Here’s why you should keep Allstate (ALL) stocks now
The Allstate Company ALL is well positioned for growth with strong top line growth resulting from improved premiums and the acquisition of National General. Cautious divestments in line with the company’s strategy to focus on its core activities and a solid financial position are other strengths of the title.
Zacks Ranking and Price Performance
Allstate currently wears a Zacks Rank # 3 (Hold).
The stock gained 40.8% in one year, surpassing the industry’s 20.3% growth and matching the recovery in the financial sector. The S&P Index climbed 37.1% over the same period.
Image source: Zacks Investment Research
The company is well positioned to progress as evidenced by its favorable VGM score of A. Here V stands for value, G for growth and M for momentum, with the score being a weighted combination of the three factors.
Zacks’ consensus estimate for company earnings in 2021 shows an 8.8% improvement over the figure released the previous year. The consensus mark for 2021 revenue reflects growth of 10.3% from the figure released a year ago.
Revision of positive estimate
Zacks’ consensus estimate for 2021 earnings has moved north 0.5% in the past 30 days.
Surprise history of impressive earnings
Allstate has beaten earnings estimates in three of the past four quarters and missed once, with the average surprise being 51.31%.
Business tail winds
Improving property and casualty insurance premiums, a well-diversified portfolio, pricing discipline and continuous product improvements boosted the company’s revenues. Allstate intends to reposition its product portfolio by shifting the focus from high-risk businesses to mid-market auto and home insurance units.
The company pursued takeovers to strengthen its capabilities and expand its presence nationwide, which in turn contributed to its revenue growth. For example, the acquisition of National General accelerated revenue growth of 23.8% in the first half of 2021.
The company’s long-term strategy includes a growing market share in personal property liability and the expansion of protection solutions for clients. Thus, he undertook divestitures to extract capital from companies that generate lower returns and growth. The company’s life insurance and annuities business was hit last year due to the pandemic-induced drop in interest rates and high death claims, which in turn clouded the outlook for the future. ‘Allstate to an extent. As a result, it sold Allstate Life Insurance Company (“ALIC”) in January of this year, followed by the Allstate Life Insurance Company of New York (“ALNY”) agreement of March 2021. These transfers marked the complete exit of ‘Allstate of life insurance and annuity business. .
The company pursued several cost reduction efforts, which enabled it to invest significantly in growth and technology. The company strives to reduce underwriting claims expenses with the goal of providing affordable protection solutions to customers.
Allstate boasts of a strong liquidity position supported by a growing cash balance. It remains inclined to prudently deploy capital to shareholders through share buybacks and dividend increases. Recently, the company approved a $ 5 billion share buyback program, which is expected to be completed by March 31, 2023. This year, management approved a 50% increase in the quarterly dividend. Its 2.5% dividend yield compares favorably with the industry’s 0.4% figure. Tactical use of shareholder funds is also reflected in Allstate’s 12-month return on equity (ROE) of 22.3%, which is higher than the industry figure of 5.7%.
Actions to consider
Some higher ranked actions in the same space include American Financial Group, Inc. AFG, Chubb Limited CB and Cincinnati Financial Corporation CINF, each sporting a rank 1 of Zacks (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.
American Financial, Chubb Limited and Cincinnati Financial have surprise earnings for the last four quarters of 52.82%, 7.14% and 36.01%, on average, respectively.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Chubb Limited (CB): Free Stock Analysis Report
Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
The Allstate Corporation (ALL): Free Stock Analysis Report
American Financial Group, Inc. (AFG): Free Stock Analysis Report
To read this article on Zacks.com, click here.