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CNA Financial (CNA) Down 1.4% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CNA Financial Corporation CNA. Shares have lost about 1.4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is CNA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CNA Financial Q1 Earnings Top Estimates, Premiums Up

CNA Financial Corporation reported first-quarter 2018 core income of $1.03 per share, beating the Zacks Consensus Estimate by 14.4%. Also, the bottom line improved 18.4% from the year-ago quarter.

CNA Financial’s delivery of strong results bears evidence to a solid start of the year. The company grossed a significant amount of core income, driven by pre-tax underlying underwriting income, marking the highest level in over a decade. Moreover, the company generated core income growth in its run-off long-term care business.

This apart, the quarter witnessed improved premiums across its segments, namely Specialty, Commercial and International.

Including net realized investment gains, net income of $1.07 per share improved 11.5% year over year.

Behind First-Quarter Headlines

Net investment income grew about 4.1% year over year to $405 million owing to stable fixed income returns and lower tax rate.

Net written premiums at Property & Casualty Operations increased 11.1% year over year to $1.8 billion. Core income jumped 22% year over year to $327 million. Combined ratio improved 410 basis points (bps) on a year-over-year basis to 93.1%.

As of Mar 31, 2018, book value (excluding AOCI) was $43.57 per share, down 3.2% from Dec 31, 2017.

Segment Results

Specialty net written premiums rose 2.4% year over year to $686 million owing to increase in new business and a positive renewal change. Combined ratio improved 570 bps to 87.5%.

Commercial net written premiums improved 14.9% year over year to $832 million. Combined ratio improved 460 bps to 97.1%.

International net written premiums increased 23.9% year over year to $295 million, fueled by broad based growth across all the company’s platforms, driven by a higher new business, retention and positive renewal premium change. Combined ratio deteriorated 150 bps to 96.6%.

Life & Group Non-Core total operating revenues nudged up 1.2% year over year to $335 million. Core income skyrocketed 250% year over year to $14 million owing to favorable persistency as well as rising rates.

Corporate & Other Non-Core core loss of $60 million was considerably wider than the loss of $37 million in the year-ago quarter.

Dividend Update

The board of directors of CNA Financial announced a dividend of 30 cents per share, payable May 30 to stockholders of record as of May 14, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.

CNA Financial Corporation Price and Consensus

 

CNA Financial Corporation Price and Consensus | CNA Financial Corporation Quote

VGM Scores

At this time, CNA has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Interestingly, CNA has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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