Can Allstate (ALL) Beat Earnings Again? - Analyst Blog

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Auto and home insurer - Allstate Corp. ( ALL ) is scheduled to release first-quarter 2014 financial results after the closing bell on May 6.

In the last reported quarter, Allstate had delivered a positive earnings surprise 23.2%. The company posted an earnings beat in the trailing four quarters with an average surprise of 13.2%. Let us see how things are shaping up for this announcement.

Factors at Play

Over the past couple of quarters, Allstate has been focusing on minimizing market risk and maximizing returns by capitalizing on its industry-leading position, diversified mix, pricing discipline and divestment of Lincoln Benefit Life Co. (LBL), which will expectedly generate incremental synergies and statutory gains.

Moreover, lower catastrophe losses, improvement in rates and synergies from agency expansions in the past few quarters score well with the ratings agencies and boosted shareholder confidence. These are also reflected by improved fundamentals and efficient capital deployment comprising a 12% dividend hike in Feb 2014 and accelerated share buybacks.

On the one hand, Allstate's interest risks on investment portfolio, loss on disposition of LBL higher operating expenses and stiff competition raise caution on the stock going forward. However, prudent capital management, comprehensive enterprise stochastic model as well as modest operating and financial leverage will likely aid Allstate to adapt to the changing market dynamics.

Earnings Whispers?

Our proven model shows that Allstate is likely to beat earnings as it ensures the required combination of two key components.

Zacks ESP : Allstate has a positive Zacks ESP. That is because Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate of $1.15 per share and the Zacks Consensus Estimate of $1.14, is +0.88%.

Zacks Rank : Allstate has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Conversely, Sell-rated stocks (#4 and 5) are kept under the radar and are never considered going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum. 

The combination of Allstate's Zacks Rank #3 and +0.88% ESP raise the prospect of an earnings beat on May 6.

Other Stocks to Consider

Here are some other stocks you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: 

NRG Yield Inc. ( NYLD ) with an earnings ESP of +23.53% and a Zacks Rank #2 (Buy).

Humana Inc. ( HUM ) with an earnings ESP of +1.55% and a Zacks Rank #3.

CST Brands Inc. ( CST ) with an earnings ESP of +14.29% and a Zacks Rank #3.



ALLSTATE CORP (ALL): Free Stock Analysis Report

CST BRANDS INC (CST): Free Stock Analysis Report

HUMANA INC NEW (HUM): Free Stock Analysis Report

NRG YIELD INC-A (NYLD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ALL , CST , HUM , NYLD

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