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Progressive (PGR) to Report Q4 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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The Progressive Corporation PGR is slated to report fourth-quarter 2020 results on Jan 27, before market open. The company delivered an earnings surprise of 10.65% in the third quarter of 2020.

Factors to Consider  

Premiums in the fourth quarter are likely to have benefited from solid policies in force, product offerings and solid performance across all lines of business.

Commercial business lines are likely to have benefited from growth in for-hire transportation business market, reflecting greater demand for shipping services in light of the pandemic, and new and renewal transportation network company (TNC) policies.

The Personal Lines business is likely to have benefited from increases in both personal auto and special lines products.

Its auto businesses are likely to have benefited from competitive product offerings and position in the marketplace, as well as increase in advertising spend and rate decreases taken on auto business policies, whereas special lines products is likely to have benefited from high demand due to the overall growth in the RV and boat industries, strong renewal and personal auto application growth.

Focus on segmentation and risk selection might have aided policies in force. The Zacks Consensus Estimate for personal lines policies in force is pegged at 21,426 million, indicating an increase of 10.4% from the year-ago reported quarter.

Improved premiums, increase in service revenues and fees as well as other revenues are likely to have fueled revenues. The Zacks Consensus Estimate for fourth-quarter revenues stands at $11.3 billion, suggesting 9.4% year-over-year growth.

Progressive is a leading auto insurer in the United States, boasting one of the 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.  

Nonetheless, the insurer bore the brunt of hurricanes, west coast wildfires, and wind, hail, and tornadoes throughout the United States.

Loss and loss adjustment expenses ratio is likely to have improved in the to-be-reported quarter on the back of lower loss and loss adjustment expense ratio due to lower auto accident frequency. The consensus estimate for Personal Line loss and loss adjustment expenses ratio is pegged at 70.

Also, lower auto accident frequency is likely to have aided underwriting profit.

However, losses and loss adjustment expenses, policy acquisition costs, other underwriting expenses, policyholder credit expense, as well as service expenses and interest expense are likely to have increased expenses in the fourth quarter.

The Zacks Consensus Estimate for earnings is pegged at $1.68, indicating a decline of 7.1% from the year-ago quarter's reported number.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Progressive this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Progressive has an Earnings ESP of -3.96%. This is because the Most Accurate Estimate of $1.61 is pegged lower than the Zacks Consensus Estimate of $1.68. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

The Progressive Corporation Price and EPS Surprise

The Progressive Corporation Price and EPS Surprise
The Progressive Corporation Price and EPS Surprise

The Progressive Corporation price-eps-surprise | The Progressive Corporation Quote

Zacks Rank: Progressive currently carries a Zacks Rank of 3.

Key Picks

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

The Allstate Corporation ALL has an Earnings ESP of +6.71% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

MGIC Investment Corporation MTG has an Earnings ESP of +2.63% and a Zacks Rank #2.

Radian Group Inc. RDN has an Earnings ESP of +1.12% and is a Zacks #2 Ranked stock.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
 
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Radian Group Inc. (RDN) : Free Stock Analysis Report
 
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