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Should Progressive Stock Be in Your Portfolio Ahead of Q3 Earnings?
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The Progressive Corporation (PGR - Free Report) is expected to report an improvement in its top and bottom lines when it reports third-quarter 2024 results on Oct. 15, before the opening bell.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for PGR’s third-quarter revenues is pegged at $18.9 billion, indicating 20.4% growth from the year-ago reported figure.
The consensus estimate for earnings is pegged at $3.33 per share. The Zacks Consensus Estimate for PGR’s third-quarter earnings has moved up 16.8% in the past 30 days. The estimate suggests year-over-year growth of 59.3%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Progressive’s earnings beat the Zacks Consensus Estimates in each of the trailing four quarters, the average surprise being 24.08%. This is depicted in the following chart.
Image Source: Zacks Investment Research
What the Zacks Model Unveils for PGR
Our proven model predicts an earnings beat for Progressive this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: PGR has an Earnings ESP of +13.37%. This is because the Most Accurate Estimate of $3.78 is pegged higher than the Zacks Consensus Estimate of $3.33.
The top line in the third quarter is likely to have benefited from improving premiums and net investment income. Better-than-expected fees and service revenues are likely to have added to the upside.
A compelling product portfolio, leadership position, strength in the Vehicle and Property businesses, healthy policies in force and solid retention are expected to have favored net premiums earned in the to-be-reported quarter. The Zacks Consensus Estimate for net premiums earned is pegged at $17.9 billion.
Focus on segmentation and prudent risk selection is likely to have benefited policies in force. Its competitive product offerings and strong market presence are likely to have benefited the personal auto business.
A higher invested asset base coupled with improved interest rate is likely to have aided net investment income. The Zacks Consensus Estimate for the metric is pegged at $732.5 million.
However, higher loss and loss-adjustment expenses, policy acquisition costs and other underwriting expenses are likely to have raised expenses. The consensus mark for loss and loss-adjustment expense ratio is pegged at 70.8.
Despite catastrophe losses, prudent underwriting is likely to have aided improvement in the combined ratio. The consensus mark for loss and loss-adjustment expense ratio is pegged at 91.
PGR’s Price Performance & Premium Valuation
The stock outperformed the industry, sector and the Zacks S&P 500 composite index in the first nine months of 2024.
Image Source: Zacks Investment Research
PGR stock is not that cheap, as the Value Score of C suggests a stretched valuation at this moment.
The stock is trading at a price-to-book value of 6.25X, higher than the industry’s 1.59X. Yet, it is attractively valued compared with other industry players like The Allstate Corporation (ALL - Free Report) and The Travelers Corporation (TRV - Free Report) .
Image Source: Zacks Investment Research
Investment Thesis
Progressive intends to accelerate growth by bundling auto with lower-risk properties. Segmentation through the rollout of the newest product model coupled with prudent pricing will improve policy life expectancy (PLE), a measure of customer retention. Progressive has also been investing to ramp up digitalization.
PGR’s combined ratio averaged less than 93% in the last 10 years and compared favorably with the industry average of more than 100%. Prudent underwriting coupled with favorable reserve development, a reinsurance program to shield its balance sheet from the impact of catastrophe events and active weather years should limit the erosion of profit.
PGR strategically maintains an investment portfolio with investments skewed toward U. S. Treasuries. A solid capital position helps it navigate a volatile market as well as invest in growth opportunities.
Though leverage compares unfavorably with the industry average, its debt servicing capabilities remain solid and also compare favorably with the industry.
Conclusion
Progressive is one of the nation’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance, and one of the top 15 homeowners carriers based on premiums written. It remains committed to enhancing customers' experience through improved services. Despite increasing expenses, PGR has been continually expanding its margins.
An impressive dividend history, its VGM Score of B, growth prospects, favorable return on capital and positive investor sentiment instill confidence.
Therefore, despite the premium valuation, the stock demands a place in investors’ portfolio.
