The Allstate Corp. ( ALL Quick Quote ALL - Free Report) looks well-poised for growth despite the coronavirus-led economic weakness on the back of a number of strategic initiatives, which bode well for the long haul.
Allstate's diversified business model, substantial earnings capacity and strong liquidity enable it to manage operations effectively through this pandemic.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 7.1% upward over the past seven days.
The stock currently has a Zacks Rank #1 (Strong Buy) and an impressive Value Score of A. You can see
Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank of 1 or 2, offer the best opportunities in the value investing space. the complete list of today’s Zacks #1 Rank stocks here. Factors That Make the Stock Attractive Rising Revenues: The company's top line has been increasing over the years owing to its broad product suite and pricing discipline. It is also benefiting from past acquisitions and growth in the emerging businesses, evident from a consistent increase in premiums written over the years. In the first six months of 2020, premiums written were up 2.3% year over year. We expect revenue growth to continue, given a number of strategic initiatives taken, such as product enhancements and changes in business mix to focus on those that command a high return on equity.
The company is on course to acquire National General Holdings Corp. The deal advances Allstate’s strategy to increase its market share in the personal property-liability space, which would inch by 1%. The acquisition will be accretive to Allstate’s earnings per share and ROE, thereby reflecting significant cost synergies. The company expects a high single-digit earnings accretion in the first year post closure of the transaction. It also anticipates the ROE accretion of approximately 100 bps, mirroring substantial cost efficiencies.
Growing Service Business: The company is making concerted efforts to expand its Service business, which provide diversification benefits. In this vein, it acquired SquareTrade in 2017, a provider of protection plans for mobile phones, consumer electronics and appliances. The company also purchased PlumChoice in 2018, a leading provider of cloud and technical support services to consumers and small businesses. In February 2019, iCracked was bought, which expanded SquareTrade’s protection offerings. These buyouts will extend the company’s Service business, which grew revenues by 7.3% in 2019 and further by 13.7% during the first six months of 2020. Strong Balance Sheet and Efficient Capital Management: The company’s cash flow has been increasing over the years. Disciplined capital deployment through share buybacks and dividend hikes is also impressive. Over the past year, the company has repurchased 5.2% of outstanding shares. In February 2020, Allstate raised its quarterly dividend by 8%. Its current dividend yield of 2.3% is considerably higher than the industry’s average of 0.4%. We believe, the company’s financial strength will continue to inspire investors’ confidence in the stock. Solid ROE: Allstate’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 17.5%, which has increased over the past two years (2018 & 2019), remains way above the industry’s reading of 6.5%, thereby reflecting its tactical efficiency in utilizing its shareholders’ funds.
Year to date, the stock has lost 14.3% compared with the
's decline of 7.6%. industry Other Key Picks
Some other stocks worth considering are Dongeal Group Inc. (
DGICA Quick Quote DGICA - Free Report) , RLI Corp. ( RLI Quick Quote RLI - Free Report) and Fidelity National Financial Inc. ( FNF Quick Quote FNF - Free Report) , each stock currently sporting a Zacks Rank of 1.
Earnings of both Fidelity National and Dongeal Group beat estimates in each of the trailing four quarters, the average being 32.13% and 86.44%, respectively.
RLI Corp.’s bottom line beat estimates in three of the last four quarters and missed the same in one, the average being a surprise of 27.21%.
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