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Earnings Estimates Rising for Alleghany (Y): Will It Gain?

Zacks Equity Research

Alleghany (Y) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this property and casualty insurance provider is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Alleghany, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $6.76 per share for the current quarter represents a change of +731.78% from the number reported a year ago.

Over the last 30 days, one estimate has moved higher for Alleghany compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 7.48%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $40.03 per share represents a change of +148.17% from the year-ago number.

The revisions trend for the current year also appears quite promising for Alleghany, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 7.09%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Alleghany currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Alleghany because of its solid estimate revisions, as evident from the stock's 6.7% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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