Will Progressive (PGR) Disappoint This Earnings Season? - Analyst Blog


Progressive Corp . ( PGR ) is set to report fourth-quarter 2013 results on Jan 22. Last quarter its earnings were in line with the Zacks Consensus Estimate.  Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Positive results in the months of October and November raise optimism for modestly higher earnings in the fourth quarter for Progressive. Increased policies in force within the personal auto, special lines and personal lines insurance business is expected to drive net premiums earned.

However, growth at Commercial Auto businesses could be challenging. Policy life expectancy (PLE), a measure for customer retention, is also showing soft results.

Nonetheless, a benign catastrophe environment should aid Progressive Corp.'s combined ratio improvement.

Progressive remains focused in returning value to its shareholders. It approved a special dividend of $1.00, testifying the inherent strength of its balance sheet. At the onset of the fourth quarter, it retired $150 million 7% Notes engaging into deleveraging activities that would further improve its debt-to-capital ratio.

Earnings Whispers?

Our proven model does not conclusively show that Progressive is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP :  That is because the Most Accurate estimate stands at 41 cents while the Zacks Consensus Estimate is higher at 42 cents. That leads to a difference of -2.38%.

Zacks Rank #3 (Hold) . Progressive's Zacks Rank #3 when combined with a negative earnings ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Aspen Insurance Holdings Ltd. ( AHL ), earnings ESP of +8.49% and a Zacks Rank #1 (Strong Buy).

PartnerRe Ltd. ( PRE ), earnings ESP of +11.24% and a Zacks Rank #1 (Strong Buy).

The Travelers Companies, Inc . ( TRV ), earnings ESP of +0.479% and Zacks Rank #2 (Buy).

ASPEN INS HLDGS (AHL): Free Stock Analysis Report

PROGRESSIVE COR (PGR): Free Stock Analysis Report

PARTNERRE LTD (PRE): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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: AHL , PGR , PRE , TRV



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