Progressive (PGR) Up 6.1% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for The Progressive Corporation PGR. Shares have added about 6.1% in that time frame.
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 the most recent earnings report in order to get a better handle on the important drivers.
Progressive (PGR) Q2 Earnings Beat on Higher Premiums
The Progressive Corporation’s second-quarter 2018 operating earnings per share of $1.15 beat the Zacks Consensus Estimate of $1.08. The bottom line soared nearly 95% year over year.
Behind the Headlines
Progressive recorded net premiums written of $8.1 billion in the quarter under review, up 20% from $6.7 billion in the year-ago period. Also, net premiums earned grew 21% year over year to $7.6 billion from $6 billion a year ago.
Net realized gains on securities were $32.8 million, up 2% from $32.1 million in the year-earlier quarter. Combined ratio — percentage of premiums paid out as claims and expenses — improved 230 basis points (bps) from the prior-year quarter to 90.9%.
Numbers in June 2018
Operating revenues rose 22% year over year to $2.5 billion. This top-line growth was driven by a 44% higher investment income, 21% rise in premiums earned, 28% increase in service revenues and 34% higher fees and other revenues.
Total expense increased 18.1% to nearly $2.3 billion. The increase can be primarily attributed to 17.5% higher loss and loss adjustment expenses, 22.9% increase in policy acquisition costs and 19% higher other underwriting expenses.
In June, policies in force were impressive at the Personal Auto segment, improving 16% from last June to 12.8 million. Special Lines inched up 1% from the prior-year month to 4.4 million.
In Progressive’s Personal Auto segment, Direct Auto grew 17% year over year to 6.7 million while Agency Auto improved 14% year over year to 6.1 million.
Progressive’s Commercial Auto segment grew 9% year over year to 0.7 million. The Property business had about 1.8 million policies in force in the reported month, up 35% year over year.
Progressive’s book value per share was $18.04 as of Jun 30, 2018, up 16.5% from $15.48 as of Jun 30, 2017.
Return-on-equity on a trailing 12-month basis was 22.3%, having expanded 340 bps from 17.4% in June 2017. Debt-to-total capital ratio improved 180 bps year over year to 27.3% as of Jun 30, 2018.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There have been four revisions higher for the current quarter compared to one lower.
The Progressive Corporation Price and Consensus
At this time, PGR has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was 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 B. 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 more suitable for growth and momentum investors than value investors.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PGR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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