The Allstate Corporation (ALL Quick QuoteALL - Free Report) is set to report third-quarter 2024 results on Oct. 30, 2024, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $2.20 per share on revenues of $16.24 billion. 

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The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. However, the bottom-line projection indicates a year-over-year surge of 171.6%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 11.4%.

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For the current year, the Zacks Consensus Estimate for Global Payments’ revenues is pegged at $63.73 billion, implying a rise of 11% year over year. Also, the consensus mark for current-year EPS is pegged at $14.17, implying a jump from 95 cents a year ago.

Allstate has a robust history of surpassing earnings estimates, beating the consensus estimate in each of the last four quarters, with the average surprise being 142.7%. This is depicted in the figure below.

Q3 Earnings Whispers for ALL

However, our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s not the case here.

ALL has an Earnings ESP of 0.00% and a Zacks Rank #3.

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What’s Shaping ALL’s Q3 Results?

Allstate’s revenues are likely to have benefited on the back of improved net premiums earned from most of its lines of business, attributable to rate increases. The Zacks Consensus Estimate and our model estimate for net premiums earned indicate 12.4% and 10.9% year-over-year growth, respectively. 

Net investment income is expected to have received an impetus from increased market-based income. The Zacks Consensus Estimate for net investment income indicates 6.4% year-over-year growth from $689 million.

The Zacks Consensus Estimate for adjusted net income from the Protection Services business indicates a 90% increase from the year-ago period’s $27 million. Also, our model estimate for Property-Liability business’ underwriting income suggests a significant improvement.

The consensus mark for underwriting income from the Homeowners brand is pegged at $135.6 million against a loss of $131 million a year ago. Similarly, the consensus estimate for underwriting income from the Auto brand is pegged at $297.2 million against a loss of $178 million a year ago.

The Auto insurance business is expected to have been aided by expanding earned premiums and lower expenses in the third quarter. The combined ratio in this line of business is pegged at 96.7%, improving from 102.1% in the year-ago quarter. This means more portion of premiums remained in the company’s kitty following claim payments.

The factors stated above are likely to have positioned the company for significant year-over-year growth. However, the consensus mark for adjusted net income from the Allstate Health and Benefits unit indicates a 23.9% year-over-year decrease. Also, the company earlier stated that its total catastrophe losses were $1.7 billion (pre-tax) in the third quarter due to different events like Hurricane Helene and others.

Ourmodel estimate for total costs and expenses indicates more than a 3% year-over-year increase due to higher operating costs. This makes an earnings beat in the third quarter uncertain.

ALL’s Price Performance & Valuation

Allstate's stock has gained 34.4% year to date, outperforming the industry’s growth of 27.1%. Some of its peers like The Hartford Financial Services Group, Inc. (HIG Quick QuoteHIG - Free Report) and American International Group, Inc. (AIG Quick QuoteAIG - Free Report) have increased 39.7% and 13.4%, respectively, during this time. Meanwhile, the S&P 500 Index has rallied 21.9% during the same period.

ALL’s YTD Price Performance

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Now, let’s look at the value Allstate offers investors at current levels.

Despite the recent price appreciation, the company’s valuation looks cheaper compared with the industry average. Currently, ALL is trading at 10.83X forward 12 months earnings, below its five-year median of 11.05X and the industry’s average of 28.27X.

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Assessing Allstate’s Prospects

ALL is projected to achieve steady revenue growth, driven by its diversified product portfolio, strategic acquisitions and disciplined pricing approach. Initiatives such as rate increases, product enhancements and an intentional shift toward high-return segments position Allstate for long-term growth. The company’s focus on expanding its Protection Services business, backed by targeted acquisitions, is instrumental in boosting revenues.

However, its high debt levels remain a concern. Additionally, rising repair costs due to an inflationary environment and supply chain challenges could compress margins. While rate hikes are intended to protect profitability, they may negatively impact the number of policies in force. Increasing competition in the insurance sector can also challenge pricing strategies, and a rise in natural disasters could further pressure profitability. Investors should monitor these factors closely as they evaluate Allstate’s outlook.

Final Words

While Allstate’s long-term outlook appears promising, it may not be the ideal time to buy. Current investors can hold their positions to benefit from its growth potential, but prospective buyers might consider waiting for a more favorable entry point. Monitoring Allstate’s efforts to improve underwriting income in the upcoming earnings reports could provide valuable insights for future investment decisions.