The Allstate Corporation (ALL – Free Report) currently trades at a discount compared to the industry average. The stock is currently trading at 10.23X, forward 12-month price to earnings, which compares to 27.94X for the industry, indicating undervaluation. The company has a Value Score of B.
Image Source: Zacks Investment Research
In the past year, shares of ALL have rallied 39.8% compared with the industry’s 27.6% growth. The company’s price performance also outperformed its peers, such as Aflac Incorporated (AFL – Free Report) , Aon plc (AON – Free Report) , and American International Group, Inc. (AIG), which gained 26.2%, 24.9% and 8.1%, respectively. The stock has also outperformed the S&P 500’s 27.2% rise.
ALL’s 1-Year Price Performance
Image Source: Zacks Investment Research
Now, let’s take a look at the stock’s growth drivers.
ALL’s Growth Drivers
The company’s strong revenue growth is driven by rising premiums from a diverse product portfolio, strategic acquisitions, and disciplined pricing. Net premiums earned have increased 13.9% in 2021, 8.7% in 2022, 10.4% in 2023, and 11.5% in the first nine months of 2024. We project an 11.3% increase for 2024. The growth is further supported by strategic measures, product improvements, and a shift in focus toward high-return businesses. However, the company’s focus is now on improving customer retention and generating new business. It expects to carry out smaller price increases, identify bundling opportunities, and conduct proactive protection reviews.
Allstate is proactively divesting non-core operations to enhance profitability. It plans to sell its Employer Voluntary Benefits business to StanCorp by mid-2025 and is considering selling its Individual and Group Health units. It is also implementing cost-cutting measures to boost efficiency, improve underwriting results, and reinvest savings into technology and product development. ALL also aims to use AI for improved customer experience and reduce customer efforts to solve problems. Expanding embedded protection plans through enhanced product offerings and distribution also bodes well.
The company’s strong cash flow generation supports leverage improvement and shareholder returns. Operating cash flow more than doubled in the first nine months of 2024. During the same period, it paid $719 million in dividends to common shareholders. With a current dividend yield of 1.9%, the company significantly outperforms the industry average of 0.3%.
Estimate Revisions for ALL Stock
The Zacks Consensus Estimate for Allstate’s 2024 adjusted earnings is currently pegged at $16.27 per share, indicating a massive growth from the year-ago period’s figure of 95 cents. The consensus mark for 2025 adjusted earnings signals a further 17.8% growth. The consensus estimate for 2024 and 2025 revenues suggests 12.1% and 7.1% year-over-year growth, respectively. It beat earnings estimates in each of the past four quarters with an average surprise of 135.2%.
The Allstate Corporation Price and EPS Surprise
The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote
Conclusion
Allstate’s strong financial performance, disciplined pricing, strategic growth initiatives, and significant undervaluation compared to industry peers make it an attractive investment opportunity. Additionally, its strong cash flow generation, shareholder-friendly policies, and use of AI to enhance customer experience further solidify its potential. All these factors make ALL a compelling buy opportunity for investors.
Allstate currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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