Why CNO Financial (CNO) Deserves a Spot in Your Portfolio
CNO Financial Group, Inc. CNO is poised for continued growth, driven by the upward trajectory of new annualized premiums for health and life products, coupled with a steady increase in net investment income. Improvements in Life margin and Long-term care margin are additional factors expected to bolster the company's overall results.
CNO Financial — with a market cap of $3.1 billion — is a top-tier holding company for a group of insurance companies operating in the United States. It administers supplemental health insurance, annuity, individual life insurance and various other products. Due to solid prospects, this currently Zacks Rank #2 (Buy) stock is worth investing in at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for CNO Financial’s 2023 earnings is pegged at $2.76 per share, indicating an 18.5% year-over-year increase. The company has witnessed one upward estimate revision in the past week against none in the opposite direction. CNO beat on earnings in one of the last four quarters, met once and missed twice. This is depicted in the graph below.
CNO Financial Group, Inc. Price and EPS Surprise
CNO Financial Group, Inc. price-eps-surprise | CNO Financial Group, Inc. Quote
The consensus estimate for 2023 revenues stands at $3.7 billion, suggesting a 4.2% rise from the prior-year reported figure. Growth in insurance policy income is likely to be a major tailwind. The consensus mark for 2023 insurance policy income indicates 0.7% year-over-year growth.
Furthermore, the Zacks Consensus Estimates for insurance policy income from Annuity, Life and Long-term care predict a 19.1%, 2.5% and 1.2% increase from the year-ago period, respectively. The consensus estimate for 2023 general account assets is pegged at $1.2 billion, which is expected to boost net investment income.
CNO Financial’s ROIC of 6.7% compares favorably with the industry average of 1.7%, demonstrating better capital efficiency compared to its industry peers, suggesting effective management of its investments. Its investments in technology to improve agent productivity and sales and advertising are expected to improve the online customer experience and enhance productivity. Its hybrid enrollment platform, Optavise, is driving improved enrollment attendance rates.
The company’s shareholder value-boosting efforts are noteworthy. In the third quarter of 2023, the company allocated $56.9 million to shareholders through a combination of $40 million in share buybacks and $16.9 million in dividends. As of Sep 30, 2023, CNO Financial still had $601.8 million in remaining funds allocated for repurchases.
Shares of the company have outperformed its industry in the past year and have more room to run. During this time, CNO shares rallied 20.9% compared with the industry’s increase of 2.5%.
Risks
However, there are a few factors that investors should keep an eye on.
CNO Financial’s long-term debt-to-capital stands at 63.1%, significantly above the industry's average of 25.3%. It exited the third quarter with unrestricted cash and cash equivalents of $460.8 million, which declined from the 2022-end level of $575.7 million. Also, higher insurance policy benefits, interest expenses and other operating costs are boosting its total costs, impacting overall margins.
However, we believe that a systematic and strategic plan of action will drive its long-term growth.
Other Key Picks
Investors interested in the broader finance space can also check other top-ranked companies like Assurant, Inc. AIZ, Chubb Limited CB and Brown & Brown, Inc. BRO. While Assurant sports a Zacks Rank #1 (Strong Buy) at present, Chubb and Brown & Brown carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Assurant’s current-year earnings indicates a 31% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 42.4%. Also, the consensus mark for AIZ’s 2023 revenues suggests 5.4% year-over-year growth.
The consensus mark for Chubb’s current-year earnings indicates a 25.9% year-over-year increase. It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 6.5%. Furthermore, the consensus estimate for CB’s 2023 revenues suggests 10.6% year-over-year growth.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $2.76 per share, which indicates 21.1% year-over-year growth. It has witnessed five upward estimate revisions against none in the opposite direction during the past 60 days. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 12.3%.
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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
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