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Cincinnati Financial (CINF): What's Up this Earnings Season?

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Cincinnati Financial Corporation (CINF - Free Report) will report fourth-quarter 2016 results on Feb 8, after the market closes. Last quarter, the company posted a positive earnings surprise of 1.18%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter   

Cincinnati Financial is likely to witness top-line growth at its Commercial Lines Property Casualty Insurance segment in the to-be-reported quarter. Several growth initiatives as well as a gradual improvement in insurance rates are likely to drive the increase in revenues.   

Moreover, the company is likely to report premium growth for each of its insurance segments, owing to better pricing. This in turn allows the property and casualty (P&C) insurer to underwrite on a policy-by-policy basis as well as confidently select and price new businesses from its agencies.  

Further, Cincinnati Re is likely to display growth supported by its team’s efforts to selectively build a diversified portfolio of treaty business.  

Also, the P&C insurer is expected to record investment income growth in the fourth quarter due to an increase in both interest and dividend income.

However, the company projects pre-tax catastrophe loss between $75 million and $85 million for the fourth quarter. This is likely to result in a deterioration of the combined ratio by 650–750 basis points (bps).

In addition, the company’s life insurance segment might be adversely affected by the persistent volatility in group benefits associated with the Affordable Care Act (ACA).

With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters, with an average beat of 11.82%.

Earnings Whispers

Our proven model does not conclusively show that Cincinnati Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Cincinnati Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 68 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cincinnati Financial holds a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, we need a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

CNO Financial Group, Inc. (CNO - Free Report) , which will report fourth-quarter earnings on Feb 7, has an Earnings ESP of +2.56% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Argo Group International Holdings, Ltd. has an Earnings ESP of +9.52% and a Zacks Rank #3. The company will report fourth-quarter earnings on Feb 13.

American International Group, Inc. (AIG - Free Report) has an Earnings ESP of +3.28% and a Zacks Rank #3. The company will report fourth-quarter earnings on Feb 14.

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