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Should Progressive Stock Be in Your Portfolio Ahead of Q3 Earnings?
The Progressive Corporation (PGR - Free Report) is expected to report an improvement in its top and bottom lines when it reports third-quarter 2024 results on Oct. 15, before the opening bell.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for PGR’s third-quarter revenues is pegged at $18.9 billion, indicating 20.4% growth from the year-ago reported figure.
The consensus estimate for earnings is pegged at $3.33 per share. The Zacks Consensus Estimate for PGR’s third-quarter earnings has moved up 16.8% in the past 30 days. The estimate suggests year-over-year growth of 59.3%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Progressive’s earnings beat the Zacks Consensus Estimates in each of the trailing four quarters, the average surprise being 24.08%. This is depicted in the following chart.
Image Source: Zacks Investment Research
What the Zacks Model Unveils for PGR
Our proven model predicts an earnings beat for Progressive this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: PGR has an Earnings ESP of +13.37%. This is because the Most Accurate Estimate of $3.78 is pegged higher than the Zacks Consensus Estimate of $3.33.
Zacks Rank: PGR currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Shape Q3 Results
The top line in the third quarter is likely to have benefited from improving premiums and net investment income. Better-than-expected fees and service revenues are likely to have added to the upside.
A compelling product portfolio, leadership position, strength in the Vehicle and Property businesses, healthy policies in force and solid retention are expected to have favored net premiums earned in the to-be-reported quarter. The Zacks Consensus Estimate for net premiums earned is pegged at $17.9 billion.
Focus on segmentation and prudent risk selection is likely to have benefited policies in force. Its competitive product offerings and strong market presence are likely to have benefited the personal auto business.
A higher invested asset base coupled with improved interest rate is likely to have aided net investment income. The Zacks Consensus Estimate for the metric is pegged at $732.5 million.
However, higher loss and loss-adjustment expenses, policy acquisition costs and other underwriting expenses are likely to have raised expenses. The consensus mark for loss and loss-adjustment expense ratio is pegged at 70.8.
Despite catastrophe losses, prudent underwriting is likely to have aided improvement in the combined ratio. The consensus mark for loss and loss-adjustment expense ratio is pegged at 91.
PGR’s Price Performance & Premium Valuation
The stock outperformed the industry, sector and the Zacks S&P 500 composite index in the first nine months of 2024.
Image Source: Zacks Investment Research
PGR stock is not that cheap, as the Value Score of C suggests a stretched valuation at this moment.
The stock is trading at a price-to-book value of 6.25X, higher than the industry’s 1.59X. Yet, it is attractively valued compared with other industry players like The Allstate Corporation (ALL - Free Report) and The Travelers Corporation (TRV - Free Report) .
Image Source: Zacks Investment Research
Investment Thesis
Progressive intends to accelerate growth by bundling auto with lower-risk properties. Segmentation through the rollout of the newest product model coupled with prudent pricing will improve policy life expectancy (PLE), a measure of customer retention. Progressive has also been investing to ramp up digitalization.
PGR’s combined ratio averaged less than 93% in the last 10 years and compared favorably with the industry average of more than 100%. Prudent underwriting coupled with favorable reserve development, a reinsurance program to shield its balance sheet from the impact of catastrophe events and active weather years should limit the erosion of profit.
PGR strategically maintains an investment portfolio with investments skewed toward U. S. Treasuries. A solid capital position helps it navigate a volatile market as well as invest in growth opportunities.
Though leverage compares unfavorably with the industry average, its debt servicing capabilities remain solid and also compare favorably with the industry.
Conclusion
Progressive is one of the nation’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance, and one of the top 15 homeowners carriers based on premiums written. It remains committed to enhancing customers' experience through improved services. Despite increasing expenses, PGR has been continually expanding its margins.
An impressive dividend history, its VGM Score of B, growth prospects, favorable return on capital and positive investor sentiment instill confidence.
Therefore, despite the premium valuation, the stock demands a place in investors’ portfolio.