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Cincinnati Upgraded to Strong Buy

by Zacks Equity Research

January 14, 2013 | Comments : 0 Recommended this article: (0)

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On January 12, Zacks Investment Research upgraded Cincinnati Financial Corp. ( CINF - Analyst Report ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cincinnati has been witnessing rising earnings estimates on the back of management’s efforts in appointing agencies and expanding product offerings to compensate the decline in businesses, strong scores from credit rating agencies and better-than-expected results at its Commercial segment. Moreover, this property & casualty insurer delivered positive earnings surprises in all the 4 quarters with an average beat of 41.7%. The expected long-term earnings growth rate for this stock is 5%.

The Zacks Consensus Estimate for 2013 is $1.76 per share, up 5.4% as 4 of the 7 estimates were revised higher over the last 60 days.

Based on the solid performance in the first three quarters, the Zacks Consensus Estimate for 2012 is $1.77 per share, up nearly 168.6% year over year. However, pretax cat loss of $25-$35 million from Hurricane Sandy will weigh on the fourth quarter results. The Zacks Consensus Estimate for the fourth quarter is 49 cents per share, down 37% year over year.

Cincinnati reported its third-quarter results on October 25. Non-GAAP earnings per share came in at 64 cents per share, surpassing the Zacks Consensus Estimate by 56.1%. It was significantly ahead of the year-ago earnings of 13 cents.

The upside was largely driven by strong property casualty underwriting.

Other Stocks to Consider

Apart from Cincinnati, other stocks in the property and casualty insurers segment that are currently performing well and are worth considering include Allstate Corp. ( ALL - Analyst Report ) and HCC Insurance Holdings Inc ( HCC - Snapshot Report ) . Both the companies carry a Zacks Rank #1 (Strong Buy).

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