Market Overview

Analyst: CNO Financial Is Stuck Dealing With A 'Problematic Product Class'

Share:
Analyst: CNO Financial Is Stuck Dealing With A 'Problematic Product Class'

With several years of lackluster growth behind it, investors should no longer be surprised by disappointing performance from CNO Financial Group Inc (NYSE: CNO), according to Morgan Stanley.

The Analyst

Morgan Stanley analyst Nigel Dally upgraded CNO from Underweight to Equal-Weight, but cut his price target from $23 to $22.

The Thesis

CNO Financial stock is down 18.4 percent this year and is underperforming its peer by 10 percent, bringing the price to a level reflective of Dally’s valuation.

Dally’s concerns are persistent though. In particular, too much exposure to long-term care insurance (a "problematic product class") prevent including a consolidation premium into the valuation.

“We do not expect the company to be successful in its plan to reduce long-term care exposure by 50 percent over the next 5 years,” said Dally in a note.

On a more positive note, the risk of large charges has been limited by a smaller number of lifetime guarantees and an aging average age of its block.

The company also has a strong free cash flow, which will enable management to drive “reasonable EPS growth” despite struggling sales.

The analyst’s bull and bear case scenarios for the stock are $29 and $15, respectively. Both of which will be driven in part by risks associated with long-term care.

Price Action

Shares of CNO traded around $20.31 Tursday afternoon.

Related Links:

CNO Financial Has Potential To Be Revalued Upward, Analyst Says In Bullish Initiation

Best Homeowners Insurance Companies

Latest Ratings for CNO

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Nov 2020Piper SandlerMaintainsOverweight
Nov 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for CNO
View the Latest Analyst Ratings

 

Related Articles (CNO)

View Comments and Join the Discussion!

Posted-In: Morgan Stanley Nigel DallyAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
PMTB of A SecuritiesMaintains18.5
IVRB of A SecuritiesMaintains3.0
EFCB of A SecuritiesMaintains15.5
NYMTB of A SecuritiesMaintains3.5
NLYB of A SecuritiesMaintains8.5
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com