Why Prudent Investors are Retaining Allstate (ALL) Stock Now

The Allstate Corporation ALL is well-poised to grow on the back of rate increases in auto and home insurance businesses. The company keeps enhancing its capabilities with acquisitions to capture an improved market share.

Allstate — with a market cap of $28.8 billion — is a major 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.

The Zacks Consensus Estimate for ALL’s 2023 earnings is pegged at $3.36 per share, indicating significant improvement from the year-ago loss of 97 cents. The estimate remained stable over the past week. Allstate beat on earnings in all the last four quarters, with an average surprise of 18.5%. This is depicted in the figure below.

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote

The consensus mark for 2023 revenues stands at $53.1 billion, indicating 1.2% growth from a year ago.

Inflationary pressure and uninterrupted claim expenses are major hurdles in the auto insurance business. Allstate continues to implement successive rate hikes to counter the headwinds and increase profits. In April, the company imposed a rate hike of 8.6% across 13 locations.

Allstate Protection Plans and Allstate Dealer Services continue to boost its Protection Services segment. In the first quarter, revenues from the segment rose 7% year over year to $671 million. The company continues to expand its business with multiple acquisitions.

The company’s prudent inorganic growth strategy includes acquisitions like National General Holdings, SafeAuto and others that boost its capabilities and enable it to scale its business while capturing significant cost synergies. It also does not shy away from divesting non-core operations to boost profitability.

Allstate’s cash flow has been increasing over the years. In the trailing 12-month period, the metric jumped 4.5% year over year to $5.1 billion. This helps the company to take shareholder-friendly moves with share buybacks and dividend payouts. It increased dividends by 4.7% in the March quarter to 89 cents per share.

In the first quarter, the company returned $153 million to shareholders through share buybacks alone. At the March quarter-end, it had $649 million left in the repurchase program.

Key Concerns

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

Allstate’s trailing 12-month price-to-book value of 1.89X is higher than the industry’s average of 1.38X, making it an overvalued stock. Its rising debt level can become concerning in the future. Debt amounted to $8,452 million at the first quarter-end, up 6.1% from the 2022-end figure. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.

Better-Ranked Players

Some better-ranked stocks in the broader finance space are Ambac Financial Group, Inc. AMBC, Lemonade, Inc. LMND and Argo Blockchain plc ARBK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ambac Financial’s 2023 earnings has improved 68% over the past 30 days. During this time, AMBC has witnessed one upward estimate revision against none in the opposite direction.

The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s 2023 revenues implies a 53.6% year-over-year rise.

The Zacks Consensus Estimate for Argo Blockchain’s 2023 bottom line suggests an 87.8% year-over-year improvement. During the past month, ARBK witnessed one upward estimate revision against none in the opposite direction.

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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 Nasdaq, Inc.

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