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CNA Financial (CNA) Down 3.2% Since Last Earnings Report: Can It Rebound?

Ventas (VTR) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

A month has gone by since the last earnings report for CNA Financial (CNA). Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

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

CNA Financial Q3 Earnings Beat Estimates, Soar Y/Y

CNA Financial Corporation reported third-quarter 2018 core income of $1.17 per share, beating the Zacks Consensus Estimate by 3.5%. Also, the bottom line increased by a whopping 101.7% from the year-ago quarter.

The company’s solid core income growth in the reported period marked its best quarterly performance since 2010. Moreover, the insurer witnessed a strong performance at its property and casualty (P&C) business in the quarter under review.

Including net realized investment gains as well as net deferred tax asset remeasurement, net income of $1.23 per share skyrocketed 132.1% year over year.

Behind Third-Quarter Headlines

Net investment income grew nearly 10.2% year over year to $400 million owing to lower tax rate.

Net written premiums at Property & Casualty Operations slipped 1.1% year over year to $1.6 billion. Core income soared 82.6% year over year to $305 million. Combined ratio improved 950 basis points (bps) on a year-over-year basis to 94.2%.

As of Sep 30, 2018, book value (excluding AOCI) was $45.20 per share, up 0.4% from the level on Dec 31, 2017.

Segment Results

Specialty net written premiums slid 1% year over year to $688 million. Combined ratio deteriorated 390 bps to 87%.

Commercial net written premiums remained flat year over year at $697 million. Combined ratio improved 1850 bps to 97.4%.

International net written premiums declined 5.3% year over year to $196 million. Combined ratio improved 2200 bps to 103.9%.

Life & Group Non-Core total operating revenues inched up 0.3% year over year to $332 million. Core income of $32 million skyrocketed 220% from the year-ago period. This upside was attributable to an after-tax reduction of long-term care claim reserves resulting from the annual claims experience study that amounted to $24 million.
 
Corporate & Other Non-Core
loss of $20 million was slightly wider than the loss of $18 million in the prior-year period.
 
Dividend Update

CNA Financial’s board of directors approved a quarterly dividend amounting to 35 cents per share, payable Dec 5 to stockholders of record as of Nov 19, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.69% due to these changes.

VGM Scores

At this time, CNA Financial has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNA Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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