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Cincinnati Financial (CINF) Up 4.5% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Cincinnati Financial Corporation (CINF - Free Report) . Shares have added about 4.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial Corporation reported fourth-quarter 2016 operating income of $0.75 per share that beat the Zacks Consensus Estimate of $0.68 by 10.3%. However, the bottom line deteriorated 31.8% year over year, mainly due to weak underwriting results and higher expenses.
Including lower net realized investment loss of $0.15 per share, the company’s net income plunged 36.2% year over year to $0.60 per share.
Full-Year 2016 Highlights
Cincinnati Financial’s full-year operating earnings came in at $3.07 per share, down 13.8% year over year.
Total revenue for 2016 increased about 5% year over year to $5.3 billion.
Operational Update
Total operating revenue in the reported quarter was $1.35 billion, up 3.5% year over year. The top-line growth was driven by 3.8% higher premiums earned and 2% rise in investment income. Moreover, revenues beat the Zacks Consensus Estimate of 1.24 billion by 8.6%.
Total benefits and expenses of Cincinnati Financial increased 13.1% year over year to $1.2 billion, primarily due to higher insurance losses and contract holders’ benefits, underwriting, acquisition and insurance expenses as well as interest expenses.
Combined ratio – a measure of underwriting profitability – deteriorated 920 basis points (bps) year over year to 96.2%.
Cincinnati Financial had 1,614 agency relationships as of Dec 31, 2016 compared with 1,526 as of Dec 31, 2015.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $781 million grew 2.5% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 64.4% year over year to $36 million. Combined ratio also deteriorated 890 bps year over year to 95.7%.
Personal Lines Insurance: Total revenue of $298 million rose 6% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $12 million, which compared unfavorably with the year-ago profit of $18 million. Moreover, combined ratio deteriorated 1040 bps year over year to 104.4%.
Excess and Surplus Lines Insurance: Total revenue of $47 million improved 6.8% year over year due to an increase in premiums earned. The segment’s underwriting profit, however, declined 9.1% year over year to $20 million. Also, combined ratio deteriorated 1060 bps year over year to 58.7%.
Life Insurance: Total revenue increased 4.3% year over year to $96 million. Total benefits and expenses decreased 6.5% year over year to $72 million.
Financial Update
As of Dec 31, 2016, Cincinnati Financial had assets worth $20.4 billion, up 7.9% from the 2015-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.3% as of Dec 31, 2016. This reflects an improvement from 11.3% at the end of 2015.
As of Dec 31, 2016, Cincinnati Financial’s book value per share was $42.95, up 9.6% from Dec 31, 2015.
How Have Estimates Been moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter In the past month, the consensus estimate has shifted by 9.3% due to these changes.
VGM Scores
At this time, Cincinnati Financial's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
The estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Cincinnati Financial (CINF) Up 4.5% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Cincinnati Financial Corporation (CINF - Free Report) . Shares have added about 4.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial (CINF - Free Report) Q4 Earnings Beat, Plunge Y/Y
Cincinnati Financial Corporation reported fourth-quarter 2016 operating income of $0.75 per share that beat the Zacks Consensus Estimate of $0.68 by 10.3%. However, the bottom line deteriorated 31.8% year over year, mainly due to weak underwriting results and higher expenses.
Including lower net realized investment loss of $0.15 per share, the company’s net income plunged 36.2% year over year to $0.60 per share.
Full-Year 2016 Highlights
Cincinnati Financial’s full-year operating earnings came in at $3.07 per share, down 13.8% year over year.
Total revenue for 2016 increased about 5% year over year to $5.3 billion.
Operational Update
Total operating revenue in the reported quarter was $1.35 billion, up 3.5% year over year. The top-line growth was driven by 3.8% higher premiums earned and 2% rise in investment income. Moreover, revenues beat the Zacks Consensus Estimate of 1.24 billion by 8.6%.
Total benefits and expenses of Cincinnati Financial increased 13.1% year over year to $1.2 billion, primarily due to higher insurance losses and contract holders’ benefits, underwriting, acquisition and insurance expenses as well as interest expenses.
Combined ratio – a measure of underwriting profitability – deteriorated 920 basis points (bps) year over year to 96.2%.
Cincinnati Financial had 1,614 agency relationships as of Dec 31, 2016 compared with 1,526 as of Dec 31, 2015.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $781 million grew 2.5% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 64.4% year over year to $36 million. Combined ratio also deteriorated 890 bps year over year to 95.7%.
Personal Lines Insurance: Total revenue of $298 million rose 6% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $12 million, which compared unfavorably with the year-ago profit of $18 million. Moreover, combined ratio deteriorated 1040 bps year over year to 104.4%.
Excess and Surplus Lines Insurance: Total revenue of $47 million improved 6.8% year over year due to an increase in premiums earned. The segment’s underwriting profit, however, declined 9.1% year over year to $20 million. Also, combined ratio deteriorated 1060 bps year over year to 58.7%.
Life Insurance: Total revenue increased 4.3% year over year to $96 million. Total benefits and expenses decreased 6.5% year over year to $72 million.
Financial Update
As of Dec 31, 2016, Cincinnati Financial had assets worth $20.4 billion, up 7.9% from the 2015-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.3% as of Dec 31, 2016. This reflects an improvement from 11.3% at the end of 2015.
As of Dec 31, 2016, Cincinnati Financial’s book value per share was $42.95, up 9.6% from Dec 31, 2015.
How Have Estimates Been moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter In the past month, the consensus estimate has shifted by 9.3% due to these changes.
VGM Scores
At this time, Cincinnati Financial's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
The estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.