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Why Is CNO (CNO) Down 3% Since Last Earnings Report?

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A month has gone by since the last earnings report for CNO Financial (CNO - Free Report) . Shares have lost about 3% 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 the most recent earnings report in order to get a better handle on the important drivers.

CNO Financial’s Q3 Earnings Top Estimates

CNO Financial’s third-quarter 2018 adjusted earnings of 53 cents per share slightly beat the Zacks Consensus Estimate of 52 cents. However, the bottom line improved 17.8% year over year, mainly driven by lower Federal income tax rate related to the Tax Cuts and Jobs Act.

CNO Financial’s total revenues improved 37.2% year over year to $1.5 billion in the reported quarter. Moreover, the top line surpassed the Zacks Consensus Estimate by nearly 50% driven by sales growth in Bankers Life segment as well as various growth initiatives implemented by the company.

Quarterly Operational Update

Total collected premiums were $922.1 million, up 4% from the prior-year quarter’s level mainly driven by Bankers Life segment.

New annualized premiums for life and health products amounted to $81.7 million, up 6% from the year-ago period.

First-year collected premiums totaled $349.1 million, up 9% 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 $635.7 million, up 7% year over year, driven by solid sales and persistency.

New annualized premiums for life and health products increased 2% year over year to $37.3 million.

Washington National

Total collected premiums of $167.5 million were up 2% year over year.

New Annualized premiums from life and health products were $25.3 million, up 2% from the year-ago quarter’s figure.

Pretax operating earnings were up 10% compared with the prior-year quarter’s count, reflecting higher margins on the supplemental health block.

Colonial Penn

Total collected premiums were $74 million, up 2% year over year.

New annualized premiums were $19.1 million, up 19% from the amount recorded in the comparable quarter last year.

The pretax earnings were $6.1 million, lower by 32.2% from the same metric of $9 million in the year-ago period mainly due to a $3.0 million adjustment and refinement to liabilities for insurance products.

Long-Term Care in Run-Off

Total collected premiums were $44.9 million, down 7.8% year over year.

The long-term care business was recaptured in September 2016 and the segment recognized pretax earnings of $2.1 million in the quarter under review. Meanwhile, the figure soared 80.2% 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 $11.8 million in the third quarter was narrower than $14.9 million incurred in the year-ago quarter, mainly due to lower expenses.

Financial Update

Unrestricted cash and investments held by CNO Financial’s holding company were $166 million as of Sep 30, 2018, down 58.2% from the level at year-end 2017.

Debt-to-capital ratio was 20.2% as of Sep 30, 2018 compared with 15.9% at the end of 2017.

Securities Repurchase and Divided Update

During the third quarter, the company did not buyback any 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

At this time, CNO has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 this revision 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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