Allstate stock downgraded to Hold, price target stays at $200

On Wednesday, Allstate Corporation (NYSE:ALL) experienced a change in stock rating as CFRA downgraded the insurance giant from Buy to Hold, maintaining a price target of $200.00. The firm's decision reflects the current valuation of Allstate shares at 11.4 times CFRA's 2025 operating earnings per share (EPS) estimate of $17.50. This valuation is compared to the one-year average forward multiple of 12.8x and a peer average of 11x.

Allstate's shares have shown a positive reaction to the recent announcement of the sale of its employer voluntary benefits business to StanCorp Financial for $2 billion. The transaction, expected to close in early 2025, is projected to result in a $600 million profit for Allstate.

The sale of the voluntary benefits business, which constituted 4% of Allstate's 2023 revenues, is set to free up approximately $1.6 billion in capital. This capital is slated for reinvestment into the company's core auto and homeowner insurance lines, as well as the expansion of its protection business.

CFRA's original upgrade of Allstate to Buy on November 3, 2023, was driven by the anticipation of improved underwriting results and further restructuring initiatives. Since then, Allstate's shares have seen a significant increase, rising about 29% year-to-date, fueled by the company's progress in underwriting and restructuring.

In other recent news, Allstate has been making strategic moves to enhance its financial standing and streamline its business operations. The company recently sold its employer voluntary benefits segment to StanCorp Financial for $2.0 billion, a transaction that is expected to increase Allstate's deployable capital by $1.6 billion and result in an approximate $600 million gain.

This divestiture, which accounted for nearly 39% of the adjusted net income for Allstate's Health & Benefits segment in the first half of 2024, is expected to expedite Allstate's share buyback program.

In response to these developments, several analyst firms have adjusted their outlooks on Allstate. TD Cowen maintained a Buy rating, while Piper Sandler kept its Overweight rating, seeing potential benefits from the divestiture.

Wells Fargo upgraded Allstate from Underweight to Equal Weight and increased its price target, acknowledging improvements in auto margins and an anticipated bolstering of capital. BMO Capital Markets also raised its price target, maintaining an Outperform rating, given the company's potential for organic growth and successful execution of its Transformative Growth strategy.

InvestingPro Insights

As Allstate Corporation (NYSE:ALL) navigates its strategic divestiture and capital reallocation, real-time data from InvestingPro provides a deeper understanding of the company's financial health and market performance. With a market capitalization of $47.54 billion and a P/E ratio of 16.18, Allstate is positioned as a prominent player in the insurance industry. The company's commitment to shareholder returns is evident, with a track record of increasing its dividend for 13 consecutive years, reflecting a solid financial discipline and a shareholder-friendly approach.

InvestingPro Tips highlight that Allstate is expected to experience net income growth this year, and analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's profitability. This aligns with the company's recent strategic moves, including the sale of its employer voluntary benefits business, which is anticipated to contribute positively to its financial results. Additionally, Allstate's shares are trading near their 52-week high, underscoring the market's favorable reception to the company's restructuring efforts and operational focus.

For investors and analysts looking to delve deeper into Allstate's performance metrics and gain access to further expert analysis, additional InvestingPro Tips are available at https://www.investing.com/pro/ALL.

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