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CNO Financial (CNO) Rises 24.9% in 3 Months: More Growth Ahead?

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CNO Financial Group, Inc.’s (CNO - Free Report) shares have jumped 24.9% in the past three months compared with the 8.2% rise of the industry it belongs to, thanks to the growing demand for benefits solutions. The company has also been gaining from the strong performance of its direct-to-consumer and worksite businesses.

Based in Carmel, IN, CNO Financial provides different products and services including financial services, life and health insurance, annuities and workforce benefits solutions, through its subsidiaries. The company has a market cap of $2.6 billion.

Can it Retain Momentum?

The answer is yes and before we get into the details, let us show you how its estimates for the full-year 2022 stand. The Zacks Consensus Estimate for CNO Financial’s 2022 earnings is pegged at $2.29 per share, which improved by a penny in the past 30 days. It has witnessed one upward estimate revision during this time against one movement in the opposite direction. The company beat earnings estimates in three of the last four quarters and missed once, with an average surprise of 26%.

CNO Financial Group, Inc. Price and EPS Surprise

CNO Financial Group, Inc. Price and EPS Surprise

CNO Financial Group, Inc. price-eps-surprise | CNO Financial Group, Inc. Quote

The consensus estimate for 2022 revenues stands at $3.6 billion.

Now let’s delve into what’s driving this Zacks Rank #3 (Hold) stock.

Over the past five years, CNO Financial’s bottom line grew 11.2% compared with the industry’s 8.2%. This is encouraging evidence for the investors, showing that the company is on the right path to growing profits against their investments.

Declining costs are helping the company to boost its bottom line. In the first nine months of 2022, benefits and expenses fell 18.5% year over year. CNO’s margins are expected to grow if this trend continues. Our estimate suggests the metric will likely decline 17.8% in 2022.

The company’s growing online presence and its investment in technology to improve productivity are major positives. Its hybrid enrollment platform Optavise Now is expected to enhance the connection between agents and employees. Serving clients via virtual consultations and digital insurance applications is expected to help the company to support enrolment growth.

Even though insurance policy income took a hit in the first three quarters of 2022, we expect things to improve in the fourth quarter, especially in the Annuity and Life arms. We expect pre-tax income for 2022 to be up 5.6% year over year. Also, growing fee income will likely support its fourth-quarter performance.

Its inorganic growth initiatives like the DirectPath buyout are expected to enhance enrollment capabilities and boost benefits management services. With the high demand for such services, CNO’s prudent acquisition moves are expected to be extremely fruitful.

Looking at the company’s price-to-earnings (P/E) ratio, CNO Financial seems undervalued at the current level. It currently has a forward 12-month P/E ratio of 9.86X lower than the industry average of 10.25X.

Risks

Despite the upside potential, there are a few factors that are holding back the stock’s growth. A leveraged balance sheet and declining revenues are concerning. The company’s total debt-to-capital stands at 68.2%, higher than the industry's average of 42.5%. Its revenues are witnessing a declining trend. The top line slumped 14.6% year over year in the first nine months of 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.

Key Picks

Some better-ranked stocks in the broader finance space are MGIC Investment Corporation (MTG - Free Report) , XP Inc. (XP - Free Report) and NerdWallet, Inc. (NRDS - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Milwaukee, WI-based MGIC Investment is a private mortgage insurance and other products provider. The Zacks Consensus Estimate for MTG’s current year bottom line is pegged at $2.86 per share, indicating 49.7% year-over-year growth.

Headquartered in Sao Paulo, Brazil, XP is a leading financial products and services provider. The Zacks Consensus Estimate for XP’s 2022 bottom line is pegged at $1.42 per share, indicating 22.4% year-over-year growth.

Based in San Francisco, NerdWallet is a digital platform operator connecting individuals and businesses with financial products suppliers. The Zacks Consensus Estimate for NRDS’ 2022 earnings signals a 74.4% improvement from a year ago.

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