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Cincinnati Financial: A Strong Buy

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On Sep 25, Zacks Investment Research upgraded Cincinnati Financial Corp. (CINF - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cincinnati Financial has witnessed rising earnings estimates on the back of strong second-quarter 2013 results. Moreover, this property and casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 72%.

Cincinnati Financial reported second-quarter results on Jul 26. Non-GAAP earnings per share came in at 61 cents, surpassing the Zacks Consensus Estimate of 32 cents by 90.6% and year-ago earnings by more than three fold.

Earnings were primarily aided by increased underwriting profits from each of the three property casualty segments.

Revenue for Cincinnati Financial improved 8% year over year driven by higher premiums earned (up 9% year over year). In addition, total benefits and expenses for Cincinnati Financial in the quarter decreased 3.5%.

At quarter-end, debt to capital ratio improved 50 basis points to 13.6% from 14.1% at year-end 2012. As of Jun 30, 2013, book value per share of Cincinnati Financial was $34.83, up 4% from Dec 31, 2012.

In August, the board also approved a 3.1% hike in its quarterly dividend to 42 cents per share. Its dividend yield of 3.6% is ahead of the industry yield of 2.5%

The Zacks Consensus Estimate for 2013 increased 15.3% to $2.56 per share. All the estimates were revised higher over the last 60 days. For fiscal 2014 as well, the Zacks Consensus Estimate moved to $2.43 by 4.3%, owing to the upward revision of all the estimates.

Other Stocks to Consider

Other better-placed property and casualty insurers Alleghany Corp. (Y - Free Report) , Berkshire Hathaway Inc. (BRK.B - Free Report) and CNA Financial Corp. (CNA - Free Report) , that carry a Zacks Rank #1 (Strong Buy), are also worth considering.

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