The Progressive Corporation (NYSE:PGR) just released its annual report and things are looking bullish. The company beat expectations with revenues of US$39b arriving 5.7% ahead of forecasts. Statutory earnings per share (EPS) were US$6.72, 9.0% ahead of estimates. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
After the latest results, the 13 analysts covering Progressive are now predicting revenues of US$41.5b in 2020. If met, this would reflect a credible 6.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to sink 20% to US$5.40 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$40.7b and earnings per share (EPS) of US$5.33 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$82.55. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Progressive at US$100.00 per share, while the most bearish prices it at US$57.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Progressive's revenue growth is expected to slow, with forecast 6.4% increase next year well below the historical 14%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 2.8% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkProgressive will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Progressive's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$82.55, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Progressive. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Progressive analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Progressive's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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