Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Aug 30, we downgraded our recommendation on the shares of Cincinnati Financial Corp. (CINF - Analyst Report) to Neutral from Outperform. Though the company posted better than expected second quarter earnings, its greater than average exposure to catastrophes, weak personal lines business and a low interest rate environment keeps us on the sidelines.
 
Why Downgrade?
 
Cincinnati Financial’s Personal Lines business has been underperforming over the past few years. The personal lines unit continues to report soft margins. Despite the company’s efforts to apply predictive modeling for pricing and raise rates in some lines, in order to save margins, the segment will not see underwriting profitability in the near term, given the stiff competitive market conditions in this line of business.
 
Cincinnati Financial also faces some headwinds due to a low interest rate environment.
 
Moreover, the company’s operations are prone to catastrophe losses, imparting volatility to the earnings.
 
Counting on the positives, Cincinnati Financial is continuously witnessing improving business conditions in Commercial and Excess and Surplus lines insurance business. 
 
A strong relationship with its agencies also bodes well for Cincinnati Financial. 
 
With respect to earnings results, second quarter 2013 operating earnings of 61 cents per share were significantly exceeding the Zacks Consensus Estimate of 32 cents per share and 3.6 times higher than 17 cents reported in the year ago quarter. 
 
The earnings beat came on the back of increased underwriting profits from each of the three property casualty segments.
 
Other Stocks to Consider
 
Besides Cincinnati Financial which is carrying a Zacks Rank #3 (Hold), HCI Group Inc. (HCI - Snapshot Report), Everest Re Group Ltd. (RE - Analyst Report) and State Auto Financial Corp. (STFC - Snapshot Report) all carrying favorable Zacks Rank #1 (Strong Buy) and look impressive.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%