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Progressive (PGR) Down 1.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Progressive (PGR). Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Progressive due for a breakout? 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 catalysts.

Progressive Q4 Earnings Top, Premiums Earned Up Y/Y

The Progressive Corporation’s fourth-quarter 2020 earnings per share of $1.83 beat the Zacks Consensus Estimate of $1.68. Moreover, the bottom line increased 1.1% from the year-ago quarter.

Behind the Headlines

Net premiums written were $9.5 billion in the quarter, down 1% from $9.6 billion a year ago. Net premiums earned grew 3% to nearly $10.2 billion.

Net realized gains on securities were $760.2 million, which more than doubled year over year.

Combined ratio — percentage of premiums paid out as claims and expenses — improved 400 basis points (bps) from the prior-year quarter to 88.

Revenues and Expenses Down In December

Operating revenues in December were $3.3 million, down 10.7% year over year. The decline can be attributed to a 10.7% decrease in premiums, 8.1% decline in fees and other revenues, 4.3% lower service revenues and 14.6% lower investment income.

Total expenses decreased 17.9% year over year to $2.8 billion in December due to 21.6% lower losses and loss adjustment expenses, 9.3% lower other underwriting expenses, and 6.8% decrease in policy acquisition costs. Expenses also include $10.4 million in policyholder credit costs.

In December, policies in force were impressive at the Personal Auto segment, having improved 11% from the year-ago month to 16.5 million. Special Lines improved 8% to 4.9 million.

In Progressive’s Personal Auto segment, Direct Auto grew 9% year over year to 7.6 million while Agency Auto improved 13% to 8.9 million.

Progressive’s Commercial Auto segment rose 9% year over year to 0.8 million. The Property business had about 2.5 million policies in force in September, up 13%.

Financial Update

Progressive’s book value per share was $28.27 as of Dec 31, 2020, up 24.5% from $22.54 on Dec 31, 2019.

Return-on-equity in December 2020 was 39.3%, up 430 bps year over year. Debt-to-total capital ratio improved 30 bps to 24.1%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 25.27% due to these changes.

VGM Scores

Currently, Progressive has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Progressive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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