It has been about a month since the last earnings report for Cincinnati Financial Corporation (NASDAQ:CINF) . Shares have added about 4.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CINF due for a pullback? 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 catalysts.
Cincinnati Financial Q4 Earnings Top, Revenues Up Y/Y
Cincinnati Financial Corporation reported fourth-quarter 2017 operating income of 93 cents per share, beating the Zacks Consensus Estimate of 86 cents by 8.1%. Also, the bottom line improved 24% year over year, mainly on higher revenues and a solid segmental performance.
Including net realized investment loss of 4 cents per share and effects of the U.S. tax reform legislation of $2.99, the company’s net income skyrocketed 546.7% year over year to $3.88.
Full-Year Highlights
For 2017, Cincinnati Financial reported operating income per share of $2.74, surpassing the Zacks Consensus Estimate by 3.4% but deteriorating 10.7% year over year.
Total operating revenues of $5.6 billion grew 4.9% year over year.
Operational Update
Total operating revenues in the quarter were $1.4 billion, up 5.2% year over year. The top-line growth was driven by 5.5% higher premiums earned and a 1.9% rise in investment income.
Total benefits and expenses of Cincinnati Financial increased 2.5% year over year to $1.2 billion, primarily due to higher underwriting, acquisition and insurance expenses.
Combined ratio — a measure of underwriting profitability — improved 330 basis points (bps) year over year to 92.9%.
Cincinnati Financial had 1,702 agency relationships as of Dec 31, 2017 compared with 1,614 as of Dec 31, 2016.
Quarterly Segment Update
Commercial Lines Insurance: Total revenues of $798 million grew 2.2% year over year. This upside was primarily driven by an increase in premiums earned. The company delivered an underwriting profit of $58 million, having soared 61.1% from the year-ago quarter. Combined ratio also improved 280 bps year over year to 92.9%.
Personal Lines Insurance: Total revenues of $321 million rose 7.7% year over year owing to a noticeable increase in premiums earned. The segment incurred an underwriting profit of $16 million, comparing favorably with the year-ago loss of $12 million. Moreover, combined ratio improved 890 bps year over year to 95.5%.
Excess and Surplus Lines Insurance: Total revenues of $56 million increased 19.1% year over year, driven by higher premiums earned. The segment’s underwriting profit slumped 45% year over year to $11 million. Also, combined ratio deteriorated 2110 bps year over year to 79.8%.
Life Insurance: Total revenues of $100 million improved 4.2% year over year. Total benefits and expenses increased 16.7% year over year to $84 million.
Financial Update
As of Dec 31, 2017, Cincinnati Financial had assets worth $21.8 billion, up 7.1% from the 2016-end level.
Cincinnati Financial’s debt-to-capital ratio was 9.0% as of Dec 31, 2017, reflecting a slight improvement from 10.3% at the end of 2016.
As of Dec 31, 2017, Cincinnati Financial’s book value per share was $50.29, up 17.1% from Dec 31, 2016.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 6.4% due to these changes.
Cincinnati Financial Corporation Price and Consensus
VGM Scores
At this time, CINF has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise CINF has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
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