Option Trade 
Allstate Corp (The) (NYSE:ALL) Calls 
Monday, May 04, 2015

**OPTION TRADE: Buy the ALL Jul 2015 70.000 call (ALL150717C00070000) at or under $1.90. Place a protective stop loss at $0.75, and a pre-determined sell at $3.50.

by Ian Harvey

May 04, 2015


Allstate Corp (NYSE: ALL), the third largest personal lines insurer in the United States and the largest that is publicly held, is expected to report earnings on 05/05/2015 after market close. The report will be for the fiscal Quarter ending March 2015.

Based on 12 analysts' forecasts, the consensus EPS forecast for the quarter is $1.39. The reported EPS for the same quarter last year was $1.30.

Wall Street is optimistic about Allstate as the consensus estimate remains unchanged over the past month.

Shares of insurance company Allstate Corp have spent the better part of 2015 in a consolidation period, that increasingly looks ready to give way to a next upside leg. ALL stock currently has well-defined technical support and with the backdrop of an overall promising looking financial sector the path of least resistance is higher.

Technical Details

Allstate Corp has a 52 week low of $56.43 and a 52 week high of $72.87. The stock’s 50-day moving average is $70.79 and its 200-day moving average is $66.41.

The company has a market cap of $29.273 billion and a P/E ratio of 11.17.


Allstate Corp last released its earnings data on Wednesday, February 4th. The company reported $1.72 EPS for the quarter, beating the Thomson Reuters consensus estimate of $1.62 by $0.10. The company had revenue of $8.86 billion for the quarter, compared to the consensus estimate of $7.27 billion.

During the same quarter in the prior year, the company posted $1.70 earnings per share. The company’s quarterly revenue was down .4% on a year-over-year basis. Analysts expect that Allstate Corp will post $5.73 EPS for the current fiscal year.

The Upcoming Report

Analysts are expecting earnings of $5.67 per share for the fiscal year. Analysts look for revenue to decrease 16% year-over-year to $7.27 billion for the quarter, after being $8.68 billion a year ago. For the year, revenue is projected to come in at $29.60 billion.

For three consecutive quarters, the company’s net income has increased. The 37% year-over-year growth in net income in the most recent quarter came after the more than twofold profit growth in the third quarter and the 49% rise in the second quarter.

Analysts Opinions

Credit Suisse initiated coverage on Allstate Corp last Wednesday with an "outperform" rating and $84 price target.

Allstate is the publicly held personal lines property and casualty insurer in the U.S.

"We think Allstate has more capital return and return on equity to offer," analysts said.

Allstate could reduce the capital supporting its home business due to an improving risk profile, Credit Suisse said, adding that their analysts think the insurance company will strongly consider a sale or reinsurance transaction on its runoff annuities block.

"We think that Allstate may benefit the most from the growing supply of reinsurance capital," analysts noted.

The primary home business is a scale business with distribution related barriers to entry, which is where Allstate adds value, and not as a capital provider, the firm added.

"We don't view Allstate's peers as rate adequate, which we think will be supportive of home pricing in the medium term," Credit Suisse said.

In addition, the analysts estimate that two-thirds of the home capital supports catastrophe risk, and that the company could benefit by ceding to the reinsurance market and by reducing its underwriting results volatility.

Analysts anticipate 2015 and 2016 fiscal year earnings of $5.58 and $6.14 per share, respectively.

Separately, TheStreet Ratings team rates Allstate Corp as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:-

"We rate Allstate Corp (ALL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, and increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."


Shares of Allstate in the bigger picture haven’t done much in 2015, though they are constructively consolidating their sharp multiyear rise above the 2006 highs, and from this perspective, barring any outside shock, the upside in ALL stock stands a good chance to resume higher.

Therefore, based on the facts above the following options trade is recommended…..

**OPTION TRADE: Buy the ALL Jul 2015 70.000 call (ALL150717C00070000) at or under $1.90. Place a protective stop loss at $0.75, and a pre-determined sell at $3.50.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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