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Why Is Cincinnati Financial (CINF) Down 5.3% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Cincinnati Financial Corporation (CINF - Free Report) . Shares have lost about 5.3% in that time frame.

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

Cincinnati Financial Misses on Q1 Earnings & Revenues

Cincinnati Financial Corporation reported first-quarter 2018 operating income of 72 cents per share, which missed the Zacks Consensus Estimate of 82 cents by 12.2%. Nonetheless, the bottom line improved 22% year over year, mainly on higher revenues and a solid segmental performance.

Including net realized investment loss of 91 cents per share, the company’s net loss came in at 19 cents versus the net income of $1.21 in the year-ago quarter.

Operational Update    

Total operating revenues in the quarter under review were $1.4 billion, up 3.8% year over year. The revenue growth was driven by 4.3% higher premiums earned and a 0.7% rise in investment income. However, the top line missed the Zacks Consensus Estimate by 0.6%.

Total benefits and expenses of Cincinnati Financial increased 2.2% year over year to $1.3 billion, primarily due to higher underwriting, acquisition and insurance expenses plus insurance loss and contract holders’ benefits.

Combined ratio — a measure of underwriting profitability — improved 180 basis points (bps) year over year to 97.9%.

Cincinnati Financial had 1,724 agency relationships as of Mar 31, 2018 compared with 1,643 as of Mar 31, 2017.

Quarterly Segment Update

Commercial Lines Insurance: Total revenues of $792 million grew 1.3% year over year. This upside was primarily driven by an increase in premiums earned as well as fee revenues. The company delivered an underwriting profit of $15 million against the year-ago loss of $2 million. Combined ratio also improved 210 bps year over year to 98.3%.

Personal Lines Insurance: Total revenues of $326 million rose 7.9% year over year owing to a noticeable increase in premiums earned. The segment incurred an underwriting loss of $9 million, narrower than the year-ago loss of $15 million. Moreover, combined ratio improved 230 bps year over year to 103.2%.

Excess and Surplus Lines Insurance: Total revenues of $56 million increased 16.7% year over year. The segment’s underwriting profit of $18 million remained flat year over year. Combined ratio deteriorated 650 bps year over year to 68.8%.

Life Insurance: Total revenues of $99 million declined 2.9% year over year. Total benefits and expenses increased 1.2% year over year to $83 million.

Financial Update

As of Mar 31, 2018, Cincinnati Financial had total assets worth $21.5 billion, up 1.7% from the 2017-end level.

Cincinnati Financial’s debt-to-capital ratio was 9.3% as of Mar 31, 2018, reflecting a slight deterioration from 9.0% at the end of 2017.

As of Mar 31, 2018, Cincinnati Financial’s book value per share was $48.42, down 3.7% from Dec 31, 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted downward by 7.4% due to these changes.

Cincinnati Financial Corporation Price and Consensus

VGM Scores

At this time, CINF has an average Growth Score of C, however its Momentum is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise CINF has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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