Why Is CNO (CNO) Down 2.2% Since Last Earnings Report?
It has been about a month since the last earnings report for CNO Financial (CNO). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CNO 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.
CNO Financial Q4 Earnings Beat on High Investment Income
CNO Financial reported fourth-quarter 2023 adjusted earnings per share (EPS) of $1.18, which beat the Zacks Consensus Estimate by 38.8%. Also, the bottom line jumped 66% year over year.
Total revenues increased 20.2% year over year to $1.2 billion in the fourth quarter. The top line beat the consensus mark by 25.3%.
The strong fourth-quarter results were supported by increased investment income, premiums and general account assets. The upside was partially offset by higher benefits and expenses.
What’s Coming?
CNO Financial now expects 2024 EPS in the range of $3.10-$3.30, indicating an increase from the 2023 figure of $3.09. The company expects the expense ratio to be in the range of 18.8-19.2% for 2024, improving from the 2023 level of 19.4%. It anticipates the effective tax rate for 2024 to be around 23%. It is also aiming at a leverage of 25-28% for this year.
Looking back at revenues, CNO’s 2023 top line of $4.1 billion rose 15.9% from 2022 levels and beat the consensus mark of $3.7 billion.
Fourth Quarter Performance
Total insurance policy income of $625.7 million fell marginally year over year and missed the Zacks Consensus Estimate of $628.3 million due to a decline in health insurance policy income.
CNO’s net investment income increased 47% year over year to $465.2 million in the fourth quarter. General account assets grew 10.3% year over year to $325.1 million, comfortably beating the consensus mark by 10.2%. Also, the policyholder and other special-purpose portfolios jumped nearly seven times to $140.1 million.
Annuity collected premiums of $438.3 million increased 2% year over year. New annualized premiums for health and life products advanced 6% year over year to $96.1 million. Annuity, Health and Life products accounted for 23%, 53% and 24%, respectively, of CNO’s insurance margin.
Total benefits and expenses were $1.1 billion, which jumped 21.5% year-over-year. The increase in the metric was attributable to higher insurance policy benefits, interest expenses and other operating costs.
Financial Update (as of Dec 31, 2023)
CNO Financial exited the fourth quarter with unrestricted cash and cash equivalents of $774.5 million, which increased from the 2022-end level of $575.7 million. Total assets of $35.1 billion rose from $33.1 billion at 2022-end.
The debt-to-capital ratio was 34% at the fourth-quarter end. It has no outstanding debt maturities till 2025. Long-term debt was at $3.3 billion as of Dec 31, 2023.
Total shareholders’ equity jumped to $2.2 billion from $1.8 billion as of Dec 31, 2022.
Book value per diluted share increased to $19.83 in the fourth quarter from $15.14 a year ago. Adjusted operating return on equity came in at 9.8%, which deteriorated from 10.8% a year ago.
Share Repurchase and Dividend Update
CNO Financial rewarded its shareholders with $80 million in the form of share buybacks and dividends of $16.7 million.
As of Dec 31, 2023, the company had remaining repurchase funds of $521.8 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, CNO has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 has been net zero. Notably, CNO has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
CNO is part of the Zacks Insurance - Multi line industry. Over the past month, MGIC Investment (MTG), a stock from the same industry, has gained 4.7%. The company reported its results for the quarter ended December 2023 more than a month ago.
MGIC reported revenues of $284.72 million in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $0.67 for the same period compares with $0.64 a year ago.
For the current quarter, MGIC is expected to post earnings of $0.60 per share, indicating a change of +11.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for MGIC. Also, the stock has a VGM Score of D.
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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
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