On Jun 2, 2014, shares of The Allstate Corporation (ALL) scaled a new 52-week high of $58.88. About 2.4 million shares exchanged hands in the last trading session, closing at $58.67. The momentum was driven by earnings strength, continued focus on enhancement of shareholders’ value and strong scores from rating agencies. The 1-year return from the stock came in at 21.6%, which was ahead of the S&P’s return of 18.03%.
With respect to earnings performance, this Zacks Rank #3 (Hold) property and casualty insurer delivered positive surprise in the last four quarters, with an average beat of 16.09%.
Total debt to capital ratio improved to 21.9% at March end from 22.4% at 2013 end, primarily driven by appreciated equity, which reflects strengthening of balance sheet. Operating return on equity improved to 14.4% from 11.9% in the year-ago quarter.
The company has also been consolidating its business portfolio to enhance its operational results. In April, Allstate divested Lincoln Benefit Life Company to Resolution Life Holdings, Inc. in its efforts to lower exposure to interest rates and spread-based businesses. It also inked a deal to vend Sterling Collision Centers, Inc. to Service King Collision Repair Centers.
With respect to increasing its shareholders value, Allstate increased its quarterly dividend as well as approved a share buyback program. In February, the board incresaed the quarterly dividend by 12% to 28 cents per share. The annualized dividend of $1.12 yields 1.9%. In addition, the board also approved a new buyback program worth $2.5 billion, the largest one since 2006.
In the last quarter, Allstate bought back about $348 million shares and an additional $750 million shares under an accelerated share repurchase agreement with Barclays plc (BCS) in Mar 2014. Allstate has $1.65 million available for repurchases under the current authorization.
Steady operational performance by Allstate helped the Zacks Consensus Estimate to move north in the last 30 days. The Zacks Consensus Estimate for 2014 is currently pegged at $5.15 for 2014, after increasing 2.2% as 12 of 17 estimates revised higher. The same for 2015 increased 0.4% as 5 of 17 estimates moved north over the same time frame. The expected long term growth rate for the stock is 9%.
Other Stocks to Consider
Some better-ranked property and casualty insurers worth considering are W.R. Berkley Corp. (WRB) and AmTrust Financial Services, Inc. (AFSI). Both these stocks sport a Zacks Rank #1 (Strong Buy).