The Allstate Corporation (ALL) has been on an impressive run this year, with its stock surging 35% year-to-date. This rise has caught the attention of many investors wondering if there’s still room for further gains.
The company’s impressive turnaround in the second quarter, transitioning from a net loss to solid profits, was largely driven by higher premiums, stronger underwriting, and fewer catastrophe-related losses. Its consolidated premiums written for the quarter were at $15.43 billion, reflecting a 12.4% increase year-over-year. At the same time, its catastrophe losses dropped to $2.12 billion, down from $2.70 billion.
Insurers often avoid the ups and downs in demand that plague other financial firms, thanks in part to the widespread use of employer-sponsored and government-mandated insurance policies. With the economy showing signs of a soft landing, markets have reached all-time highs in 2024, which is good news for insurers like Allstate as it boosts their investment income.
Tom Wilson, Allstate’s CEO, highlighted that these strong results reflect the company’s effective strategies, setting them up for continued success. ALL helped nearly 2 million customers in the last quarter by handling claims related to storms, accidents, and device breakages.
Shares of ALL have gained 36.9% over the past nine months and 66.9% over the past year, closing the last trading session at $188.69.
Now, let’s look at factors that could influence ALL’s performance in the upcoming months:
Solid Financial Performance
For the second quarter that ended on June 30, 2024, ALL reported total revenues of $15.71 billion, up 12.4% year-over-year and slightly above the analyst’s estimate of $15.23 billion. Its property and casualty insurance premiums increased by 11.9% year-over-year to $13.95 billion. Net investment income grew 16.7% from the year-ago value to $712 million.
Further, the company’s income from operations (before income tax expense) stood at $430 million versus a prior year’s loss of $1.75 billion. ALL’s non-GAAP net income amounted to $429 million and $1.61 per share, compared to an adjusted net loss of $1.16 billion and $4.42 per share in the same quarter last year. Additionally, its total investments increased to $70.60 billion as of June 30, 2024, compared to $66.68 billion as of December 31, 2023.
Favorable Analyst Estimates
The consensus revenue estimate of $15.67 billion for the fiscal third quarter (ending September 2024) represents an 8.1% increase year-over-year. The consensus EPS estimate of $3.25 for the current quarter indicates a 300.8% improvement year-over-year. The company has an excellent surprise history, surpassing the consensus revenue and EPS estimates in each of the trailing four quarters.
For the fiscal year ending December 2024, the company’s revenue is anticipated to grow 10.3% year-over-year to $62.97 billion, while its EPS is expected to increase significantly from the prior year period to $15.14.
In addition, Street expects its revenue and EPS for the fiscal year 2025 to grow 8.6% and 19.3% from the same period last year to $68.41 billion and $18.06, respectively.
Discounted Valuation
In terms of forward non-GAAP PEG, ALL is currently trading at 0.07x, 94.3% lower than the industry average of 1.29x. Likewise, its forward EV/Sales multiple of 0.94 is 69.8% lower than the industry average of 3.12x. In addition, the stock’s 10.74x forward EV/EBIT ratio is 6% below the 11.43x industry average. Also, its forward Price/Sales multiple of 0.79 compares to the industry average of 2.86.
High Profitability
ALL’s trailing-12-month ROCE of 19.32% is 86.8% higher than the 10.35% industry average. Similarly, the stock’s 10.57% trailing-12-month ROTC is 52.4% above the 6.94% industry average. Further, its trailing-12-month asset turnover ratio of 0.58x compares to the industry average of 0.22x.
POWR Ratings Show Promise
ALL’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ALL boasts an A grade for Growth, consistent with its solid financial performance in the last reported quarter.
The stock’s A grade for Momentum is justified by its share price trading above its 50-day moving average of $180.80 and 200-day moving average of $165.39. Also, its 0.48 beta justifies its B grade for Stability.
ALL is ranked #7 out of 55 stocks in the A-rated Insurance - Property & Casualty industry. Click here to access ALL’s Value, Sentiment, and Quality ratings.
Bottom Line
ALL’s strong financial performance in the second quarter shows that it’s effectively carrying out its profit improvement plan and pushing forward with its Transformative Growth strategy. The company has seen a nice bump in investment income and lower catastrophe losses, which means it’s doing well in managing risks and helping customers.
Plus, it has the financial flexibility and resources to support its future growth plans. With that in mind, it looks like there’s still plenty of room for Allstate to keep growing, making it a solid choice for investors looking to capitalize on potential gains in the insurance sector.
How Does The Allstate Corporation (ALL) Stack Up Against Its Peers?
While ALL has an overall grade of B, equating to a Buy rating, you may also check out these other A (Strong Buy)-rated stocks within the Insurance - Property & Casualty industry: Mercury General Corporation (MCY), Unipol Gruppo S.p.A. (UFGSY), and QBE Insurance Group Limited (QBIEY). To explore more Insurance - Property & Casualty stocks, click here.
What To Do Next?
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ALL shares were trading at $188.91 per share on Friday afternoon, up $0.22 (+0.12%). Year-to-date, ALL has gained 37.17%, versus a 21.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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