Chubb (CB) Stock Rises 14% in 6 Months: More Upside Left?

Chubb Limited’s CB shares have gained 13.9% in the past six months, outperforming the industry’s 5.8% growth. The Finance sector and S&P 500 composite have risen 10.4% and 6.8%, respectively, in the said time frame. With a market capitalization of $89.9 billion, the average volume of shares traded in the last three months was 1.9 million.

A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and solid capital position continue to drive this Zacks Rank #2 (Buy) insurer. Return on equity in the trailing 12 months was 14.3%, better than the industry average of 7.2%.

The insurer has a decent history of delivering an earnings surprise in each of the last three reported quarters of 2023. Earnings of this insurer grew 10.6% in the last five years.

It has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.

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Can CB Retain the Momentum?

The Zacks Consensus Estimate for CB’s 2024 earnings is pegged at $20.61 per share, indicating a 7.4% increase from the year-ago figure on 7.3% higher revenues of $52.7 billion. The expected long-term earnings growth rate is pegged at 10%.

Chubb’s growth strategy encompasses increasing focus on capitalizing on the potential of middle-market businesses (both domestic and international) and enhancing traditional core packages and specialty products.

Chubb is growing through mergers and acquisitions. The addition of Cigna’s life and non-life insurance companies expands its presence and advances long-term growth opportunities in Asia. The company also intends to buy an additional stake in Huatai Group in the fourth quarter to bring its ownership between 83% and 86%. With China being the second largest insurance market after the United States, management expects Huatai to contribute to Chubb’s revenues and earnings significantly.

Acquisitions have improved premium revenues. Premiums should also benefit from commercial P&C rate increases, new business and strong renewal retention.

On the back of a solid investment portfolio and a positive operating cash flow coupled with an improving rate environment, investment income should grow. Management estimates investment income to be between $1.435 billion and $1.45 billion and continued growth thereafter.

CB has increased dividends in the last 30 years. It has a dividend yield of 1.6%, better than the industry average of 0.3%. This makes the stock an attractive pick for yield-seeking investors. It also has $5 billion remaining under its share buyback authorization.

The company has a Value Score of A. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer better returns.

The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 7.8% and 3.3% north, respectively, in the past 30 days, reflecting analysts’ optimism.

Other Stocks to Consider

Some other top-ranked stocks from the same space are CNA Financial Corporation CNA, W.R. Berkley Corporation WRB and Berkshire Hathaway (BRK.B)

CNA Financial delivered a trailing four-quarter average earnings surprise of 9.24%. The stock has gained 2.1% year to date. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CNA’s 2023 and 2024 earnings indicates a year-over-year increase of 14.8% and 7.4%, respectively. The expected long-term earnings growth is 5%. The consensus estimate for 2023 and 2024 earnings has moved up 2.6% and 6.5%, respectively, in the past 60 days.

W.R. Berkley’s earnings surpassed estimates in three of the last four quarters while missing in one, the average being 4.35%. The stock has gained 21.6% in the past six months. It currently sports Zacks Rank #1.

The Zacks Consensus Estimate for WRB’s 2023 and 2024 earnings implies a year-over-year rise of 9.6% and 20.2%, respectively. The expected long-term earnings growth rate is 9%. The consensus estimate for WRB’s 2023 and 2024 earnings has moved up 1 cents and 3 cents  respectively, in the past 30 days.

Berkshire delivered a trailing four-quarter average earnings surprise of 0.20%. Year to date, the stock has gained 18.8%. It carries a Zacks Rank #2.

The Zacks Consensus Estimate for BRK.B’s 2023 and 2024 earnings indicates a year-over-year increase of 17.1% and 11.1%, respectively. The expected long-term earnings growth rate is 7%. The consensus estimate for BRK.B’s 2023 and 2024 earnings has moved up 0.8% and 0.9%, respectively, in the past 30 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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