Barclays Starts Allstate (ALl) at Underweight

Barclays analyst Alex Scott initiates coverage on Allstate (NYSE: ALl) with a Underweight rating and a price target of $175.00.

The analyst comments "Underweight driven by uphill battle on growth and below consensus EPS estimates: We are initiating with an underweight rating on Allstate with a price target of $175. Our Underweight rating is driven by our view that it will be difficult for Allstate to achieve improved levels of growth when considering the retention headwinds of the exclusive agent channel - a greater potential offset to the direct channel growth than the Street is anticipating. Additionally, we see risk of downward EPS revisions as the Street seems to be modeling significant improvement in loss ratios while leaving the expense ratio well below historical levels. We think that as Allstate pivots to focusing on growth, the expense ratio will naturally trend back up and may even go beyond our higher assumed expense load. Finally, it's worth pointing out that Allstate is currently running at around 3x premiums / surplus compared to historical levels in the 1.5-2x range. While Allstate has been able to temporarily run at elevated levels as results were pressure by inflation, we suspect the plan is to work it back down over time necessitating lower levels of share repurchases than consensus is currently estimating. Taken together, we see a challenging path for Allstate to meet growth and EPS expectations while the stock valuation has reached levels that we think necessitates hitting both."

For an analyst ratings summary and ratings history on Allstate click here. For more ratings news on Allstate click here.

Shares of Allstate closed at $189.20 yesterday.

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