Progressive Earnings to Beat Again? - Analyst Blog

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We expect auto insurer Progressive Corp . ( PGR ) to beat expectations when it reports second-quarter 2013 results on Jul 11.

Why a Likely Positive Surprise?

Our proven model shows that Progressive is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP : Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method ), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +2.50%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Progressive carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Progressive's Zacks Rank #2 (Buy) and +2.50% ESP makes us very confident in looking for a positive earnings beat on Jul 11.

What is Driving the Better Than Expected Earnings?

In the first two months of the quarter - April and May -   the company generated a total of 42 cents in earnings, with premiums increasing year over year for both months.

The company was successful in reducing costs as well. Although total expense in April grew 5% year over year, the same declined 14% in May.

Progressive's operating earnings and premiums' growth as well as debt-to-total capital ratio in the last two months of this year reflect an overall constant improvement. Current policies in force also remained healthy. Progressive remains focused on maintaining a healthy policy life expectancy, which is a significant measure to retain customers.

Other Stocks to Consider

Progressive is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

W.R. Berkley Corporation ( WRB ): Earnings ESP of +1.47% and a Zacks Rank #1 (Strong Buy).

Cigna Corp . ( CI ): Earnings ESP of +2.52% and a Zacks Rank #1 (Strong Buy).

Maiden Holdings, Ltd . ( MHLD ): Earnings ESP of +3.70% and a Zacks Rank #2 (Buy).



CIGNA CORP (CI): Free Stock Analysis Report

MAIDEN HOLDINGS (MHLD): Free Stock Analysis Report

PROGRESSIVE COR (PGR): Free Stock Analysis Report

BERKLEY (WR) CP (WRB): Free Stock Analysis Report

To read this article on Zacks.com click here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CI , MHLD , PGR , WR , WRB

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