With several years of lackluster growth behind it, investors should no longer be surprised by disappointing performance from CNO Financial Group Inc (NYSE: CNO), according to Morgan Stanley.
Morgan Stanley analyst Nigel Dally upgraded CNO from Underweight to Equal-Weight, but cut his price target from $23 to $22.
CNO Financial stock is down 18.4 percent this year and is underperforming its peer by 10 percent, bringing the price to a level reflective of Dally’s valuation.
Dally’s concerns are persistent though. In particular, too much exposure to long-term care insurance (a "problematic product class") prevent including a consolidation premium into the valuation.
“We do not expect the company to be successful in its plan to reduce long-term care exposure by 50 percent over the next 5 years,” said Dally in a note.
On a more positive note, the risk of large charges has been limited by a smaller number of lifetime guarantees and an aging average age of its block.
The company also has a strong free cash flow, which will enable management to drive “reasonable EPS growth” despite struggling sales.
The analyst’s bull and bear case scenarios for the stock are $29 and $15, respectively. Both of which will be driven in part by risks associated with long-term care.
Shares of CNO traded around $20.31 Tursday afternoon.
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Latest Ratings for CNO
|May 2018||Morgan Stanley||Upgrades||Underweight||Equal-Weight|
|Mar 2018||William Blair||Initiates Coverage On||Outperform|
|Oct 2017||Goldman Sachs||Initiates Coverage On||Neutral|
View More Analyst Ratings for CNO
View the Latest Analyst Ratings
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