The Allstate Corp. ALL is scheduled to report second-quarter 2015 results on Aug 3 after the closing bell.
In the last quarter, this health insurer delivered a 5.04% positive earnings surprise. The average beat for the trailing four quarters is 9.12%.
Will Allstate deliver a positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.
Q2 Flash Back
Allstate’s second-quarter earnings will likely feel the weight of an expected $797 million pre-tax ($518 million after-tax) catastrophe-related loss. Because of the exposure of the company’s property and casualty business to catastrophic events, its operating results and financial condition have varied significantly from one period to another and we expect the same for second-quarter earnings.
Nevertheless, the company’s strong foothold in the personal lines business and solid risk-adjusted capitalization will support top-line growth.
Moreover, with no debt maturities until 2018, Allstate’s debt management has been commendable, as total debt reduced 16.2% in 2014 from the 2013-end level. Debt reduction also improved the total debt-to-capital resources ratio consistently to 18.9% at 2014 end from 22.4% at 2013 end. These factors should be accretive to earnings, operating cash flow and return on equity in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Allstate is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below:
Zacks ESP: Allstate’s Most Accurate estimate is pegged at 93 cents per share, which is a penny lower than the Zacks Consensus Estimate of 94 cents. The Earnings ESP is thus -1.06%.
Zacks Rank: Allstate has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of -1.06% makes surprise prediction difficult.
Stocks That Warrant a Look
Here are some financial companies which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
AerCap Holdings N.V. AER has an Earnings ESP of +2.26% and a Zacks Rank #2.
American Financial Group Inc. AFG has an Earnings ESP of +6.61% and a Zacks Rank # 3.
American Capital, Ltd. ACAS has an Earnings ESP of +17.39% and a Zacks Rank #2.
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