Shares of Cincinnati Financial Corporation (CINF Quick QuoteCINF - Free Report) have rallied 31.5% year to date (YTD), outperforming the industry’s 27.2% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 18.1% and 14.1%, respectively, YTD. With a market capitalization of $21.27 billion, the average volume of shares traded in the last three months was 0.6 million. Currently priced at $136.17, the stock is a little below its 52-week high of $139.34.

CINF Outperforms Industry, Sector & S&P YTD

Image Source: Zacks Investment Research

Earnings have grown 11.90% in the past five years, better than the industry average of 10.5%. This Zacks Rank #2 (Buy) property and casualty insurance's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 27.01%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The rally was largely driven by a higher level of insured exposure, rate increase, agent-focused business model, consistent cash flow and effective capital deployment.

CINF Trading Above 50-Day Moving Average

The stock is trading above its 50-day and 200-day simple moving average (SMA) of $129.37 and $117.43, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

CINF’s Growth Projection Encourages

The Zacks Consensus Estimate for Cincinnati Financial’s 2024 earnings per share indicates a year-over-year increase of 9.1%. The consensus estimate for revenues is pegged at $9.85 billion, implying a year-over-year improvement of 10.8%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7% and 10.1%, respectively, from the corresponding 2024 estimates.

Optimistic Analyst Sentiment on CINF

Each of the seven analysts covering the stock has raised estimates for 2024 and three analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 5.6% and 0.8% north, respectively, in the last 60 days.

CINF’s Favorable Return on Capital

Return on equity in the trailing 12 months was 9.1%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds. 

Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting Cincinnati Financial’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 4%, better than the industry average of 6%.

Will the Bull Run Continue?

Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should benefit premiums, the primary driver of an insurer’s top line. CINF boasts above-average industry premium growth.

The Excess and Surplus line has been performing well since its inception in 2008. This segment should continue to benefit from new business written, higher renewal written premiums and higher average renewal estimated pricing. Technology and data are also being used to identify new exposures in emerging businesses.

Improving interest income from fixed-maturity securities and a decrease in equity portfolio dividends in an improved rate environment should drive net investment income.

Notably, its free cash flow conversion has remained more than 150% over the last many quarters, reflecting its solid earnings.

CINF’s Wealth Distribution

In terms of capital management, Cincinnati Financial has returned capital to shareholders through share buybacks, regular cash dividends as well as special dividends. The board of directors had increased the annual cash dividend rate for 64 consecutive years. Its dividend yield of 2.3% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. The dividend increase reflected strong operating performance and signaled management's and the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility.

CINF’s Expensive Valuation

CINF is currently expensive. It is trading at a P/B multiple of 1.67, higher than the industry average of 1.60. 

However, shares of First American Financial Corporation (FAF Quick QuoteFAF - Free Report) , CNA Financial Corporation (CNA Quick QuoteCNA - Free Report) and Axis Capital Holdings Limited (AXS Quick QuoteAXS - Free Report) are trading at a multiple lower than the industry average.