Buckingham Upgrades Allstate But Remains Cautious

It’s been a tough year so far for Allstate Corp ALL, but one Wall Street analyst said Wednesday that investors are now in good hands.

The Analyst

Buckingham Research Group's Amit Kumar upgraded Allstate from Underperform to Neutral and reiterated an $88 price target. Kumar also reiterated an Underperform rating and $52 target for Progressive Corp PGR.

The Thesis

The year-to-date 9.6-percent decline in Allstate stock has brought its valuation down to a reasonable level headed into second-quarter earnings, Kumar said in a Wednesday note. (See the analyst's track record here.) 

Buckingham raised its Q2 EPS estimate from $1.45 to $1.60 and 2018, 2019 and 2020 estimates from $8.40, $8.45 and $8.55 to $8.75, $8.60 and $8.85.

Despite an improved valuation, Kumar said Allstate still faces some market headwinds.

“We continue to remain cautious on personal auto trends, as supported by our discussion surrounding loss costs and rate filing data which points to tightening of margin going forward,” the analyst said. 

That negative outlook is a major reason why Kumar remains bearish on Progressive. There's no clear reason why Progressive shares are up 5 percent year-to-date while Allstate stock is down significantly, he said.

Progressive stock has a forward PE of around 13, while Allstate’s is near 10 — roughly in-line with its long-term historical average, according to Buckingham. 

Price Action

Allstate shares were up 1.45 percent at $95.63 at the time of publication Wednesday, while Progressive was higher by 1.09 percent at $60.05. 

Related Links:

B. Riley FBR Maintains Neutral on Allstate, Raises Price Target to $88

Generators To Insurers: Trading Tropical Storms

Photo courtesy of Allstate.