Here's Why CNA Financial (CNA) Stock is an Attractive Bet Now
CNA Financial Corporation CNA is well-poised to gain from a strong rate, higher income from a limited partnership, improved net earned premium and sufficient liquidity.
Optimistic Growth Projections
The Zacks Consensus Estimate for 2023 and 2024 earnings per share is pegged at $4.41 and $4.73, indicating an increase of 14.8% and 7.4% from the year-ago reported figure, driven by 10.5% and 2.8% higher revenues of $11.62 billion and $11.94 billion, respectively. The expected long-term earnings growth rate is pegged at 5%.
Northbound Estimate Revision
The Zacks Consensus Estimate for CNA Financial’s 2023 and 2024 earnings has moved 2.8% and 5.3% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.
Earnings Surprise History
CNA Financial has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 9.24%.
Zacks Rank & Price Performance
CNA Financial currently sports a Zacks Rank #1 (Strong Buy). In the past year, the stock has fallen 2.2% against the industry’s rise of 10.3%.
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Return on Equity (ROE)
In the second quarter of 2023, CNA Financial’s trailing 12-month ROE expanded 370 basis points (bps) to 13.8%. The core ROE expanded 370 bps to 10.1% in the first nine months of 2023. ROE reflects the insurer’s efficiency in using shareholders’ funds.
Style Score
CNA Financial has a favorable VGM Score of A. The VGM Score helps identify stocks with the most attractive value, best growth and most promising momentum.
Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best opportunities in the value investing space.
Business Tailwinds
CNA Financial remains well-poised to gain from a rise in new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results and higher net earned premium, which contribute to premium growth across its Specialty, Commercial and International segments.
Net investment income should gain from fixed-income securities and other investments as well as a rise in income from limited partnership and common stock investments. Fixed income continues to benefit from favorable reinvestment yields and strong operating cash flows. CNA Financial’s fixed-income investment strategy with the highest allocations to diversified investment grade corporates as well as highly rated municipal securities should support investment results.
CNA has been able to maintain the underlying combined ratio below 95 for straight 13 quarters. Through targeted portfolio management strategies, the company made significant progress in successfully repositioning the portfolio underwritten via Lloyd’s syndicate in its effort to improve the overall underwriting results of its international operation.
The company has a solid balance sheet with capital remaining above the target levels required for all ratings. Cash flow from P&C underwriting activities and fixed-income investments remained very strong, reflecting continued excellent underwriting and fixed-income results.
Robust balance sheet and cash flows enable CNA Financial to engage in shareholder-friendly moves like dividend hikes. CNA’s quarterly dividend payment has witnessed a 10-year (2013-2023) CAGR of 7.7%. On the back of a disciplined execution, denoted by strong underwriting results and confidence in future earnings performances, the company hiked its dividend over the past couple of years.
Attractive Valuation
CNA shares are trading at a discount than the industry average. Its price-to-book value of 1.31X is lower than the industry average of 1.45X. Before the valuation expands, it is preferable to take a position in the stock.
CNA Financial has an impressive Value Score of A, reflecting an attractive valuation of the stock. Value stocks have a long history of showing superior returns.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Mercury General Corporation MCY, Kinsale Capital Group, Inc. KNSL and Cincinnati Financial Corporation CINF. While Mercury General sports a Zacks Rank #1, Kinsale Capital and Cincinnati Financial carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mercury General beat estimates in two of the last four quarters and missed in the other two, the average being 2,833.05%. In the past year, the insurer has lost 1.8%.
The Zacks Consensus Estimate for MCY’s 2023 and 2024 earnings per share indicates a year-over-year increase of 65.2% and 343.7%, respectively.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 14.25%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings has moved 2.7% and 1.7% north, respectively, in the past 30 days, reflecting analysts’ optimism.
Cincinnati Financial surpassed earnings in three of the last four quarters and missed in one, the average being 38.33%. In the past year, the insurer has lost 1.6%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share indicates a year-over-year increase of 31.8% and 8.1%, respectively.
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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
Mercury General Corporation (MCY) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
