Progressive Corp (PGR) Up 2% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Progressive Corporation PGR. Shares have added about 2% in the past month, outperforming the market.

Will the recent positive trend continue leading up to its next earnings release, or is PGR due for a pullback? 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 drivers.

Progressive Q4 Earnings Surpass, Premiums Grow Y/Y

Progressive Corp’s fourth-quarter 2017 operating earnings per share of 79 cents beat the Zacks Consensus Estimate of 77 cents.

Including net realized losses, net income per share was 98 cents, up 48% year over year.

Behind the Headlines

Progressive recorded net premiums written of $6.8 billion in the quarter under review, up 22% from $5.6 billion in the year-ago quarter. Also, net premiums earned grew 17% year over year to $6.8 billion from $5.9 billion

Net realized loss on securities was $9.7 million, comparing unfavorably with a gain of $22.1 million in the year-ago quarter. Combined ratio — percentage of premiums paid out as claims and expenses — improved 130 basis points (bps) from the prior-year quarter to 91.4%.

Numbers in December 2017

Operating revenues improved 18% year over year to $1.97 billion. This top-line growth was driven by a 40% surge in service revenues, 16% higher fees and other revenues and 17% increase in both premiums and investment income.

Total expense increased 19.6% to nearly $2 billion. This rise in expenses can be primarily attributed to 19.8% higher loss and loss adjustment expenses, 16.5% increase in policy acquisition costs and 22% higher other underwriting expenses.

In December 2017, policies in force were impressive at the Personal Auto segment, improving 13% from December 2016 to 11.7 million. Special Lines inched up 2% from the prior-year month to 4.4 million.

In Progressive’s Personal Auto segment, Direct Auto grew 13% year over year to 6 million while Agency Auto ascended 12% year over year to 5.7 million.

Progressive’s Commercial Auto segment grew 6% year over year to 0.6 million. The Property business had about 1.5 million policies in force in the reported month, up 22% year over year.

Progressive’s book value per share was $15.96 as of Dec 31, 2017, up 16.3% from $13.72 as of Dec 31, 2016.

Return-on-equity on a trailing 12-month basis was 21.7%, having expanded 680 bps from 14.9% in December 2016. Debt-to-total capital ratio contracted 200 bps year over year to 26.3% as of Dec 31, 2017.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been five revisions higher for the current quarter. In the past month, the consensus estimate has shifted up by 19.8% due to these changes.

Progressive Corporation (The) Price and Consensus

 

Progressive Corporation (The) Price and Consensus | Progressive Corporation (The) Quote

 

VGM Scores

At this time, PGR has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was also allocated a grade of C on the value side, putting it in the middle 20% 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.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise PGR has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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Progressive Corporation (The) (PGR) : Free Stock Analysis Report
 
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