A week ago, Cincinnati Financial Corporation (NASDAQ:CINF) came out with a strong set of yearly numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 8.2% to hit US$7.9b. Cincinnati Financial also reported a statutory profit of US$12.10, which was an impressive 28% above what analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the six analysts covering Cincinnati Financial provided consensus estimates of US$6.50b revenue in 2020, which would reflect a definite 18% decline on its sales over the past 12 months. Statutory earnings per share are forecast to dive 68% to US$3.95 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.46b and earnings per share (EPS) of US$4.28 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at US$108, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Cincinnati Financial at US$135 per share, while the most bearish prices it at US$87.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Cincinnati Financial's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 18% revenue decline a notable change from historical growth of 6.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 2.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Cincinnati Financial to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Cincinnati Financial. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$108, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Cincinnati Financial analysts - going out to 2021, and you can see them free on our platform here.
You can also view our analysis of Cincinnati Financial's balance sheet, and whether we think Cincinnati Financial is carrying too much debt, for free on our platform here.
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