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Progressive Earnings to Beat Again?

Zacks Equity Research

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).

Read the Full Research Report on WRB

Read the Full Research Report on CI

Read the Full Research Report on PGR

Read the Full Research Report on MHLD

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