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Allstate (ALL) Banks on Higher Premiums, Strategic Efforts
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The Allstate Corp. (ALL - Free Report) looks well-poised for growth despite the coronavirus-led economic weakness on the back of a number of strategic initiatives, which should drive its long-term growth.
The company's diversified business model, substantial earnings capacity plus strong capital and liquidity position enable it to navigate the pandemic stress effectively manage 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.
Allstate’s top line has been increasing over the years owing to its varied product portfolio and pricing discipline. It is also benefiting from its past acquisitions and the growth trajectory in emerging businesses, evident from a steady rise in premium written over the years.
In the first nine months of 2020, premiums written were up 3.4% 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 domain with market share inching up 1%. Buyouts will be accretive to Allstate’s earnings per share and ROE, reflecting its significant cost synergies. The company expects high-single digit earnings accretion in the first year post close. It also anticipates ROE accretion of approximately 100 bps.
Allstate is making concerted efforts to expand its Service business, which provides 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 bought PlumChoice in 2018, a leading provider of cloud and technical support services to consumers and small businesses. In February 2019, iCracked was purchased, which extended SquareTrade’s protection offerings. These integrations will boost its Service business, which grew 7.3% of revenues in 2019 and a further 15.60% during the first nine months of 2020.
Its cash flow has been rising over the years. Efficient capital deployment through share buybacks and dividend hikes is also encouraging. Over the last year, the company repurchased 5.2% of its outstanding shares. In February 2020, Allstate raised its quarterly dividend by 8%. Its current dividend yield of 2.23% is considerably higher than the industry’s average 0.4%. We believe, the company’s financial strength will continue to instill investors’ confidence in the stock.
Further, Allstate’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 16.7% has increased over the past two years (2018 & 2019) and remains way above the industry’s ROE of 6.2%, reflecting its tactical efficiency in utilizing its shareholders’ funds.
Allstate currently carries a Zacks Rank #3 (Hold) and has declined 1.3% against its industry's growth of 23.4%.
Some-better ranked stocks in the same space are American Financial Group Inc. (AFG - Free Report) , Arch Capital Group Ltd. (ACGL - Free Report) and Fidelity National Financial, Inc. (FNF - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.
Earnings of American Financial, Arch Capital and Fidelity National Financial beat estimates in the last reported quarter by 58.06%, 16% and 18.4%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Allstate (ALL) Banks on Higher Premiums, Strategic Efforts
The Allstate Corp. (ALL - Free Report) looks well-poised for growth despite the coronavirus-led economic weakness on the back of a number of strategic initiatives, which should drive its long-term growth.
The company's diversified business model, substantial earnings capacity plus strong capital and liquidity position enable it to navigate the pandemic stress effectively manage 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.
Allstate’s top line has been increasing over the years owing to its varied product portfolio and pricing discipline. It is also benefiting from its past acquisitions and the growth trajectory in emerging businesses, evident from a steady rise in premium written over the years.
In the first nine months of 2020, premiums written were up 3.4% 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 domain with market share inching up 1%. Buyouts will be accretive to Allstate’s earnings per share and ROE, reflecting its significant cost synergies. The company expects high-single digit earnings accretion in the first year post close. It also anticipates ROE accretion of approximately 100 bps.
Allstate is making concerted efforts to expand its Service business, which provides 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 bought PlumChoice in 2018, a leading provider of cloud and technical support services to consumers and small businesses. In February 2019, iCracked was purchased, which extended SquareTrade’s protection offerings. These integrations will boost its Service business, which grew 7.3% of revenues in 2019 and a further 15.60% during the first nine months of 2020.
Its cash flow has been rising over the years. Efficient capital deployment through share buybacks and dividend hikes is also encouraging. Over the last year, the company repurchased 5.2% of its outstanding shares. In February 2020, Allstate raised its quarterly dividend by 8%. Its current dividend yield of 2.23% is considerably higher than the industry’s average 0.4%. We believe, the company’s financial strength will continue to instill investors’ confidence in the stock.
Further, Allstate’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 16.7% has increased over the past two years (2018 & 2019) and remains way above the industry’s ROE of 6.2%, reflecting its tactical efficiency in utilizing its shareholders’ funds.
Allstate currently carries a Zacks Rank #3 (Hold) and has declined 1.3% against its industry's growth of 23.4%.
Some-better ranked stocks in the same space are American Financial Group Inc. (AFG - Free Report) , Arch Capital Group Ltd. (ACGL - Free Report) and Fidelity National Financial, Inc. (FNF - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.
Earnings of American Financial, Arch Capital and Fidelity National Financial beat estimates in the last reported quarter by 58.06%, 16% and 18.4%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>