Allstate Q3 Countdown: Smart Move to Buy or Stick With Hold?

Core Viewpoint - Allstate Corporation is expected to report third-quarter 2024 results on October 30, 2024, with earnings estimated at $2.20 per share and revenues of $16.24 billion, reflecting significant year-over-year growth in earnings and revenues [1][2]. Financial Performance - The earnings estimate for the third quarter has seen downward revisions, but it still indicates a year-over-year surge of 171.6%, while revenues are projected to grow by 11.4% year-over-year [2]. - Allstate has a strong history of exceeding earnings estimates, achieving an average surprise of 142.7% over the last four quarters [3]. Earnings Prediction - The current model does not predict an earnings beat for Allstate, as it has an Earnings ESP of 0.00% and a Zacks Rank of 3 (Hold) [4]. - The company’s revenues are expected to benefit from improved net premiums earned, with estimates indicating a year-over-year growth of 12.4% [6]. Investment Income and Underwriting - Net investment income is projected to grow by 6.4% year-over-year, while adjusted net income from the Protection Services business is expected to increase by 90% compared to the previous year [7]. - Underwriting income for the Homeowners brand is estimated at $135.6 million, a significant recovery from a loss of $131 million a year ago, and the Auto brand's underwriting income is projected at $297.2 million, up from a loss of $178 million [8]. Cost and Expense Outlook - Total costs and expenses are expected to rise by more than 3% year-over-year due to higher operating costs, which may complicate the potential for an earnings beat [11]. Stock Performance and Valuation - Allstate's stock has increased by 34.4% year-to-date, outperforming the industry growth of 27.1% [12]. - Despite recent price appreciation, Allstate's valuation remains attractive, trading at 10.83X forward 12-month earnings, below its five-year median of 11.05X and the industry average of 28.27X [15]. Growth Prospects - Allstate is projected to achieve steady revenue growth through a diversified product portfolio, strategic acquisitions, and disciplined pricing [17]. - The company is focusing on expanding its Protection Services business, which is expected to drive revenue growth [17]. Challenges - High debt levels and rising repair costs due to inflation and supply chain issues could compress margins [18]. - Increasing competition in the insurance sector and a rise in natural disasters may further pressure profitability [18].