On Apr 3, 2013, shares of
Cincinnati Financial Corp.
) hit a 52-week high of $47.69. The company reported a positive
earnings surprise of 122% in the fourth quarter. Cincinnati
Financial witnessed positive earnings surprises in all the 4
quarters of 2012, with an average beat of 64.01%.
Cincinnati's Excess and Surplus line is performing well. Despite
a soft market environment, the segment has been able to achieve
rate increases consistently. We expect the trend to continue,
given the improving excess and surplus lines market.
Moreover, the company engages in appointing agencies to augment
its performance in the long-term. During 2013 it plans to appoint
around 65 agencies. These new agencies are expected to plough in
$5 billion of direct written premium by 2015.
Its long-term strategy also includes geographical diversification
of operations which makes Cincinnati a national insurer, a step
up from being a regional insurer.
Cincinnati has a strong capital position which allows it to
indulge in share repurchases and dividend payouts to create
shareholder value. The company also focuses on maintaining lower
debt levels. Moreover, its consistent cash flow and prudent cash
balances continue to create strong liquidity.
Significant share repurchases and long-term growth strategies are
expected to bolster earnings of Cincinnati going forward.
Cincinnati is scheduled to report its first quarter, 2013 results
on Apr 25, 2013. The Zacks Consensus Estimate for the first
quarter of 2013 is pegged at 52 cents representing a year over
year improvement of 7.64%.
Valuation looks attractive for Cincinnati. The shares are trading
at a discount to the peer group average, both on a price-to-book
basis and forward price-to-earnings basis, with return on equity
remaining 1.4% above the peer group average of 7.3%. The 1-year
return from the stock is 37.43%, much above NASDAQ's return of
Cincinnati currently carries a Zacks Rank #2 (Buy). Other stocks
in this industry such as
AXIS Capital Holdings Limited
EMC Insurance Group Inc.
Arch Capital Group Ltd.
) carry a favorable Zacks Rank #1 (Strong Buy) and appear
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