CNO Financial Raised to Outperform - Analyst Blog
January 18 2013 - 8:10AM
Zacks
On Jan 16, 2013, we upgraded insurance company CNO
Financial Group, Inc. (CNO) to Outperform. The improved
recommendation was based on strong fundamentals and prospects of
significant capital deployment in 2013.
Why the Upgrade?
We remain upbeat about the fourth-quarter 2012 earnings of CNO
Financial, with an Earnings Surprise Prediction (ESP) of 4.35%. The
company has consistently outperformed estimates in the last four
quarters, leading to an Average Surprise of 16.72%. ESP is a
leading indicator of an expected positive earnings surprise for
shares. As a result, the company carries a Zacks Rank #2 (Buy).
CNO Financial reported third-quarter 2012 adjusted operating
earnings of 26 cents per share, surpassing the Zacks Consensus
Estimate of 19 cents and year-ago earnings of 16 cents. Revenues
increased 10.1% to $1.1 billion from $0.9 billion in the prior-year
quarter. Total revenue also surpassed the Zacks Consensus Estimate
of $1.03 billion.
The Zacks Consensus Estimate for CNO Financial’s fourth-quarter
earnings is 23 cents per share, up 15.7% over the prior-year
quarter. The company’s fourth-quarter and full year 2012 financial
results are scheduled to release after the closing bell on Feb 11,
2013.
Apart from a history of outperforming estimates and strong
financial results, CNO Financial has other positives such as stable
credit ratings, strong investment portfolio and declining expenses.
Moreover, the recapitalization in September 2012 has improved the
capital structure and debt maturity profile.
Further, the value of CNO Financial’s investment portfolio is
steadily increasing since 2008 and its operating cash flow has also
been strong over the years. Moreover, the company’s strong organic
growth and excess capital generation allowed it to announce a $300
million hike in its share repurchase authorization in December
2012, after a $100 million hike in February 2012. CNO Financial is
expected to spend $250–$300 million each on share buybacks and
dividend payouts in 2013.
Other Stocks to Consider
Some of the other companies, which are performing well in the
insurance sector are Ageas SA/NV (AGESY) – Zacks
Rank #1 (Strong Buy), Prudential plc (PUK) – Zacks
Rank #2 (Buy) and FBL Financial Group Inc. (FFG) –
Zacks Rank #2 (Buy).
(AGESY): ETF Research Reports
CNO FINL GRP (CNO): Free Stock Analysis Report
FBL FINL GRP-A (FFG): Free Stock Analysis Report
PRUDENTIAL PLC (PUK): Free Stock Analysis Report
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