Citi Cuts EPS Estimates On Allstate, Maintains Buy Rating

Citi feels Allstate

should encounter short-term pressure as Street EPS estimates need to come down for 4Q10 as well as 2011 & 2012. There is no change to $37 PT and Buy rating. Cutting $0.13 from 4Q10, $0.10 off 2011 and $0.20 off 2012. It is initiating 2013E of $4.10. There is high variability around ALL EPS driving the numbers below the Street, including: CAT losses on Homeowners Insurance; investment yield pressures; life earnings; share repurchase run-rate; and a modestly higher Standard Auto CR owing to flat premiums. In the near term, Citi estimates the stock could trade down to the $28–$29 range by applying 85% projected 2010 BV of $34.18, or 8x 2011E of $3.50. However, the 12-month TP of $37 is based on its projected YE 2011 BV of $37.14. Note this BV excludes the current $1.2B of unrealized gains on the balance sheet. ALL closed Monday at $30.99