The Zacks Analyst Blog Highlights: CNA Financial, Loews, FBL Financial Group, Pluristem Therapeutics and United Therapeutics
CHICAGO, Feb. 5, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the CNA Financial Corp. (NYSE:CNA-Free Report), Loews Corp. (NYSE:L-Free Report), FBL Financial Group Inc. (NYSE:FFG-Free Report), Pluristem Therapeutics, Inc. (Nasdaq:PSTI-Free Report) and United Therapeutics (Nasdaq:UTHR-Free Report).
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Here are highlights from Tuesday's Analyst Blog:
3 Insurers to Make a Grand Start in 2014
Benign catastrophe losses, prudent risk management and improved premiums have been the highlights of the insurance industry this earnings season. Most property-casualty (P&C) or the non-life and life insurers in the U.S. have exited 2013 with poise, as reflected by favorable reserve development and improved premium rates.
The hardening of markets in the past 4−5 quarters along with improved underwriting efficiencies among P&C insurers have also been indicated by lower combined ratio. On the other hand, improved employment rates and housing markets have been recuperating, thus empowering the consumer confidence. This in turn is aiding favorable sales opportunities and pricing cycle within the life and health insurance sector.
As well, strong direct distribution networks and channels have boosted the policies-in-force for both life and non-life insurers. These positives aided the growth in the top- and bottom line as well as margins of most sector participants that have reported fourth-quarter results so far.
Moreover, the 'multi-line insurance' sector sports a Zacks Industry Rank #11, whereas 'P&C insurance' holds a Zacks Industry Rank #62 and 'life insurance' bears a Zacks Industry Rank #109. These ranks reflect a favorable position of the insurance industry in the 260+ Zacks industry groups.
Nonetheless, we cannot discount the challenges faced by the insurance sector, primarily stringent regulations, consistent low interest rates and intense competition. Yet, insurers are focusing on strong expense control in order to curb the impact of restricted investment yields and restructuring costs due to changes in regulations.
The positive effects are evident in the accelerated share repurchases and dividend hikes by many insurers, thereby boosting investor confidence in the sector. A good idea would be to identify some such insurers that have the potential to beat earrings in their upcoming release, as this should lead to a rapid price appreciation of their shares.
How to Pick the Right Stock?
Picking the most worthy stocks within the huge insurance industry could be akin to finding a needle in the haystack. A coherent way is the selection of those stocks that have a perfect blend of a favorable Zacks Rank – a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
For investors seeking to apply this strategy to their portfolio, we present 3 insurance stocks that serve as potential growth riders this week:
CNA Financial Corp. (NYSE:CNA-Free Report) carries a Zacks Rank #3 (Hold) with a noticeable earnings ESP of +22.35%. The Zacks Consensus Estimate for fourth-quarter 2013 is 85 cents per share.
With an average earnings surprise of +23.3% over the last 3 consecutive quarters, this company's strength lies in its business expansion strategies, focus on core operations and efficient claims management.
Headquartered in Chicago, CNA Financial is the 14th largest P&C insurer in the U.S., which provides property, casualty, specialty and commercial insurance coverage globally.
Loews Corp. (NYSE:L-Free Report) is a Zacks Rank #2 (Buy) stock with an earnings ESP of +10.0%. The Zacks Consensus Estimate for the fourth-quarter is pegged at 70 cents per share. This insurer boasts of a diversified business mix and expects improved underwriting results to boost performance. A healthy balance sheet with lower debt also looks promising.
Headquartered in New York, Loews is a multi-line insurer that deals in businesses related to P&C and life insurance, natural gas pipeline, exploration and hotels, among others. 90% of CNA Financial is owned by Loews.
Both CNA Financial and Loews are slated to release their fourth-quarter and full-year 2013 results before the opening bell on Feb 10.
FBL Financial Group Inc. (NYSE:FFG-Free Report) is another Zacks Rank #2 insurer with an earnings ESP of +4.5%. The Zacks Consensus Estimate for the fourth-quarter stands at 89 cents per share. The company has delivered positive earnings surprises in all of the last 4 quarters, with an average beat of 18.7%, and is expected to beat expectations in the fourth-quarter as well.
With dividend hikes at a 3-year CAGR of 33.9%, FBL Financial boasts of improved life insurance and annuity sales and low leverage, thereby strengthening its operating leverage and minimizing risk on balance sheet. These factors score well with the rating agencies as well.
Headquartered in West Des Moines, Iowa, FBL Financial is primarily a life insurer that deals in individual life insurance and annuity products, along with some P&C products.
FBL Financial is scheduled to announce its fourth-quarter results after the closing bell on Feb 6.
What Lies Ahead?
Uncertainty from weather-related events, poor yields from investments and variable annuities as well as customer-attraction toward lucrative alternate investments, amid lack of strong organic growth catalysts, continue to restrict significant upside in 2014. Nevertheless, we believe that the consistency in improved premiums and underwriting discipline should boost investors' confidence in this sector.
Moreover, strong potential for growth underlies once the markets recover to garner higher returns on investments in the long run. For the moment, you can safely rely on the industry winners that still boast of earnings strength.
Pluristem Announces New Study
Pluristem Therapeutics, Inc. (Nasdaq:PSTI-Free Report) recently announced that the U.S. National Institute of Allergy and Infectious Diseases (NIAID) will initiate a mechanism-of-action study to evaluate Pluristem's PLacental eXpanded RAD (PLX-RAD) cells for the treatment of acute radiation syndrome (ARS).
The study is expected to start later this month. NIAID aims to evaluate the impact of PLX-RAD cells on body weight, blood count parameters, cytokine concentrations and bone marrow at various intervals following the administration of PLX-RAD cells in animals.
NIAID expects to expand the scope of its PLX-RAD research if the data from this study on irradiated animals' hematological systems turns out to be positive.
Meanwhile, Pluristem is also evaluating PLX-RAD cells in the treatment of bone marrow failure following radio- or chemotherapy. The study is currently in preclinical stages and Pluristem hopes to benefit from the data from the NIAID studies.
Pluristem develops and manufactures cell therapy products in collaboration with companies like United Therapeutics (Nasdaq:UTHR-Free Report) or through research and clinical institutions.
The cells from placenta are derived using the company's proprietary PluriX therapy and are known as PLacental eXpanded cells. Pluristem's first candidate in development, PLX-PAD, is intended to treat peripheral artery disease (PAD).
We note that Pluristem intends to develop and produce cell therapy products for the treatment of multiple disorders using several methods of administration.
Last month, Pluristem released positive top-line results from a phase I/II trial evaluating the safety and efficacy of PLX-PAD cells in the treatment of muscle injury. The study met both the primary and secondary endpoints. The results from the trial showed that PLX-PAD cells were safe and statistical significance was reached for the primary efficacy endpoint.
The results indicated that PLX cells might be efficacious in the treatment of orthopedic injuries including muscles and tendons.
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