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Bear of the Day: Cincinnati Financial (CINF)

Cincinnati Financial (CINF) is a Zacks Rank #5 (Strong Sell) that provides property casualty insurance products in the United States. The company also offers commercial leasing and financing services; and insurance brokerage services.

The stock was trading at all-time highs back in April, but a bad quarter has shaken investors confidence. Now trading over 30% from those highs, the bulls are still not ready to jump in as falling estimates are concerning and the technicals do not look bullish.  

About the Company

Cincinnati Financial is headquartered in Fairfield, OH. The company was founded in 1950 and employs over 5,000 people.

The company operates through five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments.

CINF is valued at $15 billion and has a Forward PE of 19. The company holds a Zacks Style Scores of “B” in Value, but “D” in Momentum. The stock pays out a dividend of 2.8%.

Q2 Earnings

The company reported EPS in late July, missing expectations by 38%. EPS came in at $0.65, far below the $1.79 a year ago. Revenues were $820M vs the $2.3B last year.  

The big miss was due to large catastrophe losses and a higher commercial accident year loss ratio related to its commercial casualty business.

Estimates

Over the last 90 days, numbers have been taken down across all time frames.

For both the current quarter, estimates have dropped from $1.27 to $1.03, or 18%. For the current year, we see a 12% drop, over that same time frame.

While insurers can take temporary losses for unseen events, it looks like analysts see the trouble in the future. Estimates for next year have also dropped aggressively. Over the last 60 days, numbers have fallen from $5.99 to $5.34, or 10%.

After the results, RBC cut its price target from $133 to $108.

Technical Take

Not much to like when you look at the chart, as the stock is steadily moving from the upper left quadrant to the lower right.

The stock is trading below all moving averages, with the 50-day at $106 and the 200-day at $119. The bulls will likely run into resistance at these levels as long as the fundamentals are under question.

The stock hit 2022 lows in early August at $93.41, but rallied with the market back above the $105 level. However, the stock is bleeding again and falling very close to those recent lows. If that area is taken out, the bears likely press into the mid-$80s.

For those looking to buy the stock, they should wait for the 61.8% Fibonacci support area at $84. This can be found by drawing from the COVID lows to the 2022 highs.

In Summary

Cincinnati Financial might take a while to find footing. Until then, the stock should be avoided and investors should allocate capital to elsewhere.

For those interested in the P&C space, a better option in the sector might be Arch Capital (ACGL). The stock is a Zacks Rank #1 (Strong Buy) that is trading near 2022 highs.


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