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On Tuesday, BMO Capital Markets updated their outlook on Fairfax Financial Holdings (FFH:CN) (OTC: OTC:FRFHF), with analyst Tom MacKinnon increasing the price target to Cdn$2,400 from the previous Cdn$2,300. The firm maintained its Outperform rating on the company’s shares. The stock has shown impressive momentum, with a 44.8% return over the past year and currently trades near its 52-week high of $1,493.52, according to InvestingPro data. This adjustment follows Fairfax Financial’s robust fourth-quarter performance, which surpassed both BMO’s and the consensus earnings estimates.
Fairfax Financial reported a strong quarter with earnings per share (EPS) of US$50.42, significantly higher than BMO’s forecast of US$21.32 and the consensus estimate of US$38.43. The company’s favorable results were attributed to a combination of factors, including improved underwriting income, increased interest and dividend income, solid top-line growth, enhanced earnings from associates and non-insurance businesses, as well as better net investment gains and losses. InvestingPro analysis shows the company maintains strong fundamentals with a "GREAT" Financial Health score of 3.42/5, supported by a robust current ratio of 3.83x and an attractive P/E ratio of 8.76x.
Despite the positive outcomes, BMO revised its 2025 earnings per share (EPS) estimate downwards by 6%, taking into account Fairfax Financial’s guidance on potential catastrophe losses related to California fires. These potential losses are estimated to be between US$500 million and US$750 million, assuming total industry insured losses of US$35 billion to US$45 billion. However, the firm’s expectations for 2026 remain largely unchanged. The company’s strong financial position is evidenced by its consistent dividend payments, which InvestingPro data shows have been maintained for 24 consecutive years, with a recent 50% dividend growth.
The new price target of Cdn$2,400 is based on 1.4 times the estimated book value per share (BVPS) for the first quarter of 2026, up from the previous target of 1.4 times the fourth-quarter 2025 estimated BVPS. BMO considers the target multiple to be conservative given Fairfax Financial’s projected return on equity (ROE) of 12-13%. BMO anticipates that Fairfax Financial’s consistent performance will lead to a re-rating of its multiple over time. Currently trading near its InvestingPro Fair Value, the company demonstrates strong fundamentals with a return on equity of 17% and a price-to-book ratio of 1.38x. Discover more detailed valuation insights and 11 additional ProTips with an InvestingPro subscription.
In other recent news, Fairfax Financial Holdings Ltd (TSX:FFH). has been the subject of a positive update by RBC Capital Markets. The firm has raised its price target for Fairfax from Cdn$1,500.00 to Cdn$1,600.00, maintaining an Outperform rating on the stock. This decision was influenced by Fairfax’s strong underwriting results and improving returns from its investment portfolio.
RBC Capital also highlighted the company’s successful monetization of associate and affiliate holdings, forecasting this trend to favorably influence future results. Fairfax’s strategic advantage of having substantial cash reserves and ready access to capital was noted by the analyst. These recent developments underline the firm’s confidence in Fairfax’s performance and its potential for continued growth.
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