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CNO (CNO) Down 2.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for CNO Financial (CNO - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CNO 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 drivers.

CNO Financial's  Q2 Earnings Miss Estimates, Up Y/Y

CNO Financial Group, Inc.’s  second-quarter 2018 adjusted earnings of 49 cents per share missed the Zacks Consensus Estimate of 51 cents. However, the bottom line improved 8.9% year over year, mainly driven by the Bankers Life segment

CNO Financial’s total revenues slipped 1% year over year to $1,046.3 million in the reported quarter. However, the top line slightly surpassed the Zacks Consensus Estimate by 1.5%.

Quarterly Operational Update

Total collected premiums were $947.6 million, up 2% from the prior-year quarter’s level mainly driven by Bankers Life segment.

New annualized premiums for life and health products amounted to $81.8 million, down 0.1% from the year-ago period.

First-year collected premiums totaled $369 million, up 5% from the year-earlier quarter’s tally, primarily because of the contribution by Bankers Life segment.

Quarterly Segment Update

Bankers Life


Total collected premiums were $697 million, up 2% year over year, driven by strong sales and persistency.

New annualized premiums for life and health products decreased 3% year over year to $38.9 million.

Washington National

Total collected premiums of $172.8 were up 3% year over year.

New Annualized premiums from life and health products were $26 million, up 2% from the year-ago quarter’s figure.

Pretax operating earnings were up 8% compared with the prior-year quarter’s count.

Colonial Penn

Total collected premiums were $73.8 million, up 1% year over year.

New annualized premiums were $16.9 million, up 5% from the amount recorded in the comparable quarter last year.

The pretax earnings were $5.4 million, lower than $8 million in the year-ago period, reflecting higher market expenditure in the second quarter of 2018.

Long-Term Care in Run-Off

Total collected premiums were $4 million, down 9% year over year.

The long-term care business was recaptured in September 2016 and the segment recognized pretax earnings of $3.1 million in the quarter under review. Meanwhile, the figure soared 82% year over year.

The company expects this segment to report normalized earnings before net realized investment gains (losses) of approximately breakeven over the long term.  However, this segment’s quarterly results can be volatile.

Corporate Operations

The segment includes performance of the investment advisory subsidiary and corporate expenses.

Pretax loss of $14 million in the second quarter was wider than $13.2 million incurred in the year-ago quarter, mainly due to lower investment returns, offset by lower expenses.

Financial Update

Unrestricted cash and investments held by CNO Financial’s holding company were $376 million as of Jun 30, 2018, down 5.2% from the level at year-end 2017.

Debt-to-capital ratio was 17.1% as of Jun 30, 2018 compared with 15.9% at the end of 2017.

Securities Repurchase and Divided Update

During the second quarter, the company bought back common stock worth $60.5 million under authorization program. Additionally, it repurchased 3 million common shares at an average cost of $20.18 per share.

Dividends paid on common stock totaled $16.5 million in the same period.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, 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.

The company's stock is suitable solely for value based on our style scores.

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.




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