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CNO Financial Grows on Solid Cash Position, High Debt Hurts

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CNO Financial Group, Inc.’s (CNO - Free Report) financial health remains impressive.  Strong cash position enables the company to enhance shareholders’ value through several capital deployment initiatives. It has been raising quarterly dividend since 2013. Frequent share repurchase programs have been a major capital deployment strategy for the company. These initiatives have helped the company retain shareholders’ confidence in the stock.

Year to date, its shares have gained nearly 32%, outperforming the Zacks Multi-Line Insurance industry’s rally of 11%.

The company has been witnessing consistent growth in revenues backed by solid performance of its Washington National segment. Sales at the segment have been rising over the last few quarters. The company further expects to regain sales growth momentum at Washington National by restructuring the field leadership to drive greater accountability and geographic coverage, adding recruiting support and introducing new products in mobile technology to enhance agent productivity.

CNO Financial has also been making several investments to improve its operations. It has substantially invested in key initiatives like agent productivity, geographic expansion, product launches, worksite platform distribution as well as enhancement of operating efficiencies and customer retention.

However, the company continues to face underwriting and pricing challenges in the long-term care business. Sustained weak performance of this segment has been affecting the company’s top line and bottom line adversely.

CNO Financial suffers from rising level of debt that continues to push up interest expenses as well. This increasing trend in interest expenses has been raising the company’s financial risk and hurting profitability.

Moreover, CNO Financial’s valuation looks expensive at the current level. Looking at the company’s price-to-earnings (P/E) ratio, investors may not want to pay any further premium. The company currently has a trailing 12-month P/E ratio of 15.9, which is above its median of 14.9 of its range. It is also higher than the industry average of 14.5.

Zacks Rank and Stocks to Consider

CNO Financial presently carries a Zacks Rank #3 (Hold).

Investors interested in stocks from the insurance space can check out Radian Group Inc. (RDN - Free Report) , MetLife, Inc. (MET - Free Report) and Prudential Financial, Inc. (PRU - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Radian Group offers mortgage and real estate products and services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 4.52%.

MetLife offers life insurance, annuities, employee benefits and asset management products in the United States, Japan, Latin America, Asia, Europe and the Middle East. The company pulled off positive surprises in each of the last four quarters with an average beat of 9.60%. 

Prudential Financial provides insurance, investment management and other financial products and services in the United States and internationally. The company came up with positive surprises in three of the last four quarters with an average beat of 0.16%.

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