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Progressive (PGR) Up 6.7% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for The Progressive CorporationPGR . Shares have added about 6.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Progressive Q2 Earnings Miss Estimates, Improve Y/Y

Progressive Corp.'s second-quarter 2017 operating earnings per share of $0.59 missed the Zacks Consensus Estimate by nearly 1.7%. However, earnings more than doubled from $0.29, earned in the year-ago quarter.

Including net realized gains, the net income per share was $0.63, up about 93% year over year.

Behind the Headlines

Progressive recorded net premiums written of $6.7 billion in the quarter under review, up 14% from $5.9 billion in the year-ago quarter. Also net premiums earned, grew 14% year over year from $5.6 billion to $6.3 billion.

Net realized gains on securities were $32.1 million, down 1% year over year. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 360 basis points (bps) from the prior-year quarter to 93.2%.

Numbers in June

Operating revenues improved 13% year over year to $2.1 billion in the quarter. The top line growth was driven by a 13% increase in premiums, 8% higher investment income, 7% rise in fees and other revenues, plus 36% jump in service revenues.

Total expense increased 12.4% to $1.9 billion. The rise in expenses can be primarily attributed to 12.9% higher losses and loss adjustment expenses, 12.2% increase in policy acquisition costs and 9% higher other underwriting expenses.

In Jun 2017, policies in force were impressive with the Personal Auto segment, improving 8% from Jun 2016 to 11 million. Special Lines inched up 2% from the prior-year month to 4.4 million.

In Progressive's Personal Auto segment, both Direct Auto and Agency Auto grew 8% year over year to 5.3 million and 5.7 million, respectively.

Progressive's Commercial Auto segment grew 4% year over year to 0.6 million. The Property business had about 1.3 million policies in force in the reported month, up 11% year over year.

Progressive's book value per share was $15.48 as of Jun 30, 2017, up 14.9% from $13.47 as of Jun 30, 2016.

Return on equity on a trailing 12-month basis was 17.4%, up 410 bps from 14.8% in Jun 2016. Debt-to-total capital ratio deteriorated 190 bps year over year to 27.3% as of Jun 30, 2017.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower. In the past month, the consensus estimate has shifted by 7% due to these changes.

Progressive Corporation (The) Price and Consensus

Progressive Corporation (The) Price and Consensus | Progressive Corporation (The) Quote

VGM Scores

At this time, Progressive's stock has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. Following the exact same course, the stock was allocated also a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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


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

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