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Allstate Hits 52-Week High on Strong Results, Expansion Plan


On Aug 9, the stock of The Allstate Corp. ALL hit a 52-week high of $94.70. The rise in the stock is believed to have been driven by strong second-quarter results, increase in share buyback authorization and expansion plans.

Over the past one year, the stock has returned 28%, significantly outperforming the 8.6% gain logged by the industry and 17.6% by the S&P 500 index.

Yesterday, the company announced its plans to expand in Charlotte area by creating more than 2200 jobs, over the next three years.

Investors favorably viewed the company’s strong second-quarter results which beat estimates by a good 53.3% on the bottom line, driven by improved auto insurance margins and strong investment results, despite incurring losses of $993 million related to catastrophe.

Its top line beat by 14.6% cemented investors’ confidence in the company’s ability to grow its premium in a tough and competitive market environment.

The recent quarterly results reflected the company’s success in reaping profits on a number of growth initiatives (such as profit improvement plan in its auto business, and efforts to diversify its business and product offering) taken in last two years. In the recent past, the company suffered from huge claims in its auto business and overall premium remained under pressure due to low pricing and a competitive market.

Shareholders remain impressed with the company’s financial strength and commitment to proactively manage shareholders' capital. During the second-quarter earnings call, Allstate authorized a new $2 billion share repurchase program. Also, in Feb 2017, the company increased its quarterly dividend by 12%. It has been consistently increasing its dividend every year since 2010. The most recent one was in Feb 2017 (hike of 12%).

Allstate’s efforts to achieve quick growth via inorganic measures also is being viewed favorably by investors. The recently acquired SquareTrade (in Jan 2017) will increase Allstate's customer relationships and help it to enter new markets either from a product or geographic perspective.

The company also announced a new reporting structure which will expand its financial reporting segments from four to seven. This change will provide investors with enhanced transparency and operating valuation of the company.

Allstate carries a Zacks Rank #3 (Hold). Some better-ranked players in the space are CNO Financial Group Inc. CNO, FBL Financial Group, Inc. FFG and Amerisafe Inc. AMSF. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNO Financial beat estimates in three of the last four quarters with an average positive surprise of 6.7%.

FBL Financial surpassed estimates in three of the last four quarters with an average positive surprise of 6.2%.

Amerisafe’s second-quarter earnings beat the Zacks Consensus Estimate by 13.9%.

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