What's in Store for Allstate (ALL) This Earnings Season?

The Allstate Corp. ALL is scheduled to report first-quarter 2020 earnings on May 5, after market close. The company’s earnings and revenues are expected to have improved year over year.

In the last reported quarter, Allstate’s earnings surpassed the Zacks Consensus Estimate by 0.32% owing to increase in premiums, partly offset by catastrophe losses.

Q1 Earnings & Revenue Expectations    

The Zacks Consensus Estimate for Allstate’s first-quarter earnings of $3.13 per share implies a 34.78% rise from the prior-year reported number. Likewise, the consensus estimate for sales of $10.75 billion suggests a 4.1% improvement from the year-ago reported figure.

Factors at Play

Allstate’s results should reflect accretion from its long-term strategic goals of better serving its customers, grow customer base and achieve target returns on capital. The company’s property liability arm is well-equipped with pricing sophistication, claim expertise, product breadth and a broad distribution platform that covers all its agents, Ensurance's direct capabilities and Encompass’ independent agents. These significant strengths undoubtedly help it gain a competitive edge over its peers.

Its earnings results are likely to reflect strong profitability in auto and homeowners insurance. In the auto insurance business, the company is expected to have gained from a decline in auto accident claims owing to less frequency in driving as homebound Americans are adhering to lockdown norms and maintaining social distancing to flatten the coronavirus curve. The Zacks Consensus Estimate for premium written in the property and liability segment is pegged at $8.75 billion, indicating a 5% rise from the year-ago reported figure.

Policies in force are likely to have increased on the back of growth in Allstate insurance brands. Allstate protection plan, formerly known as SquareTrade, is likely to have retained its rapid growth rate owing to the recent addition of a major retail partner.

We expect to see revenue growth in Service business performance results, which the company has sustained over time through a number of acquisitions. This line of business provides revenue diversification. The Zacks Consensus Estimate for revenues from Service business stands at $389 million, implying 31.9% growth from the year-ago reported figure.
Although Allstate reported $58 million of catastrophe losses for January, the following months of February and March recorded no such losses. Earnings results are expected to reflect gains from lower-than-expected catastrophe losses.

Investment income is likely to have declined due to decrease in limited partnership income and weak investment yields. The Zacks Consensus Estimate for net investment income is pegged at $791 million, implying a 22% increase from the year-earlier reported number.

Allstate’s investments in technology and marketing are likely to have escalated operating expenses, which  in turn, might have been partially offset by its ramped-down cost-control initiatives.

Earnings Surprise History

The company boasts an attractive earnings surprise record, having surpassed estimates in all the trailing four quarters, the average being 15.19%. This is depicted in the chart 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

Here is what our quantitative model predicts:

Our proven model predicts an earnings beat for Allstate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Allstate has an Earnings ESP of 0.00%.

Zacks Rank: Allstate currently has a Zacks Rank #2.

Stocks to Consider

Some stocks worth considering from the insurance industry with the perfect combination of elements to surpass estimates this reporting cycle are as follows:

Prudential Financial Inc. PRU has an Earnings ESP of +0.56% and a Zacks Rank #3.

 

You can see the complete list of today’s Zacks #1 Rank stocks here.

MetLife Inc. MET has an Earnings ESP of +0.45% and a Zacks Rank of 3.

Lincoln National Inc. LNC has an Earnings ESP of +0.56% and is Zacks #3 Ranked.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
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