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On Monday, BMO Capital Markets adjusted its financial outlook for Allstate (NYSE:ALL), increasing the price target on the insurer’s shares to $230 from the previous $222, while reaffirming an Outperform rating. The revision follows Allstate’s recent first-quarter performance, which surpassed expectations. According to InvestingPro data, seven analysts have recently revised their earnings estimates upward, with price targets ranging from $149 to $286. The company’s shares, currently trading around $200, appear undervalued based on InvestingPro’s Fair Value analysis.
The price target hike is supported by a positive adjustment in Allstate’s adjusted earnings per share (EPS) projections for 2025 and 2026, with a significant 15% increase for 2025 and a more modest 3% for 2026. The upward revision for 2025 stems mainly from the company’s strong first-quarter results, coupled with a projected 2% rise in EPS from the second to the fourth quarter, largely attributed to a slightly lower expense ratio and, to a lesser extent, increased net investment income. The company’s financial health is rated as "GREAT" by InvestingPro, with strong profitability metrics including a return on equity of 21% and revenue growth of 11.5% over the last twelve months.
BMO Capital anticipates a quarter-over-quarter growth in policies in force of 80 basis points for the second quarter, compared to a 70 basis point increase in the first quarter. This growth is expected to be driven by higher retention rates, although it may be partially counterbalanced by a potential decline in new business acquisition. The firm suggests that Allstate’s recent success in the Direct channel could be due to seasonal patterns among less preferred customers, which could impact new business trends. As a prominent player in the insurance industry, Allstate has maintained dividend payments for 33 consecutive years, with a current dividend yield of 2%.
Allstate’s CEO, Tom Wilson, provided insights during the first-quarter earnings call, highlighting the company’s improved performance in the non-standard risk class compared to a few years ago. He acknowledged the trade-off between strong new business growth and lower retention rates, indicating an area of focus for the company moving forward.
The new price target of $230 reflects BMO Capital’s confidence in Allstate’s ability to continue its positive trajectory, based on the updated earnings estimates and the insurer’s strategic positioning in the competitive market.
In other recent news, Allstate reported its first-quarter 2025 earnings, which showed mixed results. The company missed the earnings per share (EPS) forecast, reporting an adjusted EPS of $3.53 against the expected $3.71, but exceeded revenue expectations with $16.5 billion, surpassing the projected $13.94 billion. Analysts at Keefe, Bruyette & Woods (KBW) and Raymond (NSE:RYMD) James responded positively to Allstate’s performance, with KBW raising the stock price target to $235 and maintaining an Outperform rating, while Raymond James increased their target to $250 and upheld a Strong Buy rating. Both firms cited anticipated growth in policies in force (PIF) and improved underwriting results as key factors for their optimism.
Allstate’s strategic initiatives, including the launch of new insurance products and a focus on expanding market reach, have contributed to its robust revenue growth, despite the EPS miss. The company has also been recognized for its strong capital position, holding $3 billion at the holding company level, which supports its growth and shareholder returns. Analysts have revised their EPS estimates for the coming years, with KBW projecting $17.75 for 2025 and $20.90 for 2026, while Raymond James estimates $17.25 for 2025 and introduces a new estimate of $22.00 for 2027. These revisions reflect expectations of higher premium growth and improved financial performance.
Allstate’s focus on increasing market share in personal auto policies and enhancing customer experience is seen as a positive trajectory for the company’s future growth. The firm’s proactive capital management strategies and expansion of protection offerings indicate a commitment to maintaining profitability and competitiveness in the insurance sector.
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