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Cincinnati Financial (CINF) Up 22% YTD: Will the Rally Last?

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Zacks Equity Research
·3 min read
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Cincinnati Financial Corporation CINF shares have gained 21.9% year to date, outperforming its industry's increase of 12.1%, the Finance sector’s increase of 12.9% as well as the Zacks S&P 500 composite’s rise of 10.6% in the said time frame. With market capitalization of $16.9 billion, average volume of shares traded in the last three months was 0.9 million.

Higher new business premiums, renewal written premium growth and effective capital deployment continue to drive Cincinnati Financial. The company delivered four-quarter average earnings surprise of 4.10%.

Return on equity of 5.6% in the trailing twelve months was in line with the industry average, reflecting the company’s efficiency in utilizing shareholders’ fund.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2021 and 2022 earnings has moved up 3.9% and 1.3%, respectively in the past 60 days, reflecting analysts’ optimism. The consensus estimate for 2021 indicates year-over-year increase of 21.3%.

Premium growth initiatives, price increases, higher level of insured exposures, and disciplined expansion of Cincinnati Re should continue to drive premiums for Cincinnati Financial. This Zacks Rank #2 (Buy) insurer’s premium rose at a five-year (2016-2020) CAGR of 6.1%, exceeding the industry average of 4.6%.

Focus on generating new business through appointment of new agencies bodes well as the company believes that agent-focused business model will drive long-term premium growth

Also, favorable reserve release should drive growth. The company boasts 32 years of favorable reserve development.

It has a strong capital position, reflecting financial and liquidity flexibility as well as its operational performance. This is turn supports effective capital deployment. Cincinnati Financial boasts a track record of hiking dividend for the last 61 years. It targets average value creation ratio of 10% to 13% over the next five years. It has low reliance on debt, with 7.2% debt-to-total-capital as on Dec 31, 2020.

Though the company is exposed to catastrophe losses, prudent underwriting aided its five year average combined ratio better the industry mark by 500 basis points. Combined ratio consistently remained within the range of 95% to 100%.

Other Stocks to Consider

Some other top-ranked stocks in the same space include Fidelity National Financial FNF, First American Financial FAF and Kinsale Capital Group KNSL, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fidelity National Financial delivered an earnings surprise of 60.80% in the last reported quarter.

First American Financial delivered an earnings surprise of 29.45% in the last reported quarter.

Kinsale Capital delivered an earnings surprise of 48.05% in the last reported quarter.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

First American Financial Corporation (FAF) : Free Stock Analysis Report

Fidelity National Financial, Inc. (FNF) : Free Stock Analysis Report

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Zacks Investment Research