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Progressive (PGR) Down 5.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Progressive (PGR). Shares have lost about 5.1% 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 Q2 Earnings Beat, Increase Year Over Year

Progressive's second-quarter 2019 earnings per share of $1.66 beat the Zacks Consensus Estimate of $1.43. The bottom line improved 39% from the year-ago quarter.

Behind the Headlines

Net premiums written were $9.1 billion in the quarter under review, up 13% from nearly $8.1 billion in the year-ago period. Net premiums earned grew 16% year over year to $8.8 billion.

Net realized gains on securities were $179.9 million compared with $32.8 million in the year-ago quarter.

Combined ratio — percentage of premiums paid out as claims and expenses — improved 50 basis points (bps) from the prior-year quarter’s level to 90.4%.

June Numbers Solid

Operating revenues were $2.9 million, up 15.3% year over year. The improvement can be attributed to 14.8% increase in premiums, 35.1% higher investment income, 13.7% growth in fees and other revenues and 11.5% rise in service revenues.

Total expenses increased 14.1% year over year to $2.6 billion due to 14.4% rise in losses and loss adjustment expenses, 15% increase in policy acquisition costs and 4.7% higher other underwriting expenses.

In June, policies in force were impressive at the Personal Auto segment, having improved 12% from the year-ago month to 14.3 million. Special Lines improved 3% from the prior-year month’s figure to 4.5 million.

In Progressive’s Personal Auto segment, Direct Auto grew 13% year over year to 7.5 million while Agency Auto improved 11% year over year to 6.8 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about 2.1 million policies in force in the month, up 17% year over year.

Financial Update

Progressive’s book value per share was $21.98 as of Jun 30, 2019, up 21.8% from $18.04 as of Jun 30, 2018.

Return-on-equity in June 2019 was 34.3%, having expanded 1200 basis points (bps) year over year. Debt-to-total capital ratio improved 120 bps year over year to 24.8% as of Jun 30, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Progressive has a great Growth Score of A, a grade with the same score on the momentum front. 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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