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CNA Financial (CNA) Looks Promising: Time to Add the Stock?

Zacks Equity Research
Updated

CNA Financial Inc. CNA has been witnessing estimate revisions over the past 30 days. This Zacks Rank #2 (Buy) property and casualty insurer remains promising, banking on a number of growth drivers.

Northbound Estimates: The stock has seen the Zacks Consensus Estimate for current-quarter earnings and 2018 being revised upward by 3.4% and 7.9%, respectively, over the last 30 days.

An Outperformer: Shares of CNA Financial have rallied 30.7% quarter to date, outperforming the industry’s growth of 10.9%. Its shares have also outperformed the S&P 500, having increased 14.9% over the same time frame.


Positive Earnings Surprise History: CNA Financial surpassed the Zacks Consensus Estimate in each of the trailing three quarters, with an average beat of 53.15%.

Growth Projections: The Zacks Consensus Estimate for earnings per share is $3.07 on revenues of $9.4 billion. While the top line improves 0.5% year over year, the bottom line rises 0.8%.  

For 2018, the Zacks Consensus Estimate for earnings per share is $3.42 on revenues of $9.5 billion, reflecting a year-over-year increase of 11.6% and 1.3%, respectively.

CNA Financial has expected long-term earnings per share growth of 5%.

Attractive Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 1.2, falling significantly below the industry average of 1.5. Undervalued shares with growth prospects are best investment bets. CNA Financial carries a Value Score of B.  

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 the best upside potential.

Growth Drivers in Place

CNA Financial’s improving combined ratio reflects underwriting profitability even in a challenging operating environment.

The insurer also remains focused on its ongoing efforts to continuously enhance and improve management of the Long-Term Care business.

Given a gradual improvement in the rate environment, the company’s investment income has been increasing over the last few quarters and the momentum should continue with optimism surrounding more rate hikes.

Riding on sustained solid operational performance, the company boasts a robust capital position.

CNA Financial effectively deploys capital. The board of directors has hiked its quarterly dividend by 20% in the second quarter of 2017. The company has also paid a special dividend this year. A strong balance sheet and cash flows will continue to enable CNA Financial to engage in shareholder-friendly moves.

Other Stocks to Consider

A few other other top-ranked stocks in the same space are Infinity Property and Casualty Corporation IPCC, NMI Holdings Inc. NMIH and Radian Group Inc. RDN.

Infinity Property and Casualty provides personal automobile insurance products in the United States. The company’s average four-quarter surprise is 300.65% and it sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of the company have gained 23.4% year to date, outperforming the industry’s rally.

NMI Holdings provides private mortgage guaranty insurance services in the United States. NMI Holdings' average four-quarter surprise is 11.72%. and has a Zacks Rank #1. It's shares have soared 53.5% year to date, outperforming the industry’s growth.

Radian Group offers mortgage and real estate products plus services in the United States. The company's average four-quarter surprise is 4.52%. Shares of Radian Group have gained 15.6% year to date, outperforming its industry’s increase.

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Radian Group Inc. (RDN) : Free Stock Analysis Report
 
CNA Financial Corporation (CNA) : Free Stock Analysis Report
 
Infinity Property and Casualty Corporation (IPCC) : Free Stock Analysis Report
 
NMI Holdings Inc (NMIH) : Free Stock Analysis Report
 
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Zacks Investment Research