
In the third quarter, domestic commercial revenue growth slowed to 9%, reaching $86.4 million. Closed commercial orders rose 18% to 5,302 and newly opened orders rose 23% to 5,548, but the average fee per transaction fell 8% from a year ago to $16,300 due to "reduced data center and energy transaction size and volume". International commercial revenue also dropped 35% to $7.3 million after a large prior-year deal did not repeat. More small deals could not make up for fewer giant ones.
What to watch: fourth-quarter domestic commercial fee per file against last year's $27,300 peak. Another drop in average deal size would pull commercial revenue down despite the 23% rise in open orders.
Home Buying Slump Will Last Into 2027
"This quarter, we faced increased industry headwinds that we anticipate will continue into next year," chief executive Fred Eppinger said. After cutting its 2026 housing forecast in each of the last two quarters, management now sees the residential slump stretching into 2027.
The order book shows the pressure: domestic home-purchase closed orders fell 5.2% from a year ago to 34,329, while newly opened purchase orders fell 4.1% to 48,578 by our math. Refinancing opened orders dropped 18.7% to 18,221, and domestic non-commercial title revenue edged up only 2% to $179.8 million. Lower escrow balances also cut investment income by 8% to $13.7 million. Because Stewart needs a larger housing market to reach its long-term margin goals, a weak 2027 caps its core earnings power.
What to watch: fourth-quarter domestic purchase opened orders. A reading below last year's 39,799 would confirm that home-buying volume is still shrinking heading into 2027.
Risks this quarter didn't answer
Three standing questions cannot be read from the earnings release alone and await the conference call or the quarterly filing.
- Underlying Real Estate Solutions growth: the release gave no figure excluding acquisitions; the conference call remarks will show whether it held near last quarter's 18%.
- Full-year revenue and profit targets: the release did not update the ~20% revenue and ~30% profit growth targets given on last quarter's call.
- Texas title rate cut: the release did not separate state-level revenue to show the drag from the ~6% Texas premium reduction.
💲 Other KPIs
Cash generated from operations fell by half from $92.6 million a year ago, reversing the second quarter's 13% rise. The company attributed the drop to lower net income and the timing of payments on operating liabilities. For the first nine months, operating cash flow is down 12% to $102.6 million.
Average diluted shares rose 8.7% from 28.5 million a year ago because of the December 2025 stock offering. Alongside a 55.5% jump in interest expense to $7.6 million from higher debt balances, the larger share count turned a 12% drop in profit excluding one-offs into a 19% drop per share.
Title insurance claims and losses rose 20% to $23.5 million as title revenue grew. As a share of title operating revenue, losses ran at 3.4% by our math, compared with 3.0% a year ago and 3.2% last quarter. That keeps the ratio below the company's 3.5% to 4.0% full-year expectation.
🔮 Guidance
Cut. Chief executive Fred Eppinger warned that increased industry headwinds will continue into next year, extending the downturn into 2027. While the press release did not print numeric targets, last quarter's call plan for roughly 20% full-year revenue growth and 30% profit growth would require 17% revenue growth and 53% profit growth in the fourth quarter by our math.
❓ Key Questions
Did the full-year 30% profit growth target survive Q3?
After third-quarter profit excluding one-offs fell 12%, hitting the 30% full-year growth target from last quarter's call would require 53% profit growth in the fourth quarter by our math. Did management lower that target on the call?
What did Stewart buy for $124 million of goodwill?
Goodwill jumped by $124.2 million and cash fell by $102.5 million in the third quarter, but the release named no new deals beyond MCS. Which local agencies or service businesses closed, and how much revenue did they add in the quarter?
How fast did Real Estate Solutions grow without acquisitions?
Last quarter management said on the call that underlying Real Estate Solutions revenue grew roughly 18% excluding MCS and NAN. What was the underlying growth rate and margin in the third quarter?
Are mega-deals in data centers and energy drying up?
Domestic commercial closed orders rose 18%, but average fee per file fell 8% to $16,300 on smaller data center and energy deals. Does thefourth-quarter pipeline hold enough large closings to match last year's $27,300 average fee?