It has been about a month since the last earnings report for Allstate (ALL - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Allstate due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Allstate Q3 Earnings Miss Estimates, Revenues Beat
Allstate Corporation’s third-quarter 2018 earnings of $1.93 per share missed the Zacks Consensus Estimate by 11.1% but increased 20.6% on a year-over-year basis.
The earnings growth was driven by higher premiums earned, lower catastrophe losses and a lower effective tax rate, partially offset by higher Property-Liability non-catastrophe losses.
Revenues came in at $10.29 billion, outpacing the Zacks Consensus Estimate by 20.2%. The top line was up 5.8% year over year, reflecting higher average premiums and increased policies in force.
In the quarter under review, total expenses increased 5.7% year over year to $9.43 billion on higher property and casualty insurance claims, and claims expense and operating costs.
The company incurred catastrophe loss of $625 million, which was down 27.4% year over year.
Total policies in force as of Sep 30, 2018 were 96.2 million, up 23.9% year over year.
Net investment income of $844 million remained unchanged year over year.
Solid Segmental Performance
Property-Liability insurance premiums written were $9.2 billion, up 6.7% year over year. Underwriting income of $473 million, declined 2.3% year over year, due to higher claim severity, increased expenses and unfavorable prior-year reserve reestimates. Combined ratio deteriorated 40 basis points year over year to 94.3%.
Service Businesses’ total revenues totaled $329 million, up 21% year over year. This upside was primarily driven by a 64% increase in revenues from Square Trade, followed by growth from Arity and Allstate Dealer Services.
Allstate Life’s premium and contract charges of $322 million increased 1.9% year over year, driven by growth in traditional life insurance and lower levels of reinsurance premiums ceded. Adjusted net income of $74 million remained unchanged year over year, a lower effective tax rate, higher premiums and increased net investment income were primarily offset by higher contract benefits.
Allstate Benefits’ premium and contract charges of $285 million were up 4.4% backed by 5.1% growth in policies in force. Adjusted net income of $32 million was 14% higher year over year on the back of higher premiums, reflecting a lower effective tax rate. This was partially offset by higher contract benefits and expenses.
Allstate Annuities’ premium and contract charges of $5 million increased 25% year over year. Adjusted net income of $20 million declined 42.9%, due to lower performance-based investment income.
Share Buyback and Dividend
Allstate returned $160 million to shareholders in common stock dividends and repurchased $225 million of outstanding common shares in the third quarter. A new $3 billion share repurchase authorization was approved and will start following the completion of its current program and is expected to conclude by April 2020.
Capital Position (As of Sep 30, 2018)
Total shareholders’ equity was $23.6 billion, up 6.8% year over year.
Total assets were $114.5 billion, up 0.8% year over year.
Long-term debt of $6.45 billion increased 1.6% year over year.
Ratio of debt-to-equity was 27.3%, down 140 basis points year over year.
Adjusted return on equity of 15.9% expanded 200 basis points year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.59% due to these changes.
At this time, Allstate has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Allstate has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.