Progressive (PGR) Stock Rises 19% YTD: Will the Rally Last?
Shares of The Progressive Corporation PGR have rallied 19.4% year to date, outperforming 13.8% and 4.3% growth of the industry and the Zacks S&P 500 composite, respectively. The Finance sector has decreased 0.4% in the same time frame. With a market capitalization of $111.4 billion, the average volume of shares traded in the last three months was 2.2 million.
A compelling portfolio, leadership position, strength in Vehicle and Property businesses, healthy policies in force, retention and solid capital position continue to drive this Zacks Rank #1 (Strong Buy) insurer. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved north by 2.6% and 1.1% in the past seven days, respectively, reflecting analysts’ optimism. Progressive has a VGM Score of B.
PGR’s trailing 12-month return on equity is 21.1%, ahead of the industry average of 7.2%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders fund. Its return on invested capital of 14.1% outperforms the industry average of 5%. This reflects PGR’s efficiency in utilizing funds to generate income.
This largest seller of motorcycle and boat policies has a decent surprise history, having delivered an earnings surprise in two of the last four reported quarters while missing in the remaining two. Earnings of this insurer rose 5.9% in the last five years.
Growth Drivers
The Zacks Consensus Estimate for Progressive’s 2024 earnings is pegged at $8.88 per share, indicating an increase of 45.3% on 15.5% higher revenues of $71.3 billion. The consensus estimate for 2025 earnings is pegged at $10.38 per share, indicating an increase of 17% on 12.6% higher revenues of $80.5 billion.
The long-term earnings growth rate is currently pegged at 21.7%, better than the industry average of 11.5%. We expect the 2025 bottom line to increase at a three-year CAGR of 24.9%. It has a Growth Score of A.
Its compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio should help PGR continue to deliver improved premiums. We estimate 2025 net written premiums to increase at a three-year CAGR of 11.3%.
Policy life expectancy (PLE), a measure of customer retention, has improved in the last few years across all business lines. Strategic initiatives to provide consumers with a distinctive new auto insurance option along with competitive pricing should help Progressive deliver solid PLE. The insurer has been focusing on cross-selling homes with auto insurance.
PGR’s prudent underwriting has helped it deliver a combined ratio averaging less than 96% over a decade. The ratio compares favorably with the industry average of more than 100%.
Banking on operational excellence, PGR engages in capital payout. Progressive has been paying dividends uninterruptedly since 1971, yielding 0.5%, better than the industry average of 0.3%. Notably, its free cash flow conversion has remained more than 100% in the last many quarters, reflecting its solid earnings.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited AXS, Mercury General Corporation MCY and Arch Capital Group Ltd. ACGL. While Axis Capital and Mercury General sport a Zacks Rank #1 each at present, Arch Capital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 102.57%. Year to date, the insurer has gained 11.5%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $10.10 and $11.07, respectively, indicating a year-over-year increase of 2.5% and 9.6%.
Mercury General beat estimates in three of the last four quarters and matched in one, the average being 3,417.48%. Year to date, the insurer has rallied 36.1%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $2.90 and $3.90, indicating a year-over-year rise of 866.67% and 34.48%, respectively.
Arch Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 27.32%. Year to date, ACGL has jumped 14.9%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 revenues is pegged at $15.52 billion and $16.93 billion, indicating a year-over-year increase of 15% and 9%, respectively.
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
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