The Zacks Analyst Blog Highlights:State Auto Financial, Ventas, Moody's, Chesapeake Lodging Trust and Winthrop Realty Trust

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Aug 08, 2013, 09:30 ET

CHICAGO, Aug. 8, 2013 /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 State Auto Financial Corp. (Nasdaq:STFC-Free Report), Ventas Inc. (NYSE:VTR-Free Report), Moody's Corporation (NYSE:MCO-Free Report), Chesapeake Lodging Trust (NYSE:CHSP-Free Report) and Winthrop Realty Trust (NYSE:FUR-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

State Auto (STFC) Upped to Strong Buy from Hold

On Aug 6, 2013, Zacks Investment Research upgraded State Auto Financial Corp. (Nasdaq:STFC-Free Report) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

State Auto Financial has been experiencing rising earnings estimates on the back of improved second-quarter 2013 results. Moreover, the company's strategic efforts to enhance its underwriting capabilities and coverage ratios as well as healthy capital position have been impressive. Additionally, this property-casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 113.4%.

On Aug 1, State Auto Financial reported second-quarter 2013 operating earnings of 13 cents per share, which rebounded from the Zacks Consensus Estimate of a loss of 7 cents and year-ago quarter's loss of 18 cents per share.

Results were supported by 2% growth in premiums earned, which was more than offset by 3.9% decline in net investment income, resulting in reduced total revenue. However, lower catastrophe as well as loss and loss adjusted expenses narrowed the underwriting loss, while improving the combined ratio, bottom line and return on equity (ROE). Retention and new business also remained stable amid price hikes.

State Auto Financial's strong brand name and strategy of growth through diversification, technology upgrade and agency expansion complements well with the recent industry price hikes and reinsurance programs. While catastrophe losses and weak property-casualty market lay down business risks, healthy risk-based capitalization and pricing initiatives as well as stable loss costs should drive growth in the long run. The creditworthiness of State Auto Financial also helps retain investor confidence in the stock.

Based on State Auto Financial's fundamental strength and capital management, the Zacks Consensus Estimate for 2013 jumped 9.2% to $1.07 per share in the last 7 days. The estimate for 2014 is pegged at $1.37, up 7.0% in the last 7 days. Meanwhile, no downward revision in estimates was witnessed for both the years.

Rating Upgrade for Ventas

Ventas Inc. (NYSE:VTR-Free Report), a health care real estate investment trust (REIT), received a rating upgrade from Moody's Investors Service, the rating unit of Moody's Corporation (NYSE:MCO-Free Report). The company now enjoys a senior unsecured debt rating of Baa1 that was raised from Baa2, with a stable outlook.

The uptick in the rating came on the back of Ventas's substantial increase in unencumbered assets, adherence to a conservative balance sheet as well as operational strength. Moreover, the rating agency acknowledged the company's capacity to enhance its market position and simultaneously sustain a sound liquidity.

The rating upgrade of Ventas is encouraging. In fact, this plays a major role in preserving investor confidence in the stock and helps boost its creditworthiness in the market.

In July, Ventas reported second-quarter 2013 normalized funds from operations (FFO) per share of $1.01 that rose 6.3% year over year from 95 cents. Total revenue during the quarter reached $685.8 million, escalating 12.1% year over year.

Ventas' results benefited from the strategic investments made in 2012. In particular, the company experienced an increase in net operating income in its private pay seniors housing communities, triple-net lease portfolio and medical office building segment. Ventas has raised its outlook for full-year 2013, backed by its solid business model, strategic efforts and accretive acquisitions.

We believe that going forward, the company's diversified portfolio, strategic acquisitions and decent balance sheet would provide the tempo for riding on the growth trajectory. Yet, a large portion of its revenue originates from a few tenants, which exposes it to concentration risk.

Ventas currently has a Zacks Rank #3 (Hold). The other REITs that are performing well and deserve a look include Chesapeake Lodging Trust (NYSE:CHSP-Free Report) and Winthrop Realty Trust (NYSE:FUR-Free Report), both carrying a Zacks Rank #1 (strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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