Many sectors that are poised to benefit from higher rates are finally starting to see some traction as of late. One great example of this is with the insurance sector as companies here stand to see stronger investment portfolios from a higher rate environment. Firms in this segment generally invest in longer-term fixed income instruments so higher rates will lead to more income for a number of companies in the space.
However, that doesn’t mean that this is the only issue to consider in the insurance market and that one can just buy any insurance stock that comes along. You still need to consider company specific issues and there no greater example of this than with Cincinnati Financial (CINF – Analyst Report).
CINF in Focus
CINF finds itself in the property and casualty segment of the insurance industry, an area of the market that is actually looking relatively promising overall. In fact, we currently have the industry in the top 35% of all industries suggesting an overarching solid trend for the space. CINF though has had a bit of trouble lately and especially if you look to their recent earnings report.
For Q1 earnings, CINF posted a pretty wide miss when compared to expectations as the company saw EPS of 59 cents compared to a 68 cent estimate. This represents a double digit percentage miss and it came despite reasonable growth in revenues and was the first such miss in the last four reports for CINF.
Analysts don’t seem to like the current trend that CINF finds itself on as they have been universally lowering estimates as of late. In fact, we have seen two estimates go lower for the current quarter, current year, and next year and none go higher for any of those time periods in the past two months.
The magnitude of these estimates has also been somewhat intense as the consensus for full year earnings has fallen from $2.66/share to $2.34/share in just 60 days. Thanks to this, analysts now expect an earnings contraction of over 12% year-over-year suggesting a pretty weak trend for CINF.
For these reasons, it shouldn’t be too surprising to note that CINF has earned itself a Zacks Rank #5 (Strong Sell). This puts it into rare company as just 5% of all stocks have such a lowly rank suggesting that there are far better choices out there.
Other Factors & Better Choices
If that wasn’t enough, CINF doesn’t exactly have great stats on either its Value or Momentum metrics. In fact, CINF has just a ‘C’ for Value and a ‘D’ grade for Momentum meaning there are plenty of better choices from both of these looks.
And fortunately for investors the insurance sector has a ton of other picks out there that are top ranked with better value and momentum metrics. One such example is Endurance Specialty Holdings (ENH – Snapshot Report) a company that has surged from a Zacks Rank #3 (Hold) to a Zacks Rank #1 in just the past week.
Beyond that, ENH is also in possession of ‘Bs’ for its Value and Momentum style scores so a better choice than CINF in this regard too. Add in a 2.3% yield and a forward PE below 10 and this is clearly a stock to focus on in the insurance industry and especially when compared to the currently-struggling CINF.
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