2023-04-03 11:28:30 ET
Allstate ( NYSE: ALL ) stock climbed 3.2% in Monday morning trading after William Blair analyst Adam Klauber upgraded the insurer to Outperform as a number of trends come together to improve its near-term and long-term upside potential.
Favorable trends include: high levels of reserving; potential inflection of increasing premium rates and decelerating claim frequency; improving macro trends such as miles driven stabilizing and lower used car prices and rental rates, the analysts said in a note to clients.
"Recent indications provide increased conviction that the combined ratio can return to 95% by 2024; this should translate into $15.00 of oeprating EPS," he wrote.
For full-year 2022, Allstate ( ALL ) posted an adjusted loss of $0.97 per share compared with 2021 adjusted EPS of $13.48.
"Top-line growth from 2022 to 2025 should average above 10%, which is over two times higher than normal," the analyst said. "Elevated premiums have the postive benefits of higher investment income, better expense leverage, and increased underwriting income."
That indicates a 2025 EPS range of $17-$19 is achievable, he added.
Klauber's Outperform rating contrasts with the SA Quant rating of Hold and aligns with the average Wall Street rating of Buy.
SA contributor Trapping Value takes a look at how Allstate's ( ALL.PB ) subordinated floating-interest rate debentures may fare in the current rate environment.
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Allstate upgraded to Outperform at William Blair as trends run it its favor