Allstate (ALL): Will its Earnings Surprise this Season?
The Allstate Corporation ALL is set to report fourth-quarter and full-year 2015 earnings results on Feb 3, 2016. Last quarter, it posted a positive earnings surprise of 15.2%. Let’s see how things are shaping up for this announcement:
Factors Affecting the Past Quarter
Allstate’s fourth-quarter earnings might reflect its struggles to maintain its position in a highly competitive industry, which is marked by escalating pricing pressures and selective underwriting standards. Further, Allstate’s investment portfolio is patchy due to the ongoing equity market decline and sluggish returns.
Its brands Esurance and Encompass are likely to see lower growth rates than the past quarters as a result of rate increases, decreased marketing in select regions and underwriting guidelines adjustments.
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. The same trend is expected to continue in 2015. These factors should be accretive to earnings, operating cash flow and return on equity.
Moreover, the company’s intelligent capital management strategy of returning cash to shareholders via dividend and share buyback will also lend more support to the bottom line. But will these be enough to translate into an earnings beat?
Earnings Whispers
Our proven model does not conclusively show that Allstate is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Allstate has an ESP of -5.22%. This is because the Most Accurate estimate stands at $1.27 and the Zacks Consensus Estimate is pegged at $1.34 per share.
Zacks Rank: Allstate has a Zacks Rank #2 (Buy). Though this increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.
Stocks to Consider
Here are three stocks from the finance sector that have the right combination of elements to post an earnings beat this quarter:
American Financial Group Inc. AFG has an Earnings ESP of +0.63% and a Zacks Rank #3 (Hold). The company is scheduled to release fourth-quarter earnings results on Feb 2.
The Hartford Financial Services Group, Inc. HIG has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings results on Feb 4.
Arch Capital Group Ltd. ACGL has an Earnings ESP of +1.85% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings results on Feb 9.
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HARTFORD FIN SV (HIG): Free Stock Analysis Report
ALLSTATE CORP (ALL): Free Stock Analysis Report
ARCH CAP GP LTD (ACGL): Free Stock Analysis Report
AMER FINL GROUP (AFG): Free Stock Analysis Report
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