Why You Should Retain Cincinnati Financial in Your Portfolio
Estimates for Cincinnati Financial Corporation CINF have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 move nearly 9% north to $3.15 and for 2019, revised 2.2% upward to $3.25.
The company provides property and casualty insurance products in the United States. Shares of this Zacks Rank #3 (Hold) insurance provider have rallied 14.4% quarter to date, outperforming the industry’s 10.5% increase as well as the Zacks S&P 500 Composite’s 6% gain.
Let’s focus on the factors that make Cincinnati Financial a stock to retain for attractive returns.
Improving Top Line: Cincinnati Financial has been continuously generating an improved top line, driven by higher net premiums earned as well as investment income. Growth initiatives as well as a gradual increase in insurance rates have been supporting the upside.
In fact, net written premiums in 2017 witnessed a five-year CAGR of 6.8%, nearly double the property casualty’s industry rate. Premium growth initiatives, price increases, higher level of insured exposures, and a disciplined expansion of Cincinnati Re should continue to drive revenues.
Strategic Endeavors: Appointing new agencies continues to be one of key growth strategies to ramp up its profile. The company has plans to appoint 100 agencies for focusing on high net worth personal lines clients and market only the company’s personal lines products in 2018.The insurer is also confident that its agent-focused business model will drive long-term premium growth just as it has been doing so for more than 60 years.
Effective Capital Management: Cincinnati Financial’s consistent cash flow and sufficient cash balances will continue to boost liquidity. The company boasts a commendable record of annual dividend hike for the past 58 years besides paying special dividends. Its dividend yield of 2.8% betters the industry average of 0.5%.
The company has 15.5 million shares remaining under its authorization as of Jun 30, 2018. These initiatives make Cincinnati Financial an attractive pick for yield-seeking investors.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.15, representing a year-over-year increase of 15% on 5.1% higher revenues of $5.9 billion. For 2019, the consensus mark for the bottom line stands at $3.25, translating into a 3.2% year-over-year rise while the same for the top line is projected at $6.2 billion, up 5.3%.
Positive Earnings Surprise History: Cincinnati Financial flaunts a solid earnings surprise history, exceeding the Zacks Consensus Estimate in three of the last four quarters. This outperformance underlines the company’s operational efficiency. Its average five-quarter positive earnings surprise stands at 13.84%.
Stocks to Consider
Investors interested in property and casualty industry can check out a few better-ranked stocks like Arch Capital Group Ltd. ACGL, RLI Corp. RLI and Berkshire Hathaway Inc. BRK.B, each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arch Capital provides property, casualty and mortgage insurance and reinsurance products worldwide. It delivered a 13.46% positive surprise in the earlier reported quarter.
RLI Corp. underwrites property and casualty insurance in the United States and internationally. Last reported quarter, it pulled off a 9.09% earnings surprise.
Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. It came up with a 22.91% beat in the previously reported quarter.
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