On Dec 10, 2015, Zacks Investment Research upgraded Alleghany Corporation Y to a Zacks #1 Rank (Strong Buy).
Why the Upgrade?
Alleghany has been witnessing rising earnings estimates on the back of strong inorganic growth and mixed third-quarter 2015 results. Moreover, this property and casualty insurer delivered positive earnings surprises in two of the last three quarters, with an average beat of 6.4%.
The company’s inorganic growth story remains compelling with particular focus on buying entities that complement its operating capacities. The acquisition of Smit Mobile Equipment B.V. and Smit Mobile Equipment (UK) Ltd. by the company’s unit – R. C. Tway Company, LLC. (Kentucky Trailer) – is notable in this regard. The acquisition combines Smit and Kentucky’s expertise to help the latter cater to the mobile medical market and specialty trailer efficiently.
Alleghany reported third-quarter (ended Sep 30) results on Nov 3. The company succeeded in reducing expenses to some extent in the quarter, which helped to limit margin contraction. Operating cash flows increased in the first nine months. An increased cash flow reflects the company’s ability to engage in capital deployments effectively.
In fact, in terms of capital deployments the company boasts a strong share repurchase portfolio. In order to return more value to its shareholders, Alleghany has been devising buyback programs from time to time, the latest being the “2014 Repurchase Program.” Per this program, the company authorized an additional buyback of up to $350 million, post the completion of the earlier program. Under this, the company repurchased shares worth $152 million in the third quarter of 2015, thereby bringing down the share count and boosting earnings per share.
The Zacks Consensus Estimate for 2015 increased 8% to $30.25 per share as most of the estimates were revised higher over the last 60 days.
Other Stocks to Consider
Investors interested in the P&C insurance industry may also consider stocks like Cincinnati Financial Corp. CINF, Hallmark Financial Services Inc. HALL and Heritage Insurance Holdings, Inc. HRTG. All three stocks sport the same Zacks Rank as Alleghany.
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