On Mar 14, we reiterated our recommendation on
) to Outperform based on substantial improvements in its
fundamentals, which paves the way for healthy capital
Why the Retention?
On Feb 6, Allstate reported fourth-quarter 2012 operating
earnings per share (EPS) of 59 cents, which significantly
exceeded the Zacks Consensus Estimate of a loss of 7 cents.
However, EPS lagged the year-ago quarter's earnings of $1.45 a
share. Net revenue climbed 3.8% year over year to $8.55 billion
and substantially topped the Zacks Consensus Estimate of $7.26
Allstate witnessed quite a boost over the last 60 days,
signifying noticeable growth ahead. The Zacks Consensus Estimate
for 2013 rose 2.4% to $4.62 per share, whereas for 2014, it grew
3.3% to $5.06 per share. Meanwhile, the Most Accurate Estimate
for Allstate's 2013 earnings stands at $4.63, resulting in a
positive ESP (read:
Zacks Earnings ESP: A Better Method
) of +0.22%.
Consequently, with the Zacks Consensus Estimates for both 2013
and 2014 showing steady upward pressure on the stock in the near
term, Allstate now has a Zacks Rank #1 (Strong Buy).
What is the cause for the strong positive bias on the company?
Strong fourth quarter results despite the huge catastrophe
losses, the agency expansions, healthy ratings affirmation, the
latest 13.6% dividend increment, expanded share buyback, product
restructuring and acquisitions validate Allstate's long-term
An appreciated investment portfolio also boosts the operating
cash flow and liquidity, reflected by an improved operating
return on equity (ROE) of 12.4% at 2012-end against 3.8% at
Though the current volatile economy and the catastrophe losses
will continue to impact the results in the upcoming quarters,
continued synergies are expected from Allstate's industry-leading
position, diversification and pricing discipline. All these
factors should augur growth once the markets regain momentum.
Other Stocks to Consider
Apart from Allstate, other stocks that are outperforming in
the insurance sector include
XL Group Plc
). All these stocks carry a Zacks Rank #1 (Strong Buy).
AEGON N V (AEG): Free Stock Analysis Report
ALLSTATE CORP (ALL): Free Stock Analysis
AMERISAFE INC (AMSF): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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