Back to top

Image: Bigstock

Should You Retain Allstate Stock in Your Portfolio Now?

Read MoreHide Full Article

The Allstate Corporation (ALL - Free Report) is well-poised to grow on the back of rising premiums thanks to rate increases in auto and home insurance businesses. Enhanced distribution strategy should lead to improved premiums in force in the coming days. The company keeps expanding its Protection Services business with strategic acquisitions, which positions it for long-term growth.

Allstate — with a market cap of $50.5 billion — is a major property and casualty insurance provider with operations in the United States and Canada. Courtesy of solid prospects, this presently Zacks Rank #3 (Hold) stock is worth retaining at the moment.

ALL's Price Performance

Shares of Allstate have surged 71.5% in the past year, outperforming the industry and the S&P 500 Index’s 34.1% and 34.2% growth, respectively. Currently priced at $191.25, the stock is just below its 52-week high of $193.97. This proximity underscores investor confidence and market optimism about this insurance company’s prospects. It has the ingredients for further price appreciation.

ALL's 1-Year Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

ALL’s Key Drivers

Inflationary pressures and uninterrupted claim expenses were major hurdles in the auto insurance business following the pandemic. Allstate’s strategy of implementing rate hikes to combat these headwinds is proving effective. With inflation easing, the strong pricing environment will benefit its shareholders.

ALL’s management expects to increase its market share in auto by improving its offerings and enhancing customer experience. It has worked on its distribution strategy by leveraging independent agents as well as Direct. The launch of standard and preferred products in the independent agents’ channel should aid the company in sustaining the market share gains in the future. Improved retention in the auto business poises ALL well for growth. ALL also expects to benefit from market share gains and improved retention in homeowners.

Recent upgrades to claims handling processes aim to reduce losses and improve profitability. Additionally, Allstate reallocates capital from underperforming areas to strengthen its market position in personal property-liability. Divestments and cost-cutting measures are expected to enhance margins, as reflected in the company's earnings estimates.

ALL Earnings Estimates

The Zacks Consensus Estimate for ALL’s 2024 earnings is pegged at $15.20 per share, indicating massive improvement from the year-ago figure of 95 cents. The estimate witnessed three upward revisions over the past month against no downward movement. The consensus mark for 2025 earnings suggests a further 18.1% year-over-year growth. Allstate beat on earnings in all the last four quarters, with an average surprise of 142.7%.

The consensus mark for 2024 and 2025 revenues implies 11% and 6.3% year-over-year growth, respectively.

Key Concerns for ALL

There are a few factors that investors should keep an eye on.

Allstate’s trailing 12-month price-to-book value of 3.02X is higher than the industry’s average of 1.62X, making it an overvalued stock. Its rising debt level can become concerning in the future. Debt amounted to $8.1 billion at the second-quarter end, while a cash balance of $599 million decreased from $722 million at 2023-end. Its total debt to capital of 30.3% is higher than the industry’s average of 17.2%. Nevertheless, we believe that a systematic and strategic plan of action will drive ALL’s growth in the long term.

Key Picks

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) . Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 60 days against no downward movement. The consensus mark for JXN’s current-year revenues suggests a 116.7% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 67.6% year-over-year growth. During the past two months, WT has witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 65.5% year-over-year improvement. During the past two months, HIVE has witnessed two upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $120.7 million, indicating a 5.4% increase from a year ago.

Published in