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Factors Likely to Influence Progressive's (PGR) Q2 Earnings

Zacks Equity Research

The Progressive Corporation PGR is slated to report second-quarter 2019 results on Jul 17, before market open. The company delivered a positive surprise in three of the last four quarters.

Factors to Consider

Progressive’s second-quarter results are anticipated to have benefited from its solid policies in force across all its business lines. Furthermore, competitive rates at the company’s expanded product portfolio are expected to have boosted premium.

Currently, policies in force are benefiting from investments in product design that focuses on segmentation and risk selection. The Zacks Consensus Estimate for personal lines policies in force is pegged at 18.864 million, up 2.8% from the first quarter.

Quarterly revenues are expected to have gained from solid premiums coupled with higher service revenues and fees as well as other revenues. The Zacks Consensus Estimate for second-quarter revenues stands at $9.2 billion, suggesting 14.8% growth from year-earlier quarter's reported figure.

Meanwhile, Progressive’s personal auto business is likely to benefit from its focus on marketing and competitive product offerings as well as strong market presence. Notably, Progressive is one of the leading auto insurers in the United States, boasting one of the nation’s largest auto insurance groups. It is also the largest seller of motorcycle policies, the market leader in commercial auto insurance and one of the top 15 homeowners carriers based on premiums written.

With catastrophe events of significant magnitude inducing more policy writings, the Property business is expected to retain its momentum.

Strong performing Vehicle and Property businesses are expected to support Personal and Commercial business lines.

This apart, the company is anticipated to have witnessed new business application growth in its bundled auto and home customers (i.e., Robinsons) in both the Agency and Direct channels.

A not so active catastrophe environment might have aided underwriting profit and improvement in the combined ratio during the second quarter.

Expenses are likely to rise on higher loss and loss-adjustment expenses, policy acquisition costs plus other underwriting expenses.

The Zacks Consensus Estimate for earnings is pegged at $1.43, indicating a 20.2% improvement from year-ago quarter's reported number.

What the Zacks Model Says

Our proven model does not show that Progressive is likely to beat estimates in the to-be-reported quarter. This is because the stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case as you can see below.

Earnings ESP: Progressive has an Earnings ESP of -0.40%. This is because the Most Accurate Estimate of $1.42 is pegged lower than the Zacks Consensus Estimate of $1.43. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Progressive carries a Zacks Rank of 3, which increases the predictive power of ESP.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Some other insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Chubb Limited CB has an Earnings ESP of +1.30% and a Zacks Rank #3. The company is slated to announce second-quarter 2019 results on Jul 23. You can see the complete list of today’s Zacks #1 Rank stocks here.

RenaissanceRe Holdings Ltd. RNR  is set to report second-quarter 2019 results on Jul 23. The stock has an Earnings ESP of +11.00% and a Zacks Rank of 1.

W.R. Berkley Corporation WRB has an Earnings ESP of +13.27% and a Zacks Rank of 3. The company is slated to announce second-quarter 2019 earnings on Jul 23.

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