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Allstate (ALL) to Report Q2 Earnings: What's in the Cards?

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Allstate Corp.’s (ALL - Free Report) second-quarter earnings will be reported on Jul 30, after market close. The company is expected to witness an increase in insurance premium written in its property and casualty business, higher revenues from its service business, partly offset by catastrophe losses.

Factors Affecting Q2 Results

Allstate’s Property and Casualty business is expected to grow in premium due to increase in pricing and decline in auto claim frequency along with new client growth and higher retention. The company’s use of telematics, analytical expertise, differentiated products and brands should aid business growth. The segment’s premium written has increased over the years. Due to its growth initiatives, premium written is expected to increase in the second quarter as well.

We expect to see policy growth in Allstate and Esurance brands and a higher average premium across all three underwritten brands, namely Allstate, Esurance and Encompass.

Allstate’s expansion of its Service business also bodes well for its overall growth. The acquisition of Square Trade, provider of protection plans for mobile phones, consumer electronics and appliances, should drive revenue growth in the to-be-reported quarter. SquareTrade became the exclusive protection plan provider for a leading U.S. retailer in the second half of 2018. This contract win is likely to boost revenues from this business.

Another addition to the Service business was iCracked, which was acquired in February. This must expand the company’s protection offerings.

The company’s disciplined capital management by dividend payout and share buyback also aided bottom-line growth and the same should continue in the second quarter.

However, catastrophe losses might limit Allstate's second-quarter underwriting margins. Total loss for the quarter  is estimated at around $763 million pretax.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 10.8%. This is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Allstate is likely to beat earnings estimates this season because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to do so. But that is not the case here.

Earnings ESP: Allstate has an Earnings ESP of -1.90%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Allstate carries a Zacks Rank #3, but its negative Earnings ESP leaves our surprise prediction inconclusive.

Other Stocks

Here are some other companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Lincoln National Corp. (LNC - Free Report) has an Earnings ESP of +0.71% and a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank #3.

Alleghany Corp. has an Earnings ESP of +1.74% and a Zacks Rank #3.

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