Cincinnati Financial (CINF) Gains 9% QTD: Should You Buy It?
Cincinnati Financial Corporation CINF shares have gained 9.4% quarter to date (QTD) compared with the industry’s rally of 5.6%. The Finance sector has risen 2.3% and the Zacks S&P 500 index grown 1.9% in the said time frame. With a market capitalization of $16.7 billion, the average volume of shares traded in the last three months was 0.7 million.
Higher level of insured exposures, rate increase, agent-focused business model, consistent cash flow and a solid capital position continue to drive this Zacks Rank #2 (Buy) insurer.
The insurer’s earnings have grown 6.8% in the past five years. CINF has a solid surprise history, beating earnings estimates in three of the last four reported quarters, while missed in one, the average surprise being 25.25%.
Cincinnati Financial has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum. The insurer targets average value creation ratio of 10% to 13% over the next five-year period.
Image Source: Zacks Investment Research
Will the Bull Run Continue?
The Zacks Consensus Estimate for Cincinnati Financial’s 2023 earnings is pegged at $5.00 per share, indicating a 17.9% increase from the year-ago reported figure on 12.2% higher revenues of $9 billion. The consensus estimate for 2024 earnings is pegged at $5.88 per share, indicating a 17.7% increase from the year-ago reported figure on 3.9% higher revenues of $9.4 billion. The expected long-term earnings growth rate is 17.7%, better than the industry average of 12.1%. It has a Growth Score of B. We expect 2025 bottom line to witness a three-year CAGR of 4.5%.
Premium growth initiatives, price increases, agent centric model and a higher level of insured exposures continue to drive net written premiums. We expect 2025 net earned premiums to witness a three-year CAGR of 7.3%.
Also, Cincinnati Financial continues to grow its premiums through a disciplined expansion of Cincinnati Re while the division makes a nice contribution to the company’s overall earnings.
Cincinnati Financial has been witnessing an increase in net investment income attributable to a rise in interest income from fixed-maturity securities and a decrease in equity portfolio dividends. The Fed has already made three hikes in 2023, taking the tally to 11 since March 2022.
Given its nature of business, the insurer is exposed to catastrophe losses. Yet, banking ion prudent underwriting it has a track of 34 years of favorable reserve development. It also has reinsurance program to limit insured loss.
CINF has a solid capital management policy in place. The insurer boasts a track of 62 straight years of dividend rise. This reflects the company’s strong operating performance, the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility. Its dividend yield of 2.8% is better than the industry average of 0.3%, making the stock an attractive pick for yield-seeking investors.
It has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Style Score of A or B in combination with a Zacks Rank #1 (Strong Buy) or 2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Arch Capital Group ACGL, Axis Capital Holdings AXS and ProAssurance PRA, each currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital’s earnings surpassed estimates in all the last four quarters, the average beat being 26.83%. The stock has gained 2.9% QTD.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings indicates a 38.2% and 10.4% respective year-over-year increase. The expected long-term earnings growth is 10%. The consensus estimate for 2023 and 2024 moved 2.3% and 2.5% in the last 30 days.
Axis Capital delivered a trailing four-quarter average earnings surprise of 9.75%. YTD, the stock has gained 3.7%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings indicates a 44.8% and 10.7% respective year-over-year increase. The expected long-term earnings growth is 5%. The consensus estimate for AXS’s 2023 and 2024 earnings has moved up 2.8% and 1.5%, respectively, in the past 30 days.
ProAssurance’s earnings surpassed estimates in two of the last four quarters while missed in other two. YTD, the stock has gained 19.8%.
The Zacks Consensus Estimate for PRA’s 2024 earnings implies a year-over-year rise of 143.5%. The consensus estimate for PRA’s 2023 and 2024 earnings has moved up 25.9% and 2.5%, respectively, in the past 30 days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
ProAssurance Corporation (PRA) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
