Allstate (ALL 2.02%) shareholders were in good hands this earnings season. The company easily topped expectations in the fourth quarter, helping to send the stock up as much as 6% in Thursday trading.
Mild weather leads to better results
It has been a relatively mild winter in North America, and that has been a big boost to home and auto insurers like Allstate. The company earned $5.82 per share in the fourth quarter on revenue of $14.83 billion, beating Wall Street’s consensus $3.99 per share on $12.94 billion in sales estimate.
The company reported net income of $1.5 billion in the quarter, which CEO Tom Wilson attributed to “improved auto profitability and mild weather.” Revenue was up 8.7% year over year, fueled by a $1.2 billion increase in property/liability premiums due to strong pricing power.
For the year, Allstate reported a $316 million loss on revenue of $57.1 billion. That’s an improvement over 2022, when Allstate lost $1.4 billion on sales of $51.4 billion.
Is Allstate a buy after its stronger-than-expected results?
Allstate has been focused on modernizing its pricing, and the results are a good sign that the efforts are getting the desired results. While losses and weather are hard to predict, if the company can price its policies correctly, there is a lot of margin for error.
That’s said, there are clear limits to growth and profitability here, and with Allstate shares now up 17% over the past year, questions remain about how much higher the stock can go in the quarters to come.
The stock was unable to hold its initial 6% pop, trading up just 1.7% as of 11:15 a.m. ET Thursday. While the quarter gave current holders nothing to worry about, there isn’t a real compelling reason to rush in right now.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
