Shares of The Allstate Corp. (ALL) have scaled new 52-week highs throughout this week, closing at $67.32 in the last trading session, with 1.96 million shares exchanging hands. Notably, the stock jumped 26.8% since the beginning of 2014 and rose 4.7% since the company released third-quarter 2014 earnings on Oct 29.
Yesterday’s closing price represents a strong one-year return of about 23.6%, against 15.2% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 2,187.9K.
Meanwhile, a compelling long-term growth story backed by steady growth in core fundamentals is driving the momentum of this Zacks Rank #3 (Hold) stock. While catastrophe losses and low interest rates intermittently weigh on Allstate’s bottom line, core growth remains strong.
Earnings Review
Allstate has kept its earnings streak alive by delivering positive earnings surprises in the trailing four quarters, with an impressive average beat of 16.4%. Even the third-quarter 2014 operating earnings of $1.39 per share exceeded the Zacks Consensus Estimate of $1.36. However, it fell short of the year-ago quarter figure of $1.53 per share due to higher catastrophe losses. Results reflected improvements across the Allstate, Esurance and Encompass brands, which led to higher premiums and policies-in-force as well as client retention.
Rationale
With 2014 nearing the end, Allstate appears to have fared well in its strategic operating priorities charted out at the beginning of this year. Management’s proactive approach in maximizing returns while minimizing risks are showing results, with the company’s underlying combined ratio within the targeted range of 87% to 89%. Additionally, improved core growth from agency expansions and strong distribution network within both homeowners’ and auto insurance businesses bode well for long-term growth.
Alongside, Allstate’s capital and cash positions remain secure, as evident from accelerated and expanded share buyback program as well as incremental dividend payouts. Moreover, the long-term growth rate for Allstate is pegged at 7.8%, at par with the peer group average.
Stocks to Consider
Investors interested in insurance companies could consider players like AmTrust Financial Services Inc. (AFSI), Arch Capital Group Ltd. (ACGL) and CNO Financial Group Inc. (CNO). All these sport a Zacks Rank #1 (Strong Buy).
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