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Cincinnati Financial: A Strong Buy

Zacks Equity Research

On Sep 25, Zacks Investment Research upgraded Cincinnati Financial Corp. (CINF) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cincinnati Financial has witnessed rising earnings estimates on the back of strong second-quarter 2013 results. Moreover, this property and casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 72%.

Cincinnati Financial reported second-quarter results on Jul 26. Non-GAAP earnings per share came in at 61 cents, surpassing the Zacks Consensus Estimate of 32 cents by 90.6% and year-ago earnings by more than three fold.

Earnings were primarily aided by increased underwriting profits from each of the three property casualty segments.

Revenue for Cincinnati Financial improved 8% year over year driven by higher premiums earned (up 9% year over year). In addition, total benefits and expenses for Cincinnati Financial in the quarter decreased 3.5%.

At quarter-end, debt to capital ratio improved 50 basis points to 13.6% from 14.1% at year-end 2012. As of Jun 30, 2013, book value per share of Cincinnati Financial was $34.83, up 4% from Dec 31, 2012.

In August, the board also approved a 3.1% hike in its quarterly dividend to 42 cents per share. Its dividend yield of 3.6% is ahead of the industry yield of 2.5%

The Zacks Consensus Estimate for 2013 increased 15.3% to $2.56 per share. All the estimates were revised higher over the last 60 days. For fiscal 2014 as well, the Zacks Consensus Estimate moved to $2.43 by 4.3%, owing to the upward revision of all the estimates.

Other Stocks to Consider

Other better-placed property and casualty insurers Alleghany Corp. (Y), Berkshire Hathaway Inc. (BRK.A) (BRK.B) and CNA Financial Corp. (CNA), that carry a Zacks Rank #1 (Strong Buy), are also worth considering.

Read the Full Research Report on CINFRead the Full Research Report on BRK.BRead the Full Research Report on BRK.ARead the Full Research Report on CNARead the Full Research Report on YZacks Investment Research