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Can Cincinnati Financial (CINF) Earnings Surprise in Q4? - Analyst Blog

Zacks Equity Research
Updated

Multiline insurer Cincinnati Financial Inc. (CINF) is scheduled to report fourth-quarter and full-year 2014 results after the market closes on Feb 4.

 

In the last quarter, this company delivered a 41.7% positive earnings surprise. The average beat for the trailing four quarters is 10.3%.

 

Will Cincinnati Financial deliver a positive earnings surprise this quarter as well?  Let's see what factors might have influenced the earnings report this time around.

 

Points to Consider Ahead of Q4 Announcement

 

Increase in insurance rates and Cincinnati Financial’s growth initiatives position it for top-line growth. The company has implemented the use of predictive analytics to improve its pricing precision, while also leveraging local relationships with agents. Cincinnati Financial’s Excess and Surplus line is also performing well.

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Despite a soft market environment, the segment has been able to achieve steady rate increases over the last several months at a low double-digit range. We expect the trend to continue, given the improving Excess and Surplus lines market. The company’s geographic diversification, strong cash flow and low debt levels are other positives that should aid improvement in the quarter.

 

However, a still low interest rate environment will keep investment income under pressure. 

 

Earnings Whispers

 

Our proven model does not conclusively show that Cincinnati Financial is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

 

Zacks ESP: Cincinnati Financial’s Most Accurate estimate is pegged at 79 cents per share, in line the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%.

 

Zacks Rank: Cincinnati Financial has a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

 

Stocks to Consider

 

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

 

Assured Guaranty Ltd. (AGO) has an Earnings ESP of +13.04% and Zacks Rank #1.

 

Arch Capital Group Ltd. (ACGL) has an Earnings ESP of +0.95% and a Zacks Rank #1.

 

The Allstate Corporation (ALL) has an Earnings ESP of +0.60% and a Zacks Rank #1.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CINCINNATI FINL (CINF): Free Stock Analysis Report
 
ALLSTATE CORP (ALL): Free Stock Analysis Report
 
ASSURED GUARNTY (AGO): Free Stock Analysis Report
 
ARCH CAP GP LTD (ACGL): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research