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Allstate (ALL) to Report Q3 Earnings: Is a Beat in Store?

Zacks Equity Research

Allstate Corp. ALL is scheduled to report third-quarter earnings on Oct 29, after market close. While the company’s earnings are expected to have improved year over year, revenues are likely to have declined.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 47.3% due to increase in premiums, partly offset by catastrophes losses.

Factors at Play

Increase in Premiums: Allstate’s Property and Casualty business is likely to have witnessed premium increase due to rise in pricing and decline in auto claim frequency along with new client growth and higher retention. The company’s use of telematics, analytical expertise, differentiated products and brands might have aided business growth. The segment’s premium written has increased over the years.

Allstate and Esurance brands are likely to have benefited from policy growth. Higher average premium is expected to have aided all three underwritten brands, namely Allstate, Esurance and Encompass.

Higher Contribution from Service Business: Allstate’s expansion of Service business is likely to have driven its overall growth. The acquisition of Square Trade, provider of protection plans for mobile phones, consumer electronics and appliances, is expected to have aided revenue growth in the to-be-reported quarter. SquareTrade became the exclusive protection plan provider for a leading U.S. retailer in the second half of 2018. This contract is likely to have boosted revenues from this business.

Also, the acquisition of iCracked in February, this year, is expected to have aided the revenues of the Service business.

Strong Capital Management: The company’s disciplined capital management by dividend payout and share buyback is likely to have driven bottom-line growth in the third quarter.

Catastrophe Losses: Weather related losses are likely to have weighed on Allstate's third-quarter underwriting margins. Total loss for the quarter under review is estimated to be $235 million pre-tax.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 14.86%. This is depicted in the chart below:

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation Price and EPS Surprise

The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote

Here is what our quantitative model predicts:

Our proven model predicts an earnings beat for Allstate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Allstate is +6.41%.

Zacks Rank: Allstate currently has a Zacks Rank #1.

Other Stocks to Consider

Here are some other companies that you may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

CNA Financial Corp. CNA has an Earnings ESP of +2.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chubb Limited CB has an Earnings ESP of +0.44% and a Zacks Rank #3.

Lincoln National Corp. LNC has an Earnings ESP of +0.65% and a Zacks Rank #3.

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