CNO Financial Group, Inc. (CNO) is set to report fourth-quarter 2013 results on Feb 11, 2014. Last quarter, it posted a 22.2% positive surprise. Let’s see how things are shaping up for this announcement.
Factors this Past Quarter
CNO Financial’s capital deployment strategies have always spurred growth for the company. In Dec 2013, the company approved a $300 million increase in its existing securities repurchase program, which is expected to aid fourth-quarter earnings. CNO Financial also guided securities repurchases for full-year 2013 to be around $250 million. With $221.6 million worth of securities repurchased in the first nine months of 2013, we expect the company to achieve the guided figure.
Reduced debt burden is driving book value and this trend is expected to continue going forward. However, rising levels of benefits and expenses are concerns for CNO Financial and might weigh on earnings. Moreover, deterioration in the Bankers Life segment raises caution as persistently low new money interest rates might weigh on the sales of annuities, thereby dampening the results to some extent.
Earnings Whispers?
Our proven model does not conclusively show that CNO Financial is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: That is because the Most Accurate estimate stands at 29 cents whereas the Zacks Consensus Estimate stands at 30 cents, making the difference -3.33%.
Zacks Rank #1 (Strong Buy): CNO Financial’s Zacks Rank #1 increases the predictive power of ESP, but when combined with a negative ESP, it makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing zero or negative estimate revisions momentum.
Other Stocks to Consider
Here are some other financial services companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
The Western Union Company (WU), with Earnings ESP of +6.45% and a Zacks Rank #3 (Hold).
CNA Financial Corporation (CNA), with Earnings ESP of +22.35% and a Zacks Rank #2 (Buy).
ProAssurance Corporation (PRA), with Earnings ESP of +13.59% and a Zacks Rank #2.
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