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Why Is CNO (CNO) Up 4.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for CNO Financial (CNO - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CNO due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

CNO Financial's Q3 Earnings Beat, Revenues Down Y/Y

CNO Financial reported third-quarter 2022 adjusted earnings per share (EPS) of 49 cents, which beat the Zacks Consensus Estimate by 2.1%. However, the bottom line plunged 32% year over year.

Earnings outpaced the Zacks Consensus Estimate on the back of higher annuity premiums, strong performance of its direct-to-consumer and worksite businesses, and reduced benefits and expenses. However, a decline in insurance policy income and variable investment income partially offset the upside.

Total revenues of $905.3 million dropped 6.5% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.

Insurance policy income dipped 1% year over year to $623.2 million.

Net investment income of $268.1 million dropped 13% year over year in the third quarter.

Annuity collected premiums improved 11% year over year to $370 million.

New annualized premiums for health and life products amounted to $87.3 million, up 3% year over year.

Total benefits and expenses of $768.1 million declined 8.6% year over year, attributable to lower insurance policy benefits, and other operating costs and expenses.

Financial Update (as of Sep 30, 2022)

CNO Financial exited the third quarter with unrestricted cash and cash equivalents of $498 million, which plunged 32.9% year over year.

Total assets of $33,073.3 million decreased 7.4% year over year.

Total shareholders’ equity fell 75.2% year over year to $1,297.9 million.

Book value per share plunged 72.9% year over year to $11.19 in the third quarter.

Adjusted operating return on equity of 10.2% deteriorated 130 basis points (bps) year over year.

Debt-to-capital ratio deteriorated 2,890 bps year over year to 46.7% at the third-quarter end.

Share Repurchase and Dividend Update

CNO Financial rewarded its shareholders with $26.1 million in the form of share buybacks worth $10 million and dividends of $16.1 million.

Q422 View

Fee income is predicted to remain seasonally stronger in the fourth quarter of 2022.

Expenses (excluding significant items) are estimated to be on par with the year-to-date third-quarter trend.

2022 Outlook

Management anticipates growth in sales this year.

Investment income, allocated to products, is forecast to stay moderately up, while the earlier estimate projected the metric to remain relatively flat to modestly up. Investment income, not allocated to products, is likely to remain lower than the 2021 figure.

Earlier, fee income was expected to witness an uptrend in 2022 from the 2021 level.

Expenses (excluding significant items) were estimated to be decently higher than the 2021 figure.

Free cash flow is expected to be lower than the 2021 level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, CNO has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

CNO belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, The Hartford (HIG - Free Report) , has gained 2.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

The Hartford reported revenues of $3.83 billion in the last reported quarter, representing a year-over-year change of +3.6%. EPS of $1.44 for the same period compares with $1.26 a year ago.

For the current quarter, The Hartford is expected to post earnings of $1.84 per share, indicating a change of -8.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The Hartford. Also, the stock has a VGM Score of B.


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