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Fidelity's Shares Down as One Index Rises

Real estate: The Irvine-based title insurer's stock falls 10.4% on news of a higher consumer confidence level.

March 28, 2001|From Times Wire Services

Shares of Fidelity National Financial Inc., the biggest U.S. real estate title insurer, slumped Tuesday after the federal government released better-than-expected consumer confidence data.

The Irvine-based company's stock fell $3.12, or 10.4%, to $26.30 on the New York Stock Exchange. The stock, which has lost nearly 27% of its value this year, was off as much as 17% earlier in the trading session.

Analysts said improved consumer confidence could signal an end to the Federal Reserve's easing of interest rates and hurt optimism about Fidelity National's prospects.

Title insurers generally get a boost from falling interest rates because their services are in more demand when people refinance their mortgages.

"Fidelity National was a hedge against a slowing economy," said Edward Hemmelgarn, a portfolio manager at Shaker Investments, which owns about 300,000 Fidelity shares. "If consumer confidence is going to be better, investors may be moving back into more cyclical stocks."

A spokesman for Fidelity National couldn't be reached for comment.

Bancorp Piper Jaffray analyst Michael Grondahl cut earnings estimates for the first quarter.

Citing the timing of the Federal Reserve rate cuts March 20, he lowered his estimate to 50 cents a share from 70 cents a share.

Although the first-quarter earnings estimate is considerably lower, estimates for the year remain the same--$2.85 a share.

Fidelity National will be temporarily hurt by the Fed's rate cuts as home buyers hold off closing orders in the hopes that interest rates will come down further, Grondahl said.

But he emphasized that the setback will be only temporary, since orders that did not close in the first quarter will simply close later.

Indeed, he boosted his estimates for future quarters. For the second quarter, he increased his estimate to 80 cents a share from 73 cents; for the third quarter to 79 cents from 73 cents; and for the fourth quarter to 76 cents from 69 cents.

The Conference Board's consumer-confidence index rose to 117 this month, the first increase since September, from February's 109.2. The March index was the highest in three months and reflected improved consumer outlooks for employment and an increase in plans to buy homes and appliances.

Bloomberg News and Dow Jones Newswires were used in compiling this report.

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