Allstate Investors, Are You In Good Hands? Deutsche Downgrades Stock Seeing Resistance Ahead

Dennis Haysbert famously asks TV viewers if they are in "good hands" with their insurance plans. But ask analysts at Deutsche Bank if a position in Allstate Corp (NYSE: ALL) would be in "good hands" in a portfolio and the answer is not necessarily.

Joshua Shanker downgraded Allstate's stock from Buy to Hold with a price target boosted from $90 to $96, which implies limited upside ahead.

Allstate's bullish story began in late 2015 when new pricing strategies would generate a 20-percent compounded annual growth rate, the analyst explained. But fast forward to present day and the insurance company delivered a performance that was "well in excess" of what was expected two years ago.

As is typically the case, years of strong growth will be followed by a cooling down period and Allstate is no exception. After reaching "historically best" underwriting margins the company's ability to continue growing earnings will now "meet resistance." The analyst's $7.45 EPS estimate for 2018 implies a normalized contraction on a year-over-year growth from a $7.05 per share estimate for 2017.

Allstate is trading at a price-to-book multiple of 1.8x and investors who don't already own a position should avoid the "less attractive" stock. Also, at 12.5-13.5x 2018 earnings, Allstate's stock is valued in-line with consensus estimates for large-cap peers.

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