The Allstate Corp. (ALL - Free Report) is scheduled to report third-quarter 2016 results on Nov 2 after the closing bell.
Last quarter, this insurer posted a positive earnings surprise of 16.98%. Allstate surpassed the Zacks Consensus Estimate in each of the past four reported quarters, with the average positive surprise being 16.11%. Will Allstate pull off an earnings beat this quarter?
Earnings Whispers
Our proven model shows that Allstate is likely to beat on earnings as it has the right combination of two key components. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or at least #3 (Hold) to have a significantly higher chance of beating estimates.
Zacks ESP: Allstate’s Most Accurate estimate is pegged at $1.26 per share, which is higher than the Zacks Consensus Estimate of $1.24. The Earnings ESP is thus +1.61%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
Zacks Rank: Allstate has a Zacks Rank #3, which increases the predictive power of ESP.
Why a Likely Positive Surprise?
We expect the results to bear the brunt of continued stress on the auto repair industry from higher industry frequency, cost of repairing newer and more complex vehicles and a higher total loss volume which will likely cause a spike in the claim cost.
The total number of Allstate brand policies in force is also expected to decline in the third quarter, as the company is intentionally reducing new business levels to improve returns on capital for auto insurance.
Overall, Allstate’s top line will remain under pressure as the company has undertaken a comprehensive profit improvement program, which prioritizes existing customers over new customers, leading to a significant reduction in new business volumes. It also had a negative impact on customer retention levels and resulted in a 1.4% decline in the number of property/liability policies in force in the second quarter. We expect the same to continue in the third quarter.
Nevertheless, Allstate’s strong foothold in the personal lines business and solid risk-adjusted capitalization will support top-line growth.
However, aggressive share buyback will aid the company’s bottom line.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to release third-quarter earnings results on Nov 3. The company has an Earnings ESP of +3.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lincoln National Corp. (LNC - Free Report) has an Earnings ESP of +0.62% and carries a Zacks Rank #2. The company is slated to report third-quarter earnings results on Nov 2.
Cigna Corp. (CI - Free Report) has an Earnings ESP of +2.62% and carries a Zacks Rank #3. The company is slated to report third-quarter earnings results on Nov 3.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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The Allstate Corp. (ALL - Free Report) is scheduled to report third-quarter 2016 results on Nov 2 after the closing bell.
Last quarter, this insurer posted a positive earnings surprise of 16.98%. Allstate surpassed the Zacks Consensus Estimate in each of the past four reported quarters, with the average positive surprise being 16.11%. Will Allstate pull off an earnings beat this quarter?
Earnings Whispers
Our proven model shows that Allstate is likely to beat on earnings as it has the right combination of two key components. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or at least #3 (Hold) to have a significantly higher chance of beating estimates.
Zacks ESP: Allstate’s Most Accurate estimate is pegged at $1.26 per share, which is higher than the Zacks Consensus Estimate of $1.24. The Earnings ESP is thus +1.61%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
Zacks Rank: Allstate has a Zacks Rank #3, which increases the predictive power of ESP.
Why a Likely Positive Surprise?
We expect the results to bear the brunt of continued stress on the auto repair industry from higher industry frequency, cost of repairing newer and more complex vehicles and a higher total loss volume which will likely cause a spike in the claim cost.
The total number of Allstate brand policies in force is also expected to decline in the third quarter, as the company is intentionally reducing new business levels to improve returns on capital for auto insurance.
Overall, Allstate’s top line will remain under pressure as the company has undertaken a comprehensive profit improvement program, which prioritizes existing customers over new customers, leading to a significant reduction in new business volumes. It also had a negative impact on customer retention levels and resulted in a 1.4% decline in the number of property/liability policies in force in the second quarter. We expect the same to continue in the third quarter.
Nevertheless, Allstate’s strong foothold in the personal lines business and solid risk-adjusted capitalization will support top-line growth.
However, aggressive share buyback will aid the company’s bottom line.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to release third-quarter earnings results on Nov 3. The company has an Earnings ESP of +3.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lincoln National Corp. (LNC - Free Report) has an Earnings ESP of +0.62% and carries a Zacks Rank #2. The company is slated to report third-quarter earnings results on Nov 2.
Cigna Corp. (CI - Free Report) has an Earnings ESP of +2.62% and carries a Zacks Rank #3. The company is slated to report third-quarter earnings results on Nov 3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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