Allstate (NYSE: ALL) shareholders were in good hands this earnings season. The company easily topped expectations in the fourth quarter, helping to send the stock up as much as 6% in Thursday trading.
Mild weather leads to better results
It has been a relatively mild winter in North America, and that has been a big boost to home and auto insurers like Allstate. The company earned $5.82 per share in the fourth quarter on revenue of $14.83 billion, beating Wall Street's consensus $3.99 per share on $12.94 billion in sales estimate.
The company reported net income of $1.5 billion in the quarter, which CEO Tom Wilson attributed to "improved auto profitability and mild weather." Revenue was up 8.7% year over year, fueled by a $1.2 billion increase in property/liability premiums due to strong pricing power.
For the year, Allstate reported a $316 million loss on revenue of $57.1 billion. That's an improvement over 2022, when Allstate lost $1.4 billion on sales of $51.4 billion.
Is Allstate a buy after its stronger-than-expected results?
Allstate has been focused on modernizing its pricing, and the results are a good sign that the efforts are getting the desired results. While losses and weather are hard to predict, if the company can price its policies correctly, there is a lot of margin for error.
That's said, there are clear limits to growth and profitability here, and with Allstate shares now up 17% over the past year, questions remain about how much higher the stock can go in the quarters to come.
The stock was unable to hold its initial 6% pop, trading up just 1.7% as of 11:15 a.m. ET Thursday. While the quarter gave current holders nothing to worry about, there isn't a real compelling reason to rush in right now.
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