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Progressive (PGR) Down 8.3% Since Last Earnings Report: Can It Rebound?

RLI Corp. (RLI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

A month has gone by since the last earnings report for Progressive (PGR). Shares have lost about 8.3% 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 (PGR) Q3 Earnings Top Estimates on Solid Revenues

The Progressive Corporation’s third-quarter 2018 operating earnings per share of $1.32 beat the Zacks Consensus Estimate of $1.14. The bottom line skyrocketed about 178% year over year.

Behind the Headlines

Progressive recorded net premiums written of $8.6 billion in the quarter under review, up 20% from $7.1 billion in the year-ago period. Also, net premiums earned grew 21% year over year to $7.9 billion from $6.5 billion a year ago.

Net realized gains on securities were $182.4 million, reversing the year-ago loss of $24.7 million in the year-earlier quarter. Combined ratio — percentage of premiums paid out as claims and expenses — improved 710 basis points (bps) from the prior-year quarter’s level to 90.3%.

Numbers in September 2018

Operating revenues rose 21.7% year over year to $2.6 billion. This top-line growth was driven by 56.1% higher investment income, 20.9% rise in premiums earned, 38% rise in service revenues and 18% higher fees as well as other revenues.

Total expense increased 9.3% to nearly $2.3 billion. This upside can be primarily attributed to 5% wider loss and loss adjustment expenses, 21.8% increase in policy acquisition costs and 26.2% higher other underwriting expenses.

In September, policies in force were impressive at the Personal Auto segment, having improved 15% from last September’s tally to 13.1 million. Special Lines inched up 1% from the prior-year month’s figure to 4.4 million.

In Progressive’s Personal Auto segment, Direct Auto grew 17% year over year to 6.9 million while Agency Auto improved 13% year over year to 6.2 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about 1.9 million policies in force in the reported month, up 36% year over year.

Progressive’s book value per share was $19.49 as of Sep 30, 2018, up 22% from $15.97 as of Sep 30, 2017.

Return-on-equity on a trailing 12-month basis was 27.1%, having expanded 870 bps from 18.4% in September 2017. Debt-to-total capital ratio improved 170 bps year over year to 24.6% as of Jun 30, 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

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VGM Scores

Currently, 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 looks promising. Notably, Progressive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